evilgenius wrote:As it stands, the minimum wage reflects more of a clutching to some sort of safe idea regarding the impact of inflation. Perhaps people know instinctively that participating in an economy with the sort of responsive dynamic that adjusting the minimum wage that way would bring could lead to high inflation. Maybe they remember the wage/price spiral of the Nixon years?
Spot on here, I think. (But maybe only for those old enough to have experienced and remember the 70's and 80's which high inflation and interest rates). Being 60, I have vivid memories of the 70's and early 80's inflation and how frightening it was. I remember being delighted and amazed when in my 401'K somewhere around age 25 to 27, I was able to get NO RISK tax deferred interest rates of about 14.5% on something that behaved like a short term bond fund. That seemed more attractive to me than the stock market at that point.
I'm 60. I vividly remember moving my bank account from the "premium" 5.75% "high" "Golden Nest Egg" account I'd had since I started stuffing lawn mowing and snow shoveling money in that at the ripe old age of 12. I moved it to 6 month CD's and rolled those over (you had to do that manually back then) shortly before entering college, say summer of '77.
I remember my teller remarking to a nearby teller "there goes another one", re my transaction. (I guess such accounts were becoming a thing of the past). I don't remember specifically what interest rate I got in '77, but I think it was near 10%. I DO remember getting rates like 15% and 16% near the peak around '81 - '82. I DO remember noticing prices rising in the grocery store every week and certainly EVERY MONTH when I started working, and finding that scary.
Around that time a friend told me he locked in 17% for a 30 month CD. Inflation was so variable, I was "scared" to do that, since I was investing my lifetime savings in CD's.
And working part time in the 70's starting in '76 and noticing the minimum wage, I certainly did figure that minimum wage rises might well be strengthening the wage/inflation spiral, even when such a raise impacted me. It seemed like sheer madness to me.
I remember being delighted and amazed when in my 401'K somewhere around age 25 to 27, I was able to get NO RISK tax deferred interest rates of about 14.5% on something that behaved like a short term bond fund. That seemed more attractive to me than the stock market at that point.
So I will say that if we're going to have a minimum wage policy, we should at least keep an eye on potential inflation, as part of the policy. Hopefully, since automation, etc. MAY have largely decoupled inflation from a tight correlation with wages, hopefully it wouldn't be a significant issue now. But I DON'T think we can just assume that and ignore it if inflation gets to spiraling again.
Given the track record of the perma-doomer blogs, I wouldn't bet a fast crash doomer's money on their predictions.