Why do we raise minimum wage every year and who does it?

[dallen47]

I was looking at this workers compensation poster at my job and it shows that minimum wage raises every year by 50 cents to a dollar. Who came up with this law?

Also, isnt that a problem? if we raise the minimum wage, prices of goods have to go up which brings down the value of a dollar. Eventually we will have to change currency because it wont be worth anything! If im wrong, please explain this to me.

[vohkinne]

Congress does. They do so because the public is too economically ignorant to understand that a price floor creates a surplus (in this case unemployment). Of course, being economically ignorant has never been a disqualification from Congress either. Besides, the biggest pushers for MW are unions. When the minimum wage is increased they use that to push for higher wages in their wage cartels. Congressmen get paid handsomely by unions to do this.

[aingeni]

Minimum Wage and Currency valuation don't really play a role on each other. MinWage is a Government Mandate of what a minimum wage should be paid to a worker. The problem is that such a mandate forces prices on widgets to rise because the cost to manufacture those widgets continues to increase. So either 1 of 2 things happen... The wage-cost increase is passed along to the consumer and we pay higher prices and, in effect, pay for the Government's mandate. Or the market refuses to accept the cost increase and labor must be trimmed back. Thus dumping workers into the unemployment line.

Typically Option 1 (passing cost along) is usually successful. But in hard economic times, Option 1 fails and Option 2 (laying off workers) becomes the standard practice.

[westbroc90]

Minimum Wage and Currency valuation don't really play a role on each other. MinWage is a Government Mandate of what a minimum wage should be paid to a worker. The problem is that such a mandate forces prices on widgets to rise because the cost to manufacture those widgets continues to increase. So either 1 of 2 things happen... The wage-cost increase is passed along to the consumer and we pay higher prices and, in effect, pay for the Government's mandate. Or the market refuses to accept the cost increase and labor must be trimmed back. Thus dumping workers into the unemployment line.

Typically Option 1 (passing cost along) is usually successful. But in hard economic times, Option 1 fails and Option 2 (laying off workers) becomes the standard practice.

Its not automatic that an increase in minimum wage will cause an increase in prices, nor create surpluses. It does not lead to unemployment.
For one thing, in most areas, employees are making over minimum wage so the effect is not that harsh.
It also builds up a consumer base which is needed to drive the economy, and decrease unemployment. Now, more consumers means more demand, which could cause prices to rise, but that would be a good thing in a recession.

[baigh]

I don't know what happens in your state, but FEDERAL minimum wage is voted on by congress. Don't expect MW to go up this year because inflation is down. Further, prices of goods don't go up because there is no cause to link cost and price. Price will be what the market will bear, cost includes paying wages. If it begins cutting into profit, therefore, low-end people get fired or get less hours to make up the difference. You are correct, however, about there being a feedback effect from getting a higher wage even if you got the sequence backward - you can buy more stuff, and stores and suppliers will frequently try to sneak prices up to soak up that extra money from your pocket.

Inflation is the last of our problems right now, with the possible exception of buying imports.