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The NYT reports that in a unanimous vote, the Seattle City Council went where no big-city lawmakers have gone before, raising the local minimum wage to $15 an hour, more than double the federal minimum, and pushing Seattle to the forefront of urban efforts to address income inequality. "Even before the Great Recession a lot of us have started to have doubt and concern about the basic economic promise that underpins economic life in the United States," says Council Member Sally J. Clark. "Today Seattle answers that challenge." High-tech, fast-growing Seattle, population 634,535, is home to Amazon.com, Zillow, and Starbucks. It also has more than 100,000 workers whose incomes are insufficient to support their families, according to city figures and around 14% of Seattle's population lives below the poverty level. Some business owners have questioned the proposal saying that the city's booming economy is creating an illusion of permanence. "We're living in this bubble of Amazon, but that's not going to go on," says businessman Tom Douglas. "There's going to be some terrific price inflation."
(Score: 1) by Buck Feta on Thursday June 05 2014, @03:53PM
> Rich people with money under the mattress lose out.
I think this is a very common mis-perception. The people who are most hurt by inflation are people without assets. As inflation occurs, the guy living paycheck to paycheck loses buying power as his raises lag the rate of inflation. Meanwhile, the guy with investments in income producing assets is well protected, because the income those assets generates adjusts more quickly than a paycheck.
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(Score: 1) by deimtee on Friday June 06 2014, @04:39AM
How can his pay rise lag inflation, if raising his pay is the cause of the inflation?
If you cough while drinking cheap red wine it really cleans out your sinuses.
(Score: 0) by Anonymous Coward on Friday June 06 2014, @10:03AM
Easy. His pay goes up 10%, inflation is 20%, Assets go up 50%.
Rich get richer poor get poorer.Prices don't change because of what happened in the past or even the present. Companies adjust prices based on what they think will happen in the future. The last thing that always happens is the crumbs go to the poor (if they are lucky) after everyone else has had a bite of the cake.
(Score: 1) by Buck Feta on Friday June 06 2014, @02:51PM
That's actually a great question. The answer is that there are different types of inflation and that they are caused by different forces. Commodity inflation, for instance, might be caused by bad weather, a crop failure, and higher grain prices. We saw this in Asia in recent years where the poorest people were dramatically affect by huge spikes in the cost of their biggest expenditure. In the US, much of our inflation is caused by the financial system. Regulators are constantly walking the line between too much unemployment and too much inflation. Wage inflation, as you point out, is another particular type of inflation. In the case of Seattle, if barista salaries go from $10 to $15 an hour, the cost of a cup of joe, will also rise or lots of coffeehouses will fail. In this specialized case, low level employees don't fare too badly. In reality, wage inflation usually lags other types of inflation as a response to economic conditions. I can think of only a few counter examples. During the internet bubble we saw salaries of workers in certain tech sectors spike way up, because there weren't enough butts to fill all the seats available. It was great for the workers until the bubble popped. In the Seattle example from the main story, we see legislation as the root cause of wage inflation. Probably the effect will be limited to service industries served by a relatively small percentage of the population. The price of a loaf of bread might not be affected much because local labor is such a small part of the inputs, but a cup of coffehouse coffee, is mostly made up of labor costs and so will get more expensive.
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