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Inflation a means of undermining the minimum wage?
April 7, 2010 - 10:47pm
What's the point of raising the minimum wage if it's only going to be undermined by inflation anyway? Would it not make more sense instead for the government to put an end to inflation and give worker a stronger voice through co-determination legislation, improved universal compulsory education, etc.?
Inflation isn't something you turn off or on with a switch.
And the government (the Canadian government at least) does put a lot of effort into keeping inflation down. Though if you search these forums, you'll find lots of criticism of inflation-fighting, because it usually mean less government spending and measures that raise unemployment (it is often seen as a choice between low inflation or low unemployment). Not to mention that raising minimum wages is something that contributes, to some degree, to inflation since you have more consumer dollars chasing the same goods (the same happens when you have full or nearly full employment).
Not a switch. They clobber inflation with higher interest rates. Interest rates are their one size fits all solution to fighting the inflation bogey since the neoliberalorama was imported into Canada. And in the 1980s and 90s our fearless leaders demonstrated more political will in using the monetarist equivalent of a sledgehammer in keeping the inflation bogey in check than even their conservative counterparts in America.Higher interest rates mean higher borrowing costs for average slobs on everything from student loans to cars and mortgages. The war on inflation mainly benefits the rich by increasing the value of large assets. Higher interest rates are a job killer. They can almost predict down to a few thousand how many jobs will disappear from the economy with every percentage point increase in the prime rate.
And people on fixed incomes such as seniors and other lower income earners who don't want to see the cost of their basket of goods increase too much. If a sales tax is regressive, then anything else that similarly increases consumer prices - such as inflation - is also regressive.
Linda McQuaig's "Shooting the Hippo" is a good read if you're interested in intentional, sometimes fanatical attempts to curb inflation.
Let's consider too that the rich are in a better position to hedge against inflation than the poor, leaving the poor taking the brunt of the burden.
If the government really needs more money, it would be preferable to raise taxes by 2% rather than inflate the economy by 2%. By raising taxes, the government has more control in determining will who will actually pay the tax. In the case of inflation, as mentioned above, the poor take the brunt of it since the rich can always hedge in gold, etc.
Add too that inflation encourages spending beyond our means as we try to beat the price increases. Such growth is unsustainable and eventually leads to recession once all the money's spent.I'd rather see slow but sustainable growth over impressive growth only laying the groundwork for a recession a decade down the road.
With constant inflation, the minimum wage is useless anyway. Why not do what Sweden has done:scrap minimum wage laws, introduce co-determination laws, and provide school vouchers for those who need more education to raise their market value.
Governments do not control inflation. They can try to influence it but given that interventions can be problematic in themselves 2% inflation targetting at times seems arbitrary and stupid.
Governments don't really benefit from inflation.
Minimum wages don't begin address the fact that low wage jobs offer inadequate compensation and the prevalence of low wage jobs is much too high in our economy.
There is a bit of controversy as to the value of the information that inflation as a number provides. Inflation measures aren't useless but they are simplistic and can be misleading.
market value = human capital
human capital = objectification
objectification = poor treatment of individual workers
poor treatment = workplace safety diminished, as there is always someone else to replace the lost human capital
And machjo, have you ever read other than the wiki link to Sweden's co-determination description?
Remind, I respect the assertion that speaking of the market value of labourers is dehumanising. However, given the context I think it's fair to believe that Machjo was alluding to the vast body of research that concludes that workers are more productive when given fair access to education, health care, safe work and fair wages.
So index seniors pensions to inflation. Unions fight for the same with wages. Problem solved unless there have been 170 repressive pieces of anti-labour legislation enacted across Canada since 1982. Problem solved unless next to the USA, Canada now has the second-largest non-unionized, low skill and lowly paid workforce among richest countries.
The rich love a good war on inflation, higher interest returns on bonds Bay Street sells to rich Canadians and foreign creditors. Bay Street doesn't want fuller employment policies. Bay Street doesn't want us to be able to pay off the massive national indebtedness since Brian Baloney and Shawinigan strangler, Paulie Pockets and the current fiscal Frankensteins throwing the country down a debt hole. US economist Michael Hudson says the newest nouveau liberal capitalist business model has nothing to do with wealth creation as they onces preached. The new business model for neoliberalism in disgrace says that debt is wealth creation. And public debt is considered premium quality debt. It's called more socialism for rich and powerful people. The parasites are sucking life blood from open wounds directly now.