Inflation and the Minimum Wage: The Left’s Stealth Wealth Redistribution Plan

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Daniel currently serves as the legislative liaison for the Tennessee Tenth Amendment Center in Nashville where he advocates for states' rights and against federal government overreach. He studies law at Belmont University and is pursuing career opportunities in Constitutional Law and Criminal Law litigation. Follow on Twitter: @Turklay
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Photo Credit: Fabrizio Costantini, The New York Times

Photo Credit: Fabrizio Costantini, The New York Times

NASHVILLE, February 9, 2014– The country again finds itself in yet another edition of the debate on the minimum wage. In fact, it’s difficult to assess whether or not debate has ever ended. It has been increased 29 times since FDR first implemented it in 1938, sometimes with multiple increases contained in the same bill. The omnipresent ploy to raise the minimum wage only pauses long enough for the left to pat themselves on the back after another successful campaign to increase it.

The minimum wage, and the increase thereof, is one of the most potent political weapons at the left’s disposal. Raising the minimum wage advances the narrative that the left is concerned for the welfare of the lower class while simultaneously making that group worse off by reducing the number of jobs available to them and making the price of nearly everything they buy more expensive to compensate for the raise that those who were lucky enough to keep their jobs were given.

There are three known consequences of increasing the minimum wage:

1. It costs jobs. The law of supply and demand dictates that when price increases, the demand for that product will fall. In this case, that means that the number of available jobs falls. Just because it is called a “law” of economics does not mean that Congress can change it through a piece of legislation.

2. It causes inflation. Prices rise due to the increase in wages. Those who are lucky enough to still have their job after the wage is increased will find that their purchasing power is not significantly increased, especially in the long-term. The costs of those wage increases are inevitably passed on to consumers.

3. It is devastating to our national trade deficit. The increase in wages and the resulting inflation cause American products and labor to become more expensive in relation to foreign goods and labor. This forces jobs overseas. This forces more manufacturing overseas. This makes the situation even more difficult, more expensive, and less profitable for those who still desire, or insist, on producing goods domestically. American economic policy should be encouraging domestic manufacturing; not hindering it.

The left is aware of these effects and counts on them as a perpetual source of election good-will. Nothing can be more beneficial politically for progressives than policies that purport to help the poor while keeping them in perpetual poverty and increasingly dependent on ever-expanding government programs.

But how does this tactic affect redistribution of wealth, the Holy Grail and underlying motivation of the progressive agenda? The inflation is the key here, and this applies to all inflationary monetary policies such as quantitative easing, in addition to minimum wage policy.
Inflation and hyper-inflation benefit those who are in debt. Progressive strategists know this intuitively. Inflationary policies are a very effective method of wealth redistribution as essentially everybody can be instantly debt free in an extreme enough scenario, thus transferring the wealth from the debt-holders to the debtors.

Imagine a country where minimum wage is $50/hr. $50 may only buy you a cheeseburger, but it’ll be a lot easier to make those car payments and mortgage payments that the contracts only say you have to pay back in “dollars”, not in “inflation-adjusted dollars” or in “2014 dollars”.

That reduction in the value of cash is a reduction in the value of all cash and all cash assets. Anybody with cash in the bank just had their wealth transferred to those who were “smart” enough to not have any cash reserves. Similarly, any entity that owns any debt are now holding assets that have been substantially devalued. Banks that made loans pre- inflation made loans in dollars that were worth substantially more than the dollars that they’ll be paid back in. Natural inflation is taken into account in interest rates, but there’s no way for a bank to take into account intentional, artificial, and arbitrary inflation imposed by government policy. The value of those assets are merely redistributed. The amount owed on mortgages, credit card debt, and student loans do not change, but the value of the unit, the dollar, being used to repay them are worth substantially less.

Instantly, the car that you owe the bank for is yours, nearly for free. The house that had a mortgage is yours, nearly for free and the only thing that’s changed is the scale on which we do business. Except we won’t be able to afford any foreign products, especially oil. Of course, this will also put everybody up into the highest tax brackets as everybody will be making over $100k/yr and considered “ rich”. But, of course they’ll adjust the tax brackets to account for the income discrepancies, right? The history of the Alternative Minimum Tax doesn’t support that conclusion either.

So there you have it. The minimum wage increase costs jobs, increases dependence on government and causes intentionally redistributionist inflation. It’s almost like they planned it that way? And no wonder why we’ll never stop hearing about it, no matter how many times the left is successful in convincing the country it’s the right thing to do. Don’t be fooled into thinking that the proposed minimum wage increase will solve any problems nor be the last we hear about it. The next edition is right around the corner.

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5 comments for “Inflation and the Minimum Wage: The Left’s Stealth Wealth Redistribution Plan

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  3. steve
    February 11, 2014 at 4:29 am

    It’s not the only illusion they created. They also created the illusion that it’s the business owners that are cheap for not giving their employees Health Insurance. It was never the responsibility of business to supply Health Insurance to it’s workers. Companies used Health Insurance benefits to lure good employees as an added benefit. Especially when FDR froze wages and Employers could not offer hire wages, they added in the Health Insurance. Now we have govt forcing businesses to pay health insurance for 40 hours, as if we are their property to use as pawns, which is cutting peoples work hours thereby making people even more dependent on govt for health benefits.

    The above two comments, if they’re not the same people are ridiculous. Obviously someone working an entry level job should not be being paid an engineers wages. Or raising a family on entry level job. If they want to complain about having to pay for their welfare. Then they should just keep killing opportunities for people at entry level jobs and they’ll be paying a hell of a lot more welfare. It didn’t work then and it ain’t going to work now.

  4. Michigan
    February 10, 2014 at 6:14 am

    Apparently you don’t understand economics either, or you’ve been going to the Paul Krugman school. Let’s look at your arguments.

    “1. It costs jobs. The application of Supply and Demand theory is fundamentally wrong. Also, if the statement were true, then companies like CostCo and WinCo would be out of business. The failure of minimum wage to keep up with the increases of the cost of living since 1980 has systematically shrunk the middle class. If you want to be upset about something, be upset at Walmart that has their employees’ wages subsidized by the taxpayers in the form of welfare while the Waltons are making record profits. That’s right, I don’t shop at Walmart but my tax dollars go to their employees because the Walton’s won’t pay them a decent wage. ”
    A decent wage is a squishy term that means nothing. I don’t like the government being used to redistribute wealth, but I also don’t fault people for using government programs to aid themselves. The minimum wage hike doesn’t affect wages currently being paid, unless they are currently below that amount. Since most people working at walmart have been there for a while, the minimum wage increase will not affect them one bit – except to decrease their purchasing power. Also your statement about CostCo and WinCo are factually inaccurate – those employees already make more than the minimum wage hike would be. (and no pay raise for them) CostCo makes good coin because they sell many items in bulk with bulk volume – that’s how they can afford to pay less employees more money than, say, a Kroger store, which doesn’t sell such volumes of products.

    “2. It causes inflation. Very laughable. Inflation is the direct result of the Fed printing money and weakening the dollar against other currencies. Money is being horded the rich which is not being circulated in the way Capitalism expects it to be as conceived by Adam Smith.”
    While you are correct that the FED causes inflation through the creation of new money, the FED isn’t the only cause. Increasing the minimum wage also affects inflation, as prices will go up to pay for the increased labor costs of people newly starting employment at a low/no skill job. Government deficit spending also causes inflation, as the FED buys bonds to cover the spending. Some of that is offset by the petro-dollar, as the US dollar is the currency under which oil is paid and traded in, so the US exports it’s inflation to the rest of the world’s currencies to a certain extent. (hence why the CPI excludes food and fuel – the first things to be affected by real inflation) Another cause of inflation is fractional reserve banking – giving loans at a ratio of cash on deposit, instead of only loaning as much cash as you have on deposit. Also your argument that money is being horded, I doubt you’ll find cash being left anywhere other than a number on a spreadsheet – the poster is correct about debt and the inflation effects. The rich sink their wealth into things like Berkshire-hathaway. It’s a great place to have funds since it’s basically a tax haven (since it doesn’t pay dividends) and capital gains taxes are significantly smaller, since they aren’t taken until the shares are sold. There’s no such thing as a Scrooge McDuck hiding cash in a money bin, especially when the value of cash is always decreasing.

    “3. It is devastating to our national trade deficit. We are not the manufacturing economy that we once were. Our economy has shifted more towards a service economy. An argument I recently had with someone said, that if McDonald’s is forced to pay workers $15 or even $22/hr, they would be forced to outfit their stores with robotics/computers to which I laughed because the people required to maintain machines like that cost a lot more that $22/hr.”
    While you are correct that the US has increased a service economy at the expense of manufacturing, it still has a large manufacturing base. And as an employee of a company who makes said mentioned robots, the person required to maintain those machines is not making as high as you boast (but will make higher than the new minimum wage, so they won’t get a pay hike), and they require training – something the low/no skill workers (or former workers) won’t have, and won’t get when those lower paying jobs evaporate. Also, only one worker for many restaurants is required for the service. That’s a significant ratio of people now out of work vs. those doing the maintenance.

    You are significantly short sighted, and lack compassion for those who are at the bottom. You plainly demonstrate you’ve never run a business, and find doing so repulsive.
    You seem to think that businesses are only there to extract from society, and discount any possible benefit they have. Those profits pay salaries of employees, and provide a way for more employees. No profit means less to no employees.
    You advocate policies that destroy poor people’s chances for getting out of poverty, and doom them to be reliant on politicians for their welfare. Politicians that only have their own interests in mind – getting re-elected, so they can get a good lobbyist job later, making millions at taxpayer (your) expense. They are good salesmen, and their bill of goods sounds good on paper, provided you don’t read the fine print. The effects of that are devastating to the people who need help the most.

  5. BlutoNYC
    February 10, 2014 at 5:38 am

    Whoever wrote this article needs to go back to school or probably has never gone to school in the first place. Or perhaps has other motives.

    Let’s look at the three arguments:
    1. It costs jobs. The application of Supply and Demand theory is fundamentally wrong. Also, if the statement were true, then companies like CostCo and WinCo would be out of business. The failure of minimum wage to keep up with the increases of the cost of living since 1980 has systematically shrunk the middle class. If you want to be upset about something, be upset at Walmart that has their employees’ wages subsidized by the taxpayers in the form of welfare while the Waltons are making record profits. That’s right, I don’t shop at Walmart but my tax dollars go to their employees because the Walton’s won’t pay them a decent wage.

    2. It causes inflation. Very laughable. Inflation is the direct result of the Fed printing money and weakening the dollar against other currencies. Money is being horded the rich which is not being circulated in the way Capitalism expects it to be as conceived by Adam Smith.

    3. It is devastating to our national trade deficit. We are not the manufacturing economy that we once were. Our economy has shifted more towards a service economy. An argument I recently had with someone said, that if McDonald’s is forced to pay workers $15 or even $22/hr, they would be forced to outfit their stores with robotics/computers to which I laughed because the people required to maintain machines like that cost a lot more that $22/hr.

    I find this article to be very shortsighted and probably write buy some businessowner’s kid who inherited the family company, slowly driving it into the ground, and if they can get away with not paying their employees at all, they would just so they could squeeze every possible nickle of whatever profit is left.

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