If Minimum Wage Never Rose, Why Cost of Living Keeps Rising?

[jankren]

The idea behind not increasing the minimum wage is to prevent the cost of living from rising. So how come the cost of living still keeps on rising despite the lack of increase in the minimum wage in the past decade?

[Viking Prince]

Perhaps your premise is flawed. Labor inputs is only one variable that drives cost of living stats. Minimum wage is only one input that drives other wage rates to rise.

If you were to state that a rise in the minimum wage does provide a ratchet effect to the rest of the wage rates and thus feeds into a rise in the cost of living, you would be correct. You cannot draw from that any observation that the cost of living has risen therefore there must have been a rise in the minimum wage.

[LSJ]

One factor of an increased cost of living is how many income earners there are per family. Two working parents making as much as they did in 1990 is still twice as much as one also underpaid working parent. Many families now operate off of a two-person income. Two incomes per family means they buy bigger houses and better cars, and more of everything else. As well, on average, females now earn far more than they did decades ago.

It isn't 'good' business practice to keep costs the same. You charge people whatever they will pay for something. When families used to be able to afford $120,000 houses, you charged them that much, and a lot more for luxury models. Now almost every family can afford that. Where I live, many families can afford $400,000 houses now with university education and two sources of income. If people can pay $400,000 then that is how much you charge them for a house.

Of course this has negative effects for single people or single-income families (such as a single mother). They now cannot afford a house where they want one, and they have less money for other things.

[jankren]

So I wonder what purpose does Minimum Wage serve if Minimum Wage is one of the factors that drives cost of living? I mean if people make more, then they can afford more, and if people can afford more, businesses simply charge more. This is circular.

[Platon]

Because the LEND us the money so we can keep consuming

[Viking Prince]

Minimum wage laws are a political band aid for people to think that they are 'helping' those at the low end of the income ladder to be better able to obtain a 'livable' wage. However, not all potential employees are hireable at the minimum wage, but upon entering the workforce they could quickly be able to command higher wages with experience and training. So minimum wages act as a barrier to entry into the labor pool. The economic reality is that employers hire based upon the employee being a profitable addition to the workforce and not to provide the employee with money. There would be less unemployment among the low skilled portion of the workforce without the minimum wage laws. I am not saying that working for $5 dollars an hour is a solution to the problem, but it is better than not working at all. The idea that employers would simply lower wages to $5 for all employees is not valid though. Very few jobs are at the level of the minimum wage.

[Platon]

...The idea that employers would simply lower wages to $5 for all employees is not valid though. Very few jobs are at the level of the minimum wage.

It's very valid, and there are many jobs that could have very low wages.

[Thorn777]

It's very valid, and there are many jobs that could have very low wages.

Indeed, as seen in Germany not having a MW. What you get is masses of people getting additional govt money on top of their 1,50€-5,00€ an hour salary so they can survive - hence taxpayer money for lazy people on welfare actually working full-time so the wonderful and flawless businessworld can make use of this situation having the govt paying half the salaries as a business-model. Also US unions then needing to mediate wages allot more are rather inept compared to Germany's so it will be even more awesome in the US. Its pick or choose...the good thing is though that the rightwing can complain about the rising welfare-budget...I love you people...

I've been trough this with @VP and others in another thread, so I don't get why he still thinks it will be just wonderful...

[Viking Prince]

Indeed, as seen in Germany not having a MW. What you get is masses of people getting additional govt money on top of their 1,50€-5,00€ an hour salary so they can survive - hence taxpayer money for lazy people on welfare actually working full-time so the wonderful and flawless businessworld can make use of this situation having the govt paying half the salaries as a business-model. Also US unions then needing to mediate wages allot more are rather inept compared to Germany's so it will be even more awesome in the US. Its pick or choose...the good thing is though that the rightwing can complain about the rising welfare-budget...I love you people...

I've been trough this with @VP and others in another thread, so I don't get why he still thinks it will be just wonderful...

I think it to be the better of some really poor alternatives -- not wonderful. Nearly all existing jobs would remain at existing wages. Not all though. Like most in economics, we are working at the margin. But there would be a net increase in employment with the elimination of the floor. Another net benefit would be to discourage the hiring of illegals in a shadow labor market simply because the illegals are cheaper than minimum wage workers. The trick is to continue government assistance, but to allow a marginal gain by any employee who moves up in wages. Taking benefits away dollar for dollar is never a good means to get people off of the dole.

[Thorn777]

I think it to be the better of some really poor alternatives -- not wonderful. Nearly all existing jobs would remain at existing wages. Not all though. Like most in economics, we are working at the margin. But there would be a net increase in employment with the elimination of the floor. Another net benefit would be to discourage the hiring of illegals in a shadow labor market simply because the illegals are cheaper than minimum wage workers. The trick is to continue government assistance, but to allow a marginal gain by any employee who moves up in wages. Taking benefits away dollar for dollar is never a good means to get people off of the dole.

In Germany real-wages went down the last 10 years, unlike any other OECD country...and in the western country's around us with MW they had on average less unemployment the last two decades(and rising wages).

Germany's main export branches all have high unionized wages. So the current positive economic situation highlighted everywhere has nothing to do with having no MW...

Actually, if both me and my girlfriend were living on 20 Euro per day, assuming working Monday to Friday, we'd have more to live on than we do now.

Lemme guess, you live at home...

[jankren]

Yeah, I think Minimum Wage is foolish. It prevents unskilled people from finding work.

[Platon]

Yeah, I think Minimum Wage is foolish. It prevents unskilled people from finding work.

Of cource.. thats the best way actually to eliminate unemployment. You should be happy to have a job, even if it pays 20€/day.
Actually we should go back to allow slavery. At least as a slave you get free meals, roof over your head and free healthcare as long as you are productive. There is no way you can afford that with 20€/day in the EU today.

[Rolling Thunder]

Of cource.. thats the best way actually to eliminate unemployment. You should be happy to have a job, even if it pays 20€/day.
Actually we should go back to allow slavery. At least as a slave you get free meals, roof over your head and free healthcare as long as you are productive. There is no way you can afford that with 20€/day in the EU today.

Actually, if both me and my girlfriend were living on 20 Euro per day, assuming working Monday to Friday, we'd have more to live on than we do now.