5 ms·

So input costs rise, some business cut services, some raise prices, causing inflation. Not sure what the news story is here. Anyone interested in the truth wil

So input costs rise, some business cut services, some raise prices, causing inflation. Not sure what the news story is here. Anyone interested in the truth will tell you that raising the minimum wage will destroy at least some jobs.

conanbatt 7y ago
Increasing minimum wage is unrelated to inflation. Inflation is purely a monetary phenomenon.
- formercoder 7y ago
  Output prices rise, aka inflation happens, when input costs rise. Input costs can either rise due to market forces or regulation.
  - conanbatt 7y ago
    Changes in relative pricing are not inflation. Inflation is the generalized increase in nominal prices: doubling minimum wage, if it affects prices, will not increase the cost of a lambo or a yatch, etc. The inflation model that is all about costs is old and not correct. The government institution in charge of controlling inflation is the Fed, through monetary policy. Sidenote: getting a bit tired at the insta-downvotes on any straight-forward opinion.
    - deleted 7y ago
      [deleted]
    - Anon1096 7y ago
      >The inflation model that is all about costs is old and not correct. I mean, okay if you believe this, but you should know that it isn't popular. The way we measure inflation is the CPI and common consumer products. Lambos and yachts can be stagnant while inflation is still occurring.
    - formercoder 7y ago
      I thought we measured inflation with something like the CPI-W, which tracks the prices of a basket of goods. Am I missing something?
      - conanbatt 7y ago
        The purpose of measuring prices of a basket of goods as opposed to a BigMac Index is to diversify the subjects to measure inflation. Inflation is the generalized increase in prices which means that supply/demand shocks that change the prices of some goods but not others are not inflation by definition. Goods change prices all the time relatively (a new technology makes something cheaper, a climate disaster makes a produce more expensive, etc). Changes in MW are not going to impact all goods: for starters it will not impact goods you import. It is a bad habit of news to call inflation to a subset of goods (asset inflation, healthcare inflation, etc) but that is just plain incorrect in terms of economic terminology. The Fed is not concerned for healthcare costs rising, they are concerned for inflation which is when everything rises because the money supply outpaces economic output growth. Going deeper: before the Milton friedman era, the Keynesian era had the argument that inflation was a problem of the cost of production of goods. So if you could stop that from happening you could stop inflation, resulting in price control policies, collective union bargaining for fixed prices, etc. It was considered and thought that fiscal policy and regulation could stop inflation and even Nixon got into that. Milton Friedman ushered the new era with the phrase from another comment: Inflation is always and everywhere a monetary phenomenon. Countries today that use the old model, that price controls could fix inflation, include Venezuela and Argentina, that have the worst inflations in the world. Argentina has taken this concept that inflation is on the measuring of the basket of goods that they manipulate the statistic two ways: first, the agree to price controls and make sure the controler products are in the basket of goods, to claim lower inflation than real. Second, to actually fudge the numbers of inflation as measured. Naturally, neither strategy works, because as long as you have a monetary imbalance, you have inflation. Hopefully you are at least amused by my expose!
- harryh 7y ago
  This is correct. "Inflation is always and everywhere a monetary phenomenon in the sense that it is and can be produced only by a more rapid increase in the quantity of money than in output." -Milton Friedman
- Mikeb85 7y ago
  Price inflation locally is definitely related to the cost of inputs (like minimum wage). You're right about the academic definition of inflation, theoretically with a fixed supply of money, a rise in minimum wage would simply be offset by a reduction in jobs, hours or profit. But the money supply is ever increasing, so here we are...
pytester 7y ago
>Anyone interested in the truth will tell you that raising the minimum wage will destroy at least some jobs. This is the "big lie" used to justify keeping it low. The reality is that minimum wage hikes hit profit margins first and hardest, inflation next and jobs get hit last (maybe if it gets hiked $10 / hour). http://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.421.7637&rep=rep1&type=pdf http://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.421... >"Studying profitability is important because the empirical evidence suggests that minimum wages do raise the earnings of low wage workers, but do not seem to have large negative employment consequences." >"Across both datasets our results show that that profitability was significantly reduced by the introduction of the minimum wage. " Minimum waged labor is very, very, very inelastic. For better or worse the people who clean your toilets and serve you coffee in the mornings are extremely necessary and very hard to substitute. Much more so than most middle class jobs, even. Business lobbies know this to be the truth, but they know that they will get nothing but by asking the general public to have sympathy for their falling profit margins. So, they try to scare the shit out of you by claiming that they will be forced to fire you instead (e.g. this expensive billboard for the national restaurant association demonstrating their concern): https://pando.com/2014/07/17/new-san-francisco-billboard-warns-workers-theyll-be-replaced-by-ipads-if-they-demand-a-fair-wage/ https://pando.com/2014/07/17/new-san-francisco-billboard-war...
- theodorejb 7y ago
  If a business's profitability drops, that very frequently translates to lost jobs or cut hours in order to preserve expected returns. Otherwise the business may close entirely and the owners seek to invest in a more profitable venture.
  - pytester 7y ago
    >If a business's profitability drops, that very frequently translates to lost jobs or cut hours in order to preserve expected return Businesses that slash necessary costs in response to cut margins have a special word to describe them: Bankrupt.
- mrfredward 7y ago

conanbatt 7y ago

Increasing minimum wage is unrelated to inflation. Inflation is purely a monetary phenomenon.

formercoder 7y ago
Output prices rise, aka inflation happens, when input costs rise. Input costs can either rise due to market forces or regulation.
- conanbatt 7y ago
  Changes in relative pricing are not inflation. Inflation is the generalized increase in nominal prices: doubling minimum wage, if it affects prices, will not increase the cost of a lambo or a yatch, etc. The inflation model that is all about costs is old and not correct. The government institution in charge of controlling inflation is the Fed, through monetary policy. Sidenote: getting a bit tired at the insta-downvotes on any straight-forward opinion.
  - deleted 7y ago
    [deleted]
  - Anon1096 7y ago
    >The inflation model that is all about costs is old and not correct. I mean, okay if you believe this, but you should know that it isn't popular. The way we measure inflation is the CPI and common consumer products. Lambos and yachts can be stagnant while inflation is still occurring.
  - formercoder 7y ago
    I thought we measured inflation with something like the CPI-W, which tracks the prices of a basket of goods. Am I missing something?
    - conanbatt 7y ago
      The purpose of measuring prices of a basket of goods as opposed to a BigMac Index is to diversify the subjects to measure inflation. Inflation is the generalized increase in prices which means that supply/demand shocks that change the prices of some goods but not others are not inflation by definition. Goods change prices all the time relatively (a new technology makes something cheaper, a climate disaster makes a produce more expensive, etc). Changes in MW are not going to impact all goods: for starters it will not impact goods you import. It is a bad habit of news to call inflation to a subset of goods (asset inflation, healthcare inflation, etc) but that is just plain incorrect in terms of economic terminology. The Fed is not concerned for healthcare costs rising, they are concerned for inflation which is when everything rises because the money supply outpaces economic output growth. Going deeper: before the Milton friedman era, the Keynesian era had the argument that inflation was a problem of the cost of production of goods. So if you could stop that from happening you could stop inflation, resulting in price control policies, collective union bargaining for fixed prices, etc. It was considered and thought that fiscal policy and regulation could stop inflation and even Nixon got into that. Milton Friedman ushered the new era with the phrase from another comment: Inflation is always and everywhere a monetary phenomenon. Countries today that use the old model, that price controls could fix inflation, include Venezuela and Argentina, that have the worst inflations in the world. Argentina has taken this concept that inflation is on the measuring of the basket of goods that they manipulate the statistic two ways: first, the agree to price controls and make sure the controler products are in the basket of goods, to claim lower inflation than real. Second, to actually fudge the numbers of inflation as measured. Naturally, neither strategy works, because as long as you have a monetary imbalance, you have inflation. Hopefully you are at least amused by my expose!
harryh 7y ago
This is correct. "Inflation is always and everywhere a monetary phenomenon in the sense that it is and can be produced only by a more rapid increase in the quantity of money than in output." -Milton Friedman
Mikeb85 7y ago
Price inflation locally is definitely related to the cost of inputs (like minimum wage). You're right about the academic definition of inflation, theoretically with a fixed supply of money, a rise in minimum wage would simply be offset by a reduction in jobs, hours or profit. But the money supply is ever increasing, so here we are...

pytester 7y ago

>Anyone interested in the truth will tell you that raising the minimum wage will destroy at least some jobs. This is the "big lie" used to justify keeping it low. The reality is that minimum wage hikes hit profit margins first and hardest, inflation next and jobs get hit last (maybe if it gets hiked $10 / hour). http://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.421.7637&rep=rep1&type=pdf http://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.421... >"Studying profitability is important because the empirical evidence suggests that minimum wages do raise the earnings of low wage workers, but do not seem to have large negative employment consequences." >"Across both datasets our results show that that profitability was significantly reduced by the introduction of the minimum wage. " Minimum waged labor is very, very, very inelastic. For better or worse the people who clean your toilets and serve you coffee in the mornings are extremely necessary and very hard to substitute. Much more so than most middle class jobs, even. Business lobbies know this to be the truth, but they know that they will get nothing but by asking the general public to have sympathy for their falling profit margins. So, they try to scare the shit out of you by claiming that they will be forced to fire you instead (e.g. this expensive billboard for the national restaurant association demonstrating their concern): https://pando.com/2014/07/17/new-san-francisco-billboard-warns-workers-theyll-be-replaced-by-ipads-if-they-demand-a-fair-wage/ https://pando.com/2014/07/17/new-san-francisco-billboard-war...

theodorejb 7y ago
If a business's profitability drops, that very frequently translates to lost jobs or cut hours in order to preserve expected returns. Otherwise the business may close entirely and the owners seek to invest in a more profitable venture.
- pytester 7y ago
  >If a business's profitability drops, that very frequently translates to lost jobs or cut hours in order to preserve expected return Businesses that slash necessary costs in response to cut margins have a special word to describe them: Bankrupt.
mrfredward 7y ago