Inflation and Minimum wage are two separate concepts but share many of the same implications. I identified the connection between inflation and minimum wages such that; Inflation is often brought about by inconsistent growth in wages or increases in prices relative to wages. While an increase in minimum wage can help reduce inflation if a country’s cost of living increases (LaPonsie, 2022). The significance of carrying out this research was to help identify the cost of many items individuals use daily, such as houses, food, and fuel, which have gone up in recent years. This has impacted the need for inflation in the economy, where the cost of labor is also increasing, which leads to a minimum wage that employers must meet, or they may lose business (LaPonsie, 2022). Conversely, this will cause inflation to rise dramatically as companies raise prices to keep up with the rising costs. As a result, better jobs will become more challenging for low-income earners and people who have not completed high school or college education since these workers are usually at the bottom of the wage scale (LaPonsie, 2022). The impact of inflation and minimum wages has also led to an increase in unemployment rates in my life, and the minimum wage has been fixed since I have been paid per hour. This paper explores more on the connection between inflation and minimum wages.
According to my research, the federal government, inflation, and minimum wages are tied into economic policy, which leads to wage increases. They are products of an inflationary economy and have been closely linked with the national debt (LaPonsie, 2022). Inflation forces wage increases as companies need to raise their prices to compensate employees for the increasing costs they incur due to price increases. The federal government is directly linked to inflation and minimum wages because it sets the floor for minimum wage increases (LaPonsie, 2022). The federal government tends to use inflation to increase the pay rate without having to change legislation.
Changes in the inflation rate will cause minimum wages to increase by the same amount, thereby making it seem as though there has been no legislative change. This benefits legislators who do not wish to appear unfair or insensitive for making drastic changes concerning wage structure (LaPonsie, 2022). The Federal Reserve has a powerful effect on inflation because of the amount of control it wields over the money supply. I have learned that the creation of the Federal Reserve System was the leading cause of the Great Depression, and its policies still affect the country’s economic policy today (LaPonsie, 2022). The Federal Reserve is responsible for setting short-term interest rates, which are extremely important in controlling inflation and wages for the nation and affecting foreign trade.
In conclusion, based on my experience, to relieve the cost of living pressure, minimum wages should be raised while they are lowered at the same time by lowering inflation rates. The government must control spending and inflation rates to reduce living costs while raising wages. The government should also ensure that inflation rates stay high because this would bring a problem of rising prices and leave people with less money in their pocket, leaving them less to spend. One way for the government to keep inflation under control is by controlling spending. Hence, this can be done by placing a ceiling on the federal budget deficit or imposing a tax on purchases. The deficit ceiling is how much the government can spend in a year, and the tax on purchases is a flat tax applied to all products sold and services rendered. Inflation is kept under control by controlling the money supply.
Reference
LaPonsie, M. (2022, August 3). Wages Vs. Inflation: Can Your Income Keep Up With Rising Prices? Forbes Advisor. https://www.forbes.com/advisor/personal-finance/minimum-wage-vs-inflation/
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