> No, what it does is it causes prices to go up, which are amortized across all of society - between both people who are paid $15/hour, and people who are paid $150/hour.
Do people who are paid 10x necessarily consume 10x over a person paid minimum wage? If raising the minimum wage causes across the board price increases (aka inflation), then those whose income is lower are affected more since a higher percentage of their income is spent on essential consumption (food, water, shelter).
If the operational concept is "small wealth transfer" to the folks earning the lowest income using inflation as a stealth tax then it is a highly regressive tax.
Using polling data for 31,869 households in thirty-eight countries and allowing for country effects, we show that the poor are more likely than the rich to mention inflation as a top national concern.
> Do people who are paid 10x necessarily consume 10x over a person paid minimum wage?
Even if their consumption was 1x, my point would still stand. Most people aren't earning minimum wage, nor are their salaries affected by minimum wage increases. This means that the cost of most products does not increase as minimum wages increase.
Minimum wage increase money comes from somewhere, and since ~everyone relies on minimum wage workers, that means that ~everyone pays for that wage increase.
If you take a dollar away from 100 people, and split half the resulting money between the 10 poorest in that group, and the other half between the next 20, it's a regressive tax, with a progressive benefit that has a net benefit for the poorest. Minimum wage increases work the same way. The rich lose very little, the middle class lose some, the poor win.
Are there better ways of structuring this sort of thing? Theretically yes, but practically, the rich are really, really good at protecting themselves from wealth redistribution. If you're going to hold the poor hostage to them, you're never going to get anything done.
The stealth taxation of inflation affects the lowest 30 in the 100 the most in order to pay the lowest 10. The change in purchase power is not like taxing everyone $1. Whether it’s like taxing on a sliding scale from low to high income that is $1 to $.5 or $1 to $0, I don’t know, just $1 across the board isn’t right. There are probably second order confounders as well, for example since federal gas ax is not inflation indexed, inflation acts as a tax cut.
“It isn’t the sum you get, it's how much you can buy with it, that's the important thing; and it's that that tells whether your wages are high in fact or only high in name.”
Mark Twain A Connecticut Yankee in King Arthur's Court (1889)[0]
$1 across the board is, indeed, not right. In reality, people higher up on the wealth scale would pay more (as they consume more goods and services - just not 1:1 proportionately more.)
A change in real dollars still affects lower income folks more because a higher percentage of income is devoted towards basics. Inflation reduces purchasing power for all, but some categories of spending cannot be substituted or eliminated.
U.S. households with higher incomes spend more money on food, but the amount spent represents a smaller overall portion of their budgets. In 2020, households in the lowest income quintile spent an average of $4,099 on food (representing 27 percent of income), while households in the highest income quintile spent an average of $12,245 on food (representing 7 percent of income).
So, you're saying that for every dollar taken from the poor (to be redistributed to the working poor), we'd be taking three dollars from the rich (to again, be redistributed to the working poor)?
That seems to support my point that raising the minimum wage disproportionately helps the working poor.
Key word is proportionate. Inflation disproportionately affects those with low income. The affects are not linear—look at the difference in pct income to food in lowest quintile compared to others. A dollar from the lowest quintile is objectively more valuable in purchasing power than three dollars is to the highest.
It’s akin to the company town giving a buck more in wages but charging 2 more in groceries. Sure you make “more,” but since you can buy less of what you need, you are effectively making less.
Do people who are paid 10x necessarily consume 10x over a person paid minimum wage? If raising the minimum wage causes across the board price increases (aka inflation), then those whose income is lower are affected more since a higher percentage of their income is spent on essential consumption (food, water, shelter).
If the operational concept is "small wealth transfer" to the folks earning the lowest income using inflation as a stealth tax then it is a highly regressive tax.
Using polling data for 31,869 households in thirty-eight countries and allowing for country effects, we show that the poor are more likely than the rich to mention inflation as a top national concern.
https://www.jstor.org/stable/2673879