Inflation - what is it?

[Randolph]

I'm reluctant to enter this argument, but I feel somehow compelled. None of the points people have made are purely incorrect, but many are incomplete.

1. A strong argument can be made that an increase in the minimum wage will increase unemployment. When the price of [unskilled] labor is set to a point higher then the market equilibrium (where the supply and demand curves meet), there will be more people who want to work at the set wage then employers who wish to pay it. This is a very solid “macroeconomics 101” understanding of the impact of a minimum wage (there is no doubt this is the “correct” basic economic analysis).

Unfortunately, real markets are much more fickle then economic models, and actual studies have had mixed results. Many studies have found no significant result, and one or two actually found an increase in employment when the minimum wage was implemented.

2. The connection between a minimum wage increase and inflation is much more tenuous. An employer will never be able to pass on all of the increased costs of production (including wages) to consumers (unless demand was perfectly inelastic, and it’s not even close in most markets that involve minimum wage work). There will also not be more total spending money, particularly if the analysis in (1) is correct (unemployment = less spending money); and the fact that some people will have more money will increase the demand for goods, and thus suppliers will respond with increased production (stimulating the economy).

Most importantly though the impact of the minimum wage on inflation is simply not significant. It’s a drop in the ocean compared to things like the price of oil.

3. Unfortunately, this has become a partisan political issue, rather then a mutual goal improve the welfare of society. Clearly many people here have been listing to the right-leaning champions of the free market, many of whom are not against the minimum wage because in increased unskilled unemployment, but because it increases the profit line of huge companies. Others have been listening to the left-leaning social welfare folks who often ignore the big picture impact.

Try to keep in mind that when a politician or someone advocating a particular political position makes a “factual” statement about economics it’s probably a half-truth; this goes for both sides.

 

[Jheronimus]

Inflation is when you have to spend money to buy a game and then its expansion pack to get a "finished" product.

Good one , I think you might be right here, maybe the developers leave things out of the main game to introduce in expensive expansionpacks.

 

[Tommy1234567890]

Insert mouth into balloon --> blow outwards.

lol good one

 

[clinton]

Just so everyone is clear on this, the inflation in civ4 is nothing like the inflation in real life. Inflation in real life is the devaluation of currency. This effects both income and expenditure. So in real life, if inflation was 900% per annum, your wages will go up 10x per annum, and costs would go up 10 times, barring other factors. However, the relative, sometimes called "Real" cost of goods does not rise if inflation.

But, in civ4, "civ4 inflation" is the rise in the real cost of maintainence. Without a corresponding income. This effectively means the economy is becoming more inefficient. This is quite unrealistic, as in actual fact, successful economies become more efficient, not less so over time (not commenting on whether its good or bad from a gameplay perspective).

 

[devilhunterred]

in real life a country can easily battle out inflation by increasing interest rates

i wonder why you can't control interest rates in civ IV though

in fact there is even no such thing

 

[homan1983]

It raises the cost of doing buisines, thus raising the cost of goods produced, thus making the money you made less valuable.

What people forget is raising minimum wage has the effect of raising all wages across the board over time. For example if you make $7 an hour, but the minimum wage is raised to $7 an hour, so all the less skilled employees under you are now making the same as you, you would demand a raise right?

By the logic of raising minimum wage, you might as well make it so everyone makes at least $100,000 a year no matter what. Think about what would happen if that was enacted, and you will understand how it causes inflation.

LOL

The effect minimum wage has on inflation is like the effect of gravity on the Sun from Pluto.

It is negligible to the point of not existing.

Inflation is caused by many things, but minimum wage isn't one of them.

Unless you go to the extreme of making the minimum wage $100,000 a year.

 

[sherrick13]

LOL

The effect minimum wage has on inflation is like the effect of gravity on the Sun from Pluto.

It is negligible to the point of not existing.

Inflation is caused by many things, but minimum wage isn't one of them.

Unless you go to the extreme of making the minimum wage $100,000 a year.

Wrong, for many reasons, not the least of which Unions peg their wages to the minimum wage (another reason democrats support it), thus driving up ALL wages.

 

[homan1983]

Unfortunately that is NOT the case as has been pointed out many times in this thread.

Inflation and Minimum Wage are two completely unrelated entities. However many republicans are against it as it

a) Reduces profit margins of companies who hire people and pay below minimum wage by increasing their expenditure

b) Means wealthy people can't hire dirt-cheap labor to do the dirty work in life for them

Of course the republicans can't come out and say this, they'd look greedy to the people who vote for them - so the concucted some BS story about minimum wage increasing inflation thus damaging the working and middle classes.

 

[blaugh]

Minimum wage is constantly increasing here in Canada (in my province it has increased twice (I think) in the last few years), and there are no problems with inflation, nor any concerns about it.

 

[KiOwA_25]

Inflation in Civ is basically meant to provide something of an incentive to the player to continue developing his/her economy via expansion/war/both, rather than just sitting and turtling.

OTOH, no one can possibly argue real-life inflation encourages economical expansion.

 

[Traxis]

The problem with minimum wage is if your labor is only worth $6/hr, and minimum wage is $7/hr, you are now priced out of the job market. This makes it a lot harder for unskilled workers to get their start. The biggest problem with poverty is people not being able to get a job in the first place. When you are too poor to afford higher education or job training, your only starting point is on the bottom rung of the ladder, and minimum wage raises that rung higher. It can be good for some people, but for others it puts that rung out of reach.

 

[seanlo]

By the power of grayskull I resurrect thee!

I can give you rough idea in explanation as I started working my first job right before minimum wage decided to go up. When I was 16 I got a job at 4.25/hr. Candy bars (just a given item of small value to show the increase that took place - not to mention something I bought alot of back then) costed $0.33-$0.49. Then the idea of taking minimum wage to 4.75 came out. Of course, naturally, I was all about this as it meant more money in my pocket or so I thought. (months later it raised to the 5.15 it is now)

However, my family explained how this was a bad move. Here is why. The grocery store I worked at had alot of minimum wage employees as do many many companies out there. SO naturally to make up for this hit on their profits for payroll, they had to increase prices to compensate. Not only for the loss of money but to adjust to the new economy as well. There is more money out there for grabs so campanies not only raise prices so that they can pay their employees but add in a bonus profit cost to take their fair share of the bigger pie.
So when your getting a minimum wage raise, you have to realize prices are about to go up. That same candy bar is now $0.79-$0.99. The price doubled, but minimum wage didn't. Before the candy bar was worth about 4 mins. of work. Now it costs about 10 mins. of work. That is an expensive candy bar. Minimum wage people are actually now more poor than they were before minimum wage went up.

Also, the people that have jobs that are paid more than minimum wage can't get as much from their paycheck anymore. This $0.90 raise in minimum wage has demoted some workers in the workforce. How would you feel if you had worked 2 years to get up to $5.50/hour from $4.25 and now minimum wage goes up. 2 years of work are now worth less than when you started the job.

Raising minimum wage is targeted at, ideally, decreasing income disparity. But decreasing income disparity (I personally think) is better handled by bringing jobs into the economy that have competative wages and not rely on what the minimum standard is. Here in KC your not going to make it if you work a full-time minimum wage job. Even if you got an extra 10-20 hours of overtime that week. Heck, take 40 hours of overtime everyweek and you would be lucky to get by for a year or two.
Minimum wage being raised seems like an obvious solution, more dollar bills are printed out to accomodate it, thus decreasing their value. A 1994-95 US dollar was worth more than a 2006 by a very noticable amount... if your broke. If your rich, you probably didn't notice too much. Middle class, I am not sure how much it affected them.

There has to be at least 1 benefit to this though I would think. I have never heard a valid one to this day though.

EDIT: I will throw in that the candy bar is a bit high upon thinking about it because it is a cheap item. Something that costed about 20 bucks would now be about 25-30. So just under 5 hours of work to buy it in the 90s and between 5-6 hours now. The higher priced the item, the less the difference. The amount of high price items you can afford at minimum wage, not much.

I have to correct this absurd argument by raising this thread from the dead. Purpose : Prevent the innocent malleable children who read this thread from being brainwashed by this nonsense.

Folks, that's a pile of garbage.

The real answer here is BALANCE. When dad and mum work full minimum hour wages, and is not able to pay their bills, rent a house to stay, afford health insurance, purchase a car, you have a problem. In the meantime, the rich(top 5%) owns 90% of all the wealth in your country (USA)..
THEN the problem is solved by RAISING the minimum wage.
The side effect here is a slight inflation. Not 100% inflation like Mr Doomsday prophet claims.

When dad and mum are able to buy all the above, afford you a good life, and you double their minimum wage, THEN you MIGHT have a 100%+ inflation. If your government decides to print 10 trillion dollars to finance his rich buddy's projects, THEN you will have 5000% inflation like them south african countries.

 

[Grimz101]

you evil thread necroing B*******

and inflation is evil.. it makes corporations broken

 

[King Flevance]

Dude, what the hell? If you are working a minimum wage job as a mother or father, you need to set the bar a little higher. In my country.

The reason inflation went up by 100% in my example was because it was a freaking candy bar. Read the edit.

The real answer here is BALANCE.

Balance? Balance of what? That's like saying the answer is 4. Which by the way people, the real answer here is 4.

When dad and mum work full minimum hour wages, and is not able to pay their bills,rent a house to stay, afford health insurance, purchase a car, you have a problem.

That means minimum wage is below the poverty level for a 40 hour work week. And I am sorry to say but if Mom and Dad don't have enough initiative to go find a job that pays above minimum wage, we have a problem. 80 hours worth of work puts you in the lower middle class income bracket AT minimum wage. So even minimum wage families can meet this. Or a single parent working either 2 minimum wage jobs, or 1 job that pays decent.

I have watched minimum wage go up over the past 12 years here. Each time, the inflation knocks out the benefit of it raising. Think about this. A guy owns some real estate property that he rents out to people. He doesn't get paid minimum wage. So when everyone else gets this raise, inflation occurs. Well, he is still making the same amount of money off his property as he was before this inflation. He doesn't like that. So guess what? He raises rent. And he doesn't sit down with a calculator and figure up the correct inflation rate to charge, he just grabs a number like 50 or 100 bucks more a month. He actually just pulled more out than what any of his minimum wage tenants just got out of the system. All businesses do this when they see there profit margins drop when minimum wage is increased. SO they end up sucking more money out than they were before.

Is minimum wage at 7 bucks an hour now here in the states? I think it is. If you think gas will ever drop below 2 bucks a gallon again, your dreaming. Unless those electric cars start getting alot of financial backers.

(It's funny too because I was just thinking about this old ass thread about a week ago.)

I am curious seanlo? Our poverty level here is just under $20,000 a year. So why not according to your view of this just raise minimum wage to about 25,000 a year?

 

[tucnymaster]

If you raise the minimum wage, the percentage of the owner's plus-value will diminish. So the real income of the guy working on minimum wage will go up, but NOT the income of someone not working on minimum wage.

And to the one who said if the government made gas prices would go up to 5$ a galloon, just know that if the taxes are well redistributed it can do some positive change.

 

[exile2]

People who oppose the minimum wage generally don't work in minimum wage jobs and would like to receive cheap goods and services at the expense of the people who produce such goods and services.

Odd that the argument is NEVER applied when it comes to salaries and bonuses for CEOs which run into millions of dollars. Where does THAT money come from? Either from customers or stockholders.

Afraid this is a classic left-right argument where neither side is prepared to apply the logic of their position across the board, but only where it suits their wider political prejudices. That is, lefties tend to want low paid workers to get more money, right wingers want the rich to get more money. The economic arguments are secondary.

 

[Silence101]

I can give you rough idea in explanation as I started working my first job right before minimum wage decided to go up. When I was 16 I got a job at 4.25/hr. Candy bars (just a given item of small value to show the increase that took place - not to mention something I bought alot of back then) costed $0.33-$0.49. Then the idea of taking minimum wage to 4.75 came out. Of course, naturally, I was all about this as it meant more money in my pocket or so I thought. (months later it raised to the 5.15 it is now)

However, my family explained how this was a bad move. Here is why. The grocery store I worked at had alot of minimum wage employees as do many many companies out there. SO naturally to make up for this hit on their profits for payroll, they had to increase prices to compensate. Not only for the loss of money but to adjust to the new economy as well. There is more money out there for grabs so campanies not only raise prices so that they can pay their employees but add in a bonus profit cost to take their fair share of the bigger pie.
So when your getting a minimum wage raise, you have to realize prices are about to go up. That same candy bar is now $0.79-$0.99. The price doubled, but minimum wage didn't. Before the candy bar was worth about 4 mins. of work. Now it costs about 10 mins. of work. That is an expensive candy bar. Minimum wage people are actually now more poor than they were before minimum wage went up.

Also, the people that have jobs that are paid more than minimum wage can't get as much from their paycheck anymore. This $0.90 raise in minimum wage has demoted some workers in the workforce. How would you feel if you had worked 2 years to get up to $5.50/hour from $4.25 and now minimum wage goes up. 2 years of work are now worth less than when you started the job.

Raising minimum wage is targeted at, ideally, decreasing income disparity. But decreasing income disparity (I personally think) is better handled by bringing jobs into the economy that have competative wages and not rely on what the minimum standard is. Here in KC your not going to make it if you work a full-time minimum wage job. Even if you got an extra 10-20 hours of overtime that week. Heck, take 40 hours of overtime everyweek and you would be lucky to get by for a year or two.
Minimum wage being raised seems like an obvious solution, more dollar bills are printed out to accomodate it, thus decreasing their value. A 1994-95 US dollar was worth more than a 2006 by a very noticable amount... if your broke. If your rich, you probably didn't notice too much. Middle class, I am not sure how much it affected them.

There has to be at least 1 benefit to this though I would think. I have never heard a valid one to this day though.

EDIT: I will throw in that the candy bar is a bit high upon thinking about it because it is a cheap item. Something that costed about 20 bucks would now be about 25-30. So just under 5 hours of work to buy it in the 90s and between 5-6 hours now. The higher priced the item, the less the difference. The amount of high price items you can afford at minimum wage, not much.

Excellent explaination - I completely agree. It still strikes me as odd whenever people vote for a minimum wage increase. I think there's many people who don't understand this concept.

A little off topic... yes - but good post.

 

[Silence101]

People who oppose the minimum wage generally don't work in minimum wage jobs and would like to receive cheap goods and services at the expense of the people who produce such goods and services.

Odd that the argument is NEVER applied when it comes to salaries and bonuses for CEOs which run into millions of dollars. Where does THAT money come from? Either from customers or stockholders.

Afraid this is a classic left-right argument where neither side is prepared to apply the logic of their position across the board, but only where it suits their wider political prejudices. That is, lefties tend to want low paid workers to get more money, right wingers want the rich to get more money. The economic arguments are secondary.

When I started working, I was working minimum wage. I worked hard though - I didn't fret about all the people who made more money than me. I didn't think that I somehow deserve to be making more money. I didn't blame my CEO, the stockholders, the republicans, or anyone - I worked hard. I have a hard time understanding the "help the rich arguement" that classic left wingers throw out there. I'm not rich. I claim no loyalty to rich people. I am for allowing average, ordinary people like myself to gain skills, work hard, and take responsability for their OWN lives.

 

[steveit546]

Ok, I think the problem here is very straightforward. The free market arguments here are largely theoretical. The leftist arguments here are largely not based on anything. Here is what I have to say about the matter. First of all, the minimum wage has minimal effects on inflation. I have not seen anything about the minimum wage written in The Economist lately. The bigger problems we face here are a result of high oil prices and high government debt.

However, despite its minimal effect on inflation, I do not personally believe in a minimum wage. I cannot accept any legislation that places limitations on contracts between two consenting individuals, companies, and what have you. Although it is not a big cause of inflation, the minimum wage hurts America and other industrialized nations. Corporations will move operations with lots of minimum wage jobs overseas to avoid having to pay artificially high wages.

This is a transcript from an interview with Milton Friedman:

FRIEDMAN: Let me give you a very simple example. Take the minimum wage law. Its well-meaning sponsors -- there are always in these cases two groups of sponsors. There are the well-meaning sponsors and there are the special interests who are using the well-meaning sponsors as front men. You almost always when you have bad programs have an unholy coalition of the do-gooders on the one hand and the special interests on the other. The minimum wage law is as clear a case as you could want. The special interests are, of course, the trade unions, the monopolistic craft trade unions in particular. The do-gooders believe that by passing a law saying that nobody shall get less than $2 an hour or $2.50 an hour, or whatever the minimum wage is, you are helping poor people who need the money. You are doing nothing of the kind. What you are doing is to assure that people whose skills are not sufficient to justify that kind of a wage will be unemployed. It is no accident that the teenage unemployment rate -- the unemployment rate among teenagers in this country -- is over twice as high as the overall unemployment rate. It's no accident that that was not always the case until the 1950's when the minimum wage rate was raised very drastically, very quickly. Teenage unemployment was higher than ordinary unemployment because, of course, teenagers are the ones who are just coming into the labor market -- they're searching and finding jobs, and it's understandable that on the average they would be unemployed more. But it was nothing like the extraordinary level it has now reached -- it's close to 20%.

HEFFNER: Why?

FRIEDMAN: Because the minimum wage law is most properly described as a law saying employers must discriminate against people who have low skills. That's what the law says. The law says here's a man who would -- has a skill which would justify a wage rate of $1.50, $2.00 an hour. You can't, you may not employ him. It's illegal. Because if you employ him you have to pay him $2.50. Well, what's the result? To employ him at $2.50 is to engage in charity. Now there's nothing wrong with charity. But most employers are not in a position where they can engage in that kind of charity. Thus the consequences of minimum wage rates have been almost wholly bad, to increase unemployment and to increase poverty. Moreover, the effects have been concentrated on the groups that the do-gooders would most like to help. The people who have been hurt most by minimum wage laws are the blacks. I've often said that the most anti-Negro law on the books of this land is the minimum wage rate. And so I think the real answer to your question is that you must not judge a bottle solely by its label. You have to look at what's inside and see what the law or the measure produces.

5:00

HEFFNER: If one looked at the label, though, and perhaps one of those government regulations that you would look askance at, is that we look at labels. If one looked at the label and identified the objective of minimum wages, are there no positive, legitimate objectives achieved by minimum wage?

FRIEDMAN: None whatsoever. In my opinion, there's absolutely no positive objective achieved by minimum wages. It's real purpose is to reduce competition for the trade unions and make it easier for them to maintain wages of their privileged members higher than the others. And again, go back to my earlier point. Is there any group in this country that has been more discriminatory in its effects than the trade unions? It used to be at one time -- to take this point of yours farther -- you and I are both old enough to remember that it used to be lese majeste to criticize trade unions -- trade unions were on the side of the angels -- and it was an automatic (pause) conditioned reflex on the part. of any intelligent, well-meaning man, if you said trade union, 'ah, good." That's changed. And desirably, it's changed. Why has it changed? Because the harm which they've done -- do -- has become so absolutely obvious and patent. But even the most innocent and naive of well-meaning people -- he might still have a warm feeling in his heart for labor, but he no longer makes a mistake of equating labor with labor unions.

 

[pikesfan]

And I am sorry to say but if Mom and Dad don't have enough initiative to go find a job that pays above minimum wage, we have a problem.

What does their initiative have to do with anything? I may have the initiative to find a new official patch for BtS to replace the Bhruic patch, but that doesn't mean there is one, or that Firaxis will be moved to provide one. I neither have the power to compel such a thing be done, or the influence to persuade them to provide one, or ability to manipulate them so they think that complying with my wishes is in their interests. All I can do is wait for an official patch, or do without; they have the power, I have none. Same with jobs.

I understand the argument that having a minimum wage makes employers reluctant to hire people who are not worth that wage but you have to have something to prevent employers from imposing a wage that will not keep the employee alive. And I say "impose" because it is just ludicrous to speak here of two sides negotiating. In most circumstances the employer has all the power here; the would-be employee has none.