- Position‹5 of 5
- A minimum wage is ineffective at reducing poverty
Increased wages for the lowest workers drives prices up, which leads to higher inflation.
The argument
Higher minimum wages do not create higher standards of living and a reduction in poverty. As the cost to provide services and produce products increases, businesses increase prices, leading to increased inflation, and reduced purchasing power of low-income earners. This increase in inflation offsets any increase in living standards, leaving the same low-income families the minimum wage was designed to help to languish in poverty.
Context
When the costs of production increase, businesses increase the prices of products to recover the costs. This causes rising inflation.
Premises
Counter-arguments
While this was once the case, in the age of automation and technological solutions, higher minimum wages do not equate to higher inflation. Productivity has been rising, which has been lowering the costs of production. Implementing or raising a minimum wage would put more money in the hands of low-income workers. The increased wage costs on businesses could be offset by the increased productivity unlocked through more automation. This could keep prices, and inflation, low, while increasing standards of living and the purchasing power of the lowest earners.
Rejecting the premises
[Rejecting P1] Improved technology and automation have improved productivity. This productivity improvement has reduced the costs of production. These reduced costs more than offset the cost increases caused by a minimum wage. Therefore, employers would not need to raise prices and inflation would not increase.