![\"MW](\"http:\/\/theredneckeconomist.com\/wp-content\/uploads\/2014\/02\/MW-vs-CPI-Chart-300x195.png\")
<\/p>\nThe Minimum Wage vs Inflation<\/b><\/p>\n
In 1938, the US Congress passed the 1938 Federal Minimum Wage Law.\u00a0\u00a0 The law established, for the first time, a minimum wage of $0.35 per hour for all workers employed by companies engaged in interstate commerce.\u00a0\u00a0 Congress amended the law during the 1940\u2019s and 1950\u2019s several times by increasing the rate to $1.00 per hour by 1960.\u00a0\u00a0 Following numerous lawsuits to define \u201cInterstate commerce,\u201d the law was amended in 1961 to include workers of large retail and service enterprises, local transit, construction, and gasoline station employees at the same rate of $1.00 per hour.<\/p>\n
Since 1961, the law has been amended six (6) times to increase the Federal minimum wage.\u00a0 \u00a0The six amendments were signed into law by three (3) Democratic Presidents and three (3) Republican Presidents.\u00a0\u00a0 \u00a0In 1978, the law was amended to include all workers .\u00a0\u00a0 There are still a few classes of workers that are exempt, like children under the age of 19 working for the parents.\u00a0\u00a0 Today, the Federal minimum wage is $7.25 per hour.<\/p>\n
The question we want to explore in this paper is which greyhound is chasing the rabbit \u2013 do increases in the minimum wage rate cause inflation, or is the minimum wage increased because of inflation.\u00a0 When the law was passed in 1938, it was done so following pressure from labor unions in the automotive, manufacturing, steel, and transportation industries to assure workers in those industries a guaranteed wage.\u00a0\u00a0 Today, the argument for increasing the minimum wage is based on maintaining a family income\u00a0at the \u201cUS poverty level.\u201d\u00a0\u00a0 You will see in the supporting graphics that inflation and the cost of living have increased continually following amendments to the law increasing the minimum wage rate.\u00a0 Which dog is chasing the rabbit?\u00a0 Further increases in the Federal Minimum Wage will drive a bigger wedge between those that have and those that don’t.<\/p>\n
The chart below illustrates the percentage increases of both the Federal Minimum Wage and the Consumer Price Index, one measure of the rate of inflation.<\/p>\n
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The US Congress is studying the actions by President Obama to increase the minimum wage rate to $10.10 per hour, an increase of $2.85 or 39.3%.\u00a0\u00a0 We believe this will cause a rapid increase in inflation forcing the middle income Americans at the lower end of the income scale into poverty levels and those currently in the poverty level further into financial distress.<\/p>\n
The effect of inflation on our economy and the economies of the world is disastrous.\u00a0\u00a0\u00a0 Before the rate increases in 2007, one could buy their favorite hamburger, fries, and drink for around $5.00.\u00a0\u00a0 Today, the average price of the same hamburger ranges from $7.50 to $8.50.\u00a0\u00a0 Why has the cost increased?\u00a0\u00a0 Because most of the employees in those business are paid at or near the minimum wage. \u00a0The Bureau of Labor Statistics has a CPI Inflation Calculator at www.bls.gov\/data\/inflation_calculator.htm. \u00a0It calculates the buying power of $1.00 at some time in history to 2013.<\/p>\n
One can relate the increases in most consumer goods to the same reason.\u00a0 Other examples are: a grocery store clerk that stocks the shelves;\u00a0 cleaning staffs at hotels; janitorial staffs in office buildings, your local laundry, security guards at airports, factories, and public buildings and on and on.\u00a0\u00a0 Increasing the minimum wage rate raises the cost of everything we use in our daily lives.\u00a0\u00a0\u00a0 Does one think the grocery store is going to hold the price of its goods, while paying its employees the higher wage? \u00a0Non-luxury hotel room rates five years ago ranged from $39.95 to $69.95 per night across the nation.\u00a0\u00a0 Today, the rate at the same hotels range from $89.95 to $129.95.\u00a0\u00a0 Why?, increased cost of operations caused by the 2007 increases in the minimum wage rate.<\/p>\n
There are those in Washington that know the simple truth.\u00a0\u00a0 If the government can cause inflation by increasing the minimum wage the cost of everything goes up.\u00a0\u00a0Inflated cost and revenue amounts cause the appearance of growth in the economy when in reality we produce less. \u00a0 One end result of lower production is less jobs. \u00a0The other result is\u00a0governments at all levels\u00a0collect more taxes. \u00a0 We will explore the effect of inflation and increasing the minimum wage on tax revenues in our next rant.<\/p>\n
The Redneck Economist<\/p>\n","protected":false},"excerpt":{"rendered":"
The Minimum Wage vs Inflation In 1938, the US Congress passed the 1938 Federal Minimum Wage Law.\u00a0\u00a0 The law established, for the first time, a minimum wage of $0.35 per hour for all workers employed by companies engaged in interstate commerce.\u00a0\u00a0 Congress amended the law during the 1940\u2019s and 1950\u2019s … Continue reading