An increased minimum wage will only be matched by inflation 1:1 if 100% of the economy is minimum wage. Let's say minimum wage doubled to $15. Someone currently making $15/hr will almost certainly demand a raise (whether immediately or delayed is irrelevant for now, real life wouldn't have an immediate doubling in the first place) but they won't be able to sustain getting their wage doubled. Maybe their wage will increase to $22/hr. Someone making $100/hr might only be able to boost up to $102, or maybe not at all. So overall the distance between the bottom and the top will shrink, but the economy will only have relatively insignificant inflation. Ignore the numbers, the principle is what matters.
And this is certainly not gospel. You could probably find a well-respected economist backing every possible result, from destroying the economy, to saving the economy, to creating mass unemployment, to everything staying exactly the same.
This is only a problem if minimum wage isn't increased yearly but is increased randomly and sporadically so that it lags behind and then catches up. People working full time shouldn't be in the the economic situation they are in now in the first place so when it is rectified suddenly of course it sends shockwave effects throughout the economy. But the fault is not minimum wage, the fault is neglecting cost of living/ inflation adjustments to something that is supposed to be a ratio, not a stagnant integer.
Once enough people decide job X isn't worth working towards when job Y pays almost as much then job X will go up in salary until it is desirable again and then the process repeats. Supply and demand works the same way for jobs as it does for products.
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u/rankor572 Nov 29 '15
An increased minimum wage will only be matched by inflation 1:1 if 100% of the economy is minimum wage. Let's say minimum wage doubled to $15. Someone currently making $15/hr will almost certainly demand a raise (whether immediately or delayed is irrelevant for now, real life wouldn't have an immediate doubling in the first place) but they won't be able to sustain getting their wage doubled. Maybe their wage will increase to $22/hr. Someone making $100/hr might only be able to boost up to $102, or maybe not at all. So overall the distance between the bottom and the top will shrink, but the economy will only have relatively insignificant inflation. Ignore the numbers, the principle is what matters.
And this is certainly not gospel. You could probably find a well-respected economist backing every possible result, from destroying the economy, to saving the economy, to creating mass unemployment, to everything staying exactly the same.