While increasing the minimum wage may increase the income of certain workers, won’t the inflation that results be a burden to retirees on a fixed income?
Answers
Raising the minimum wage has been a problem for decades, particularly with the recent demands to increase the federal minimum wage to $15 per hour. There are disagreeing opinions on whether raising the minimum wage boosts inflation. Some economists claim that extending the minimum wage artificially builds imbalances in the labour market and results in inflation.
Other economists state that when minimum wages have been increased, inflation did not follow in the past. So it all depends on what sources you consult. While some argue that increasing the minimum wage to an excessively high rate would wield inflationary pressure on the economy, study shows that raising it to keep pace with inflation would only have a minimal impact. Inflation and its adverse effect on retirement finances have catapulted into the top-three concerns that Canadians have when they consider retirement, according to the RBC Financial Independence in Retirement Poll executed by Ipsos.
Three in ten (29%) place the effect of inflation on their retirement among their top-three retirement concerns. While having sufficient savings (47%) and being able to preserve their standard of living (36%) are the top-two concerns, anxieties about inflation beat out concerns about the cost of healthcare (27%) and the possibility that they might outlive their savings (25%). Concerns about the effect of inflation on retirement haven’t been this high in a decade.
Not only is inflation a reason for concern in retirement, but it is also affecting Canadians’ ability to save money. When questioned what is stopping them from saving more money than they currently do, 29% said that their fixed expenses are too high and will likely rise further because of inflation, only behind the opinion that their income is too low (36%).
Rounding out the top-five aspects acting as an obstacle to saving more are not having any cash left at the end of the month (26%), unplanned expenses such as car repairs or dental work (26%), and inconsistent employment income (13%).
I find this question a bit baffling. I realize that every time the idea of raising the federal minimum wage is mentioned, some start hysterically forecasting the near-collapse of the economy as a result.
Yet, honestly, there is no historical evidence to indicate that increasing the minimum wage would yield that outcome. So, no, I don’t think these two are necessarily connected.
Inflation could cause harmful effects on fixed incomes, reducing retirees’ income. As inflation increases, most people with fixed incomes may feel vulnerable. But there is no evidence to support the relationship between increasing the minimum wage and increasing inflation. Any rise in the inflation rate could be caused by many financial, political, and economic factors. So what we should know is that raising wages does not always cause inflation to rise!
There’s not even unity in economists’ ideas about this subject. Some of them consider the minimum wage raise as a factor that upsets the balance of the labor market and leads to inflation.
However, many other economists can name various periods in history when minimum wages have been raised, but inflation did not follow the pattern! So, there wouldn’t be so many concerns about increasing the minimum wage for you as a person with a fixed income. There is not enough proof to confirm this hypothesis that rising wages always cause inflation.
I’m a little puzzled by the question, but I guess it shouldn’t. Despite wage stagnation, inflation has nothing to do with wages, as shown by rampant inflation. The national debt payment, a function of GDP, determines inflation. More people earning more money will help to lower the national debt.
Furthermore, commodities brokers profit from the stock market, causing commodity inflation. Farm output does not get paid at an hourly rate. Food would be prohibitively expensive because produce states like California have the highest minimum wages. Instead, produce is paid on a volume basis. The higher farm workers’ productivity, the more money they get paid.
