Quote:
Originally Posted by girldetective
It seems to me that the minimum wage is increased after the price of living goes up and people are struggling, not before. And even then, its like pulling teeth.
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It's all a balancing act. You want to increase the minimum wage when you wish to boost your demand for products and services. This is best done particularly at a time when the economy is in a downcycle after a previous period of higher inflation...which can lead to recession. If the average prices for goods have increased over a period of time (inflation), boosting minimum wage will make the goods more affordable to many people, but it will also increase unemployment (as mentioned). This encourages a downward trend in a hot economy (to avoid overheating). The net effect is that you're trying to keep inflation in check by switching strategies between upcycles and downcycles. You don't want to let the economy get overheated or let it linger in the doldrums. Minimum wage is one of several tools for moderating the economy. Another is interest rates.
Governments never try to eliminate unemployment altogether. They consciously use that as an essential consideration.
(Forgive me if this doesn't make sense; I'm tired....)