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In times of inflation, such as the one we are currently experiencing, the idea of wage increases returns to public discussion, with one group in favor, saying that it is necessary to maintain purchasing power, and another against, arguing that it increases inflation.


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Hello friends of leofinance, I hope you are very well. today I want to talk to you about an issue that affects many of us who work for a company with a formal contract. Especially in these times where in many countries, in many regions of the world there are episodes of inflation.
In times like these, as well as during times of political turbulence, the idea of raising the minimum wage comes up. And of course it sounds good to people like me, but at the same time it can be worrisome, because some economists argue that an increase in minimum wages can be detrimental to the economy in the long run.

<h1> The argument of those against it. </h1>

For some, raising minimum wages, and indeed their existence in general, is an intervention by states in the economy that creates inefficiencies. By creating a minimum wage of say, $15 an hour, you close the door to anyone willing to do the work for less, say, $10 or $12 an hour, this creates inflated economic ratios that may not represent the real value of labor in that region or country. in turn creating unemployment and low competitiveness.

The other argument is that by increasing minimum wages, companies, whether they are goods or services, will increase the prices of their products to pay for the increase in labor, and maintain their profit margins at the same percentages as always. This would result in a generalized price increase in all goods and services, which in turn would destroy any benefit to the working class that they have gained from the increase in their wages.

An additional aspect pointed out by some is the fact that an increase in the minimum wage in a country does not affect all companies equally, by increasing the cost of labor the transnationals and large corporations can afford to outsource, while the small and medium enterprises of a country have to deal with more expensive labor, affecting the real engine of development of a nation, its small and medium enterprises.

In a more extreme situation of inflation, and wage increases one after the other, one can fall into a vicious circle where the wage is increased, inflation destroys the increase, and increases again... destroying the economy.

Of course this is said by those who are against minimum wage increases.

<h1> Counterargument in favor of the minimum wage increase. </h1>

It's actually simple, after measuring as comprehensively as possible the effect of the increase on the economy, the W.E. Upjohn Institute for Employment Research concluded that for every 10 percent increase in the minimum wage in a country or state, inflation increases by only 0.36 percent. This of course detracts from the arguments against wage increases.

And certainly in the scale of a nation's economy, the wages of those in formal employment are only a small fraction of all that inflation can increase, which has historically been tied to factors such as government spending and low competitiveness in the international marketplace.

Another factor to take into account is the fact that higher wages result in happier workers, which in theory increases productivity, although this effect is very difficult to quantify.

What is well documented is that a decent wage results in people missing less work. And it also significantly reduces the rate of resignations, both of which increase the productivity of companies, making people work longer hours and preventing companies from having to operate with vacancies, then hire, train and integrate a new employee into their operations on a regular basis. Continuous resignations can greatly affect the productivity of a country's industry, as the recent episode of mass resignations in the United States demonstrated.
All of this, of course, does not respond to the argument of making it harder to get a job, so while the arguments against raising minimum wages have many holes and some may not even be valid, others have some logic to them.

<h1> Conclusion. </h1>

Wage increases and their effect on the economy are a very complex matter and one that needs a study that takes into account the country and the global economic situation where you want to apply, as there may be many variables between nations or times, and therefore, when discussing a minimum wage increase should be set aside ideological or emotional biases, as misapplied can be a catastrophe for the working class. But that does not make them any less necessary [as long as they are applied consistently], especially in times like these where corporate and CEO profits are constantly increasing and what workers around the globe earn is worth less and less because of inflation.

<h1>  Recommended Bibliographic Reference</h1>

[1]<a href="https://www.investopedia.com/ask/answers/052815/does-raising-minimum-wage-increase-inflation.asp#:~:text=Is%20Minimum%20Wage%20Tied%20to,response%20to%20change%20in%20prices.
 ">response change oprices </a>

[2]<a href="https://www.upjohn.org/research-effects-raising-minimum-wage
">research effects raising minimum wage </a>


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