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On Apr 24, 1:07 pm, "Ed Huntress" wrote:




I don't believe that they even have the effect of "cutting the bottom
out of the labor market" as you say, because so few actually work for

Pete, if the people making minimum wage are "very few," how could an
increase in the minimum wage trigger inflation?


Easy. The wages of people like backhoe operators is determined by the
wage of a laborer. A backhoe with a frontloader can do as much work
per hour as about seven or eight laborers. And therefore a backhoe
costs about 7 or 8 times as much per hour as a laborer costs.

That may be true (I didn't check), but the numbers don't work in terms of
influencing inflation, Dan. Total construction costs run around 8% of our
economy. Total excavation costs run from 7% (new residential) to 40%
(shopping centers) of that. A typical minimum wage increase is on the order
of 8% - 10%.

So, if you included all excavation in your theory about backhoe operators,
you have something like 1.5% of the US economy. An increase of 10% of the
minimum wage would add maybe 0.15% to inflation, by that means, at the
most -- assuming your theory is correct, of which I'm skeptical.

You don't have enough there to have any measureable influence on the
economy. It's lost in the low-level noise. Next theory? g


We could look at the numbers and show that there is a correlation between
minimum wage and inflation, but you'd see that, at least since 1968, wage
increases have LAGGED inflation by a substantial amount. And, again, the
monetary effects of increasing minimum wage are so low that they
disappear
into the noise.


There is not a lot of correlation because a lot of that time, one
could not hire anyone at the minimum wage.

If you can't hire someone at minimum wage, then the minimum wage has NO
possible effect on inflation.

Next theory? g

It was certainly true in
the Seattle area when I was there. I do not know what the minumum
wage was at the time, but you couldn't hire a high school kid for less
than $10/ hr. And an adult cost a few dollars more.

So what the minimum wage really did was to jack up the labor costs of
the states which had low wages. But did not affect the wages of the
states with high labor costs.

Then what is the net inflationary effect of a 10% increase in the minimum
wage? Not knowing how you're separating states with high versus low labor
costs, we could split the difference, and say that it maybe had a 0.075%
effect.

But I doubt that very much.

Question for you, Ed. How much per hour does one have to pay for yard
work in your area? Mowing grass, raking leaves, trimming hedges?

I have no idea. I don't speak Spanish well enough to ask, and I do all of my
own yard work. d8-)

And
what is the minumum wage?

$7.25. We're one of the low ones.

--
Ed Huntress