Minimum Wage & Inflation
One of the more common arguments I hear against raising the minimum wage is that it will cause inflation to increase. So I decided to look at how the two compared over 58 years and see if, when minimum wage increases, inflation increases as well.
Working with data from 1960 to 2018, one thing became evident. The two hardly have an impact on each other. For example, when raising the minimum wage, while sometimes resulting in higher inflation, it stayed the same or dropped in some cases.
Take for instance the years 1973 to 1974. Over this period, the largest drop in minimum wage*, over one year, happened, a 90 cent decrease in the minimum wage from one year to the next. Meanwhile, inflation from 1973 to 1974 has never seen a higher increase. Inflation rose 4.87 percent to 11.05 percent. So when one argues increasing minimum wage increases inflation, they say the two are a direct relationship. However, as we see from 1973 to 1974, that is not the case. You would say they are an inverse relationship.
Now, I would not say they are an inverse relationship, but I will argue that they are not as directly related as some people think.
More examples of inverse relationships would be from 1974 to 1975. Over this period, the minimum wage increased by one dollar and sixty-seven cents. Meanwhile, inflation decreased by 1.91 percent. Also, from 2008 to 2009, inflation saw a record decrease, dropping 4.20 percent. But, again, over that period minimum wage was increased by 84 cents.
Another angle I took was the average minimum wage and over those 58 years. The mean (adding up all numbers and dividing by the amount of entries) is eight dollars and thirty-eight cents, while the minimum wage in 2018 was seven dollars and twenty-five cents.
No matter how I look at it, I cannot see the argument behind raising the minimum because it will increase inflation. There are just too many instances to show this is not the case. Furthermore, there are other factors into inflation besides how much one makes. For example, one argument could be increasing the minimum wage would result in the workers working harder, resulting in more products being made. If more product is produced than usual, those prices will likely decrease as demand stays the same, but supply increases.
*All minimum wages are adjusted to match what would be equivalent to 2018 dollars (i.e., minimum wage in 1960 was one dollar, in 2018 that dollar would be worth eight dollars and forty-eight cents)
