Is the COLA increase fair?

Quote: Tanko

When you add eleven million legal immigrants, plus eight million illegal immigrants, to a population over a four year period, you're going to see inflation across every sector.

Especially food and housing.

The biggest jump in prices was between 2020 and 2023.

Beef prices are up due higher demand combined with herd levels at a 64 year low.

Quote:

No, generally fewer immigrants do not match up with years of less inflation; in fact, economic research suggests the opposite is true. A reduced number of immigrants tends to contribute to higher inflation by exacerbating labor shortages and driving up wages and consumer prices, particularly in specific sectors of the economy.

Key Economic Mechanisms:

Labor Supply: Immigration increases the supply of labor, which helps businesses fill job vacancies and meet consumer demand. When immigration levels are low, as seen during and immediately after the COVID-19 pandemic, persistent worker shortages emerge, leading employers to raise wages more competitively. These higher labor costs are often passed on to consumers as higher prices, thus fueling inflation.

Specific Industries Affected: Industries heavily reliant on immigrant labor, such as construction, hospitality, agriculture, and childcare, are particularly sensitive to immigration levels. When the supply of workers in these sectors declines, prices for associated goods and services (e.g., food, housing, restaurant meals) tend to rise significantly.

Overall Demand vs. Supply: While an influx of immigrants also increases demand for goods, services, and housing, most economic analyses conclude that the effect on labor supply often outweighs the immediate demand effects, resulting in a net disinflationary or at least muted impact on overall inflation.

Recent Historical Context: The U.S. experienced historically high inflation in 2021, a period that coincided with significantly reduced immigration levels due to pandemic-related restrictions and prior policy changes. The subsequent return of immigration to pre-pandemic levels in 2022 and 2023 has been credited by economists, including those at the Federal Reserve, with helping to ease labor market tightness and reduce inflationary pressures.

Quote: SOOPOO

No idea on the toaster or laptop. But the TVs are much cheaper still!

I’m not saying inflation isn’t real, or a problem, or even not expected! You want me to show you 100 SOOPOO posts that predicted this when the damn broke on the guaranteed minimum wage? When the kid stocking the milk now gets $17 an hour instead of $10 an hour I wonder what will happen to the price of milk? When the guy making $17 an hour to tell the kid when to stock the milk now wants $22 an hour, what will happen to the price of milk? When the (tipped!) waiter now must be paid $15 an hour instead of the previous $6 an hour what will happen to the cost of the burger and fries? This all happened pre silly Trump tariff wars.

Geno will chime in that ‘good for those workers’. And I’ll say when you buy that expensive milk ‘you get the days you voted for’. And thats a Democrat platform.

Quote:

Minimum wage increases can cause a small, temporary increase in inflation, but evidence suggests the effect is typically minimal and not a major driver of price instability. The impact depends on factors like the size of the wage increase, the proportion of workers affected, and the overall economic environment. Some studies have found the effect to be negligible, and the impact is often offset by other economic factors, such as increased consumption from higher-paid workers. 

Arguments for a link between minimum wage and inflation

Increased labor costs: When businesses must pay higher wages, they may pass these increased costs onto consumers through higher prices for goods and services. 

Increased demand: Higher wages for low-income workers can lead to increased spending, which may boost demand for goods and services, potentially leading to price increases if supply cannot keep up. 

Arguments against a significant link

Small effect on overall labor costs: Minimum wage earners are a relatively small portion of the workforce, so a minimum wage hike may only slightly increase the total wage bill of the economy. 

Other factors at play:

The economy is influenced by many factors, including monetary policy, productivity, and global conditions, which can have a larger impact on inflation than minimum wage increases. 

Limited empirical evidence: Many studies have found the link between minimum wage hikes and inflation to be weak or non-existent, especially when the increase is small or phased in over time. 

Temporary effects: Any price increases that do occur are often found to be temporary and limited to the period immediately following the wage hike.  What the evidence suggests

A large, one-time price increase of less than \(0.5\%\) could theoretically result from a $15 minimum wage if all costs were passed on, but this is unlikely and doesn't account for other factors. 

Some research has found that a \(10\%\) minimum wage increase leads to about a \(0.36\%\) increase in prices, which is a modest effect. 

Most studies find that minimum wage increases do not cause significant or lasting inflation, and some even suggest that small increases may reduce prices. 

Quote: GenoDRPh

SooPoo's cure for inflation is to lower the wages of those who already earn the lowest wages?

Quote: rxwine

Tanko can fight with Mr. Ai

Quote: missedhervee

There should be no such thing as a "minimum wage" in a truly capitalist system: let the market set the wage, not the government.

The fairly recent minimum wage hikes have hurt the economy more than helped.

Quote: SOOPOO

Of course. It’s called common sense. The higher the minimum wage, the greater the impetus to replace human workers with AI type fill ins. Just tried to call and order Chinese food. Was on hold forever, but remembered you can order pick up on their website. One less person needed to answer phones apparently.

Quote: missedhervee

True, but I was focusing more on how arbitrarily requiring employers to start paying more to their employees understandably leads to an increase in the cost of goods and services related thereto, "it's a recipe for inflation."

Quote: SOOPOO

Another insidious negative is more subtle. Kid can get entry level, no upside, job at local factory starting at $25 an hour. Just need a high school diploma. It de-incentivizes going to college. Or a trade school. The kid thinks $200 a day is a boatload. Until he/she has kids/wants a house/wants a nice car/wants….

Quote: SOOPOO

I’m agreeing with you. The point is so obvious it’s hard for me to fathom someone disagreeing. If you want to say it’s still the right thing to do, that’s different. But don’t deny it’s inflationary.

Another insidious negative is more subtle. Kid can get entry level, no upside, job at local factory starting at $25 an hour. Just need a high school diploma. It de-incentivizes going to college. Or a trade school. The kid thinks $200 a day is a boatload. Until he/she has kids/wants a house/wants a nice car/wants….