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Raising minimum wage doesn’t increase inflation

Opponents of raising the minimum wage sometimes argue that raising it will increase the costs for customers.

That’s sort of true, but only in a microeconomic sense. In other words, if a single business has to increase the salaries of the employees and their profit margins are thin (or they don’t want to lose out on profits), then they must increase what they charge customers.

But what if all the businesses in an entire community raise wages?

Sure, the labour costs of those businesses increase. However, what will all those workers do with the additional money? Well, if they’re low-wage workers instead of billionaires, they won’t hoard it in savings or investments. They’ll spend it.

And where will they spend it?

In those businesses where the wages had to be increased. If more people are spending money in those businesses (or if even it’s the same number, but they’re buying more of their products), then that means revenues will increase.

The question then isn’t how much they’ll have to increase their product prices by. Rather it becomes whether their additional revenue will end up being lower or higher than their added expenses.

If revenues end up being higher than expenses with the same product prices, then why would you need to raise product prices at all?

On the other hand, if revenues end up being lower than expenses, then perhaps what’s needed is more revenue, not less expenses.

All the more reason to advocate for higher wages for as many workers as possible, rather than just those making the least.

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By Kim Siever

Kim Siever is an independent journalist based in Lethbridge, Alberta. He writes daily news stories, focusing on municipal, provincial, and federal politics, specializing in investigative journalism and critical analysis from a leftist political lens. He also writes regular editorials on general politics and social issues.

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