Sunday, June 12, 2016

Money, Not Wage, Problem

Hundred dollar car note
Two hundred rent
I get a check on Friday
But it's already spent
--Huey Lewis & the News

As observed here, those concerned about people not being able to maintain a 'living wage' are missing the primary cause of the situation. The cause is not related to lack of a high enough legal minimum wage. In fact, as these pages have noted many times, legal minimum wages surely reduce the number of people able to earn enough money to satisfy basic needs.

Rather, the problem is more directly traceable to inflation. As money supply is expanded, the value of money goes down (ECON 101). As the value of money goes down, the dollars in our pockets buy less. This hurts the least productive members of society (i.e., those with lowest income) hardest.

1964-D 50c Kennedy PCGS MS66

In September of 1965, the federal minimum wage was increased from $1.15 to $1.25/hr--equivalent to 5 1964 Washington quarters or 2.5 1964 Kennedy half dollars. Interestingly enough, the silver content in those coins today is worth about $15--similar to the minimum wage proposed by many advocates.

Solve the money problem, and concerns about the sustainability of a living wage dissipate.

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