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Politics : Formerly About Advanced Micro Devices
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To: Wharf Rat who wrote (761924)1/6/2014 11:05:53 PM
From: neolib  Read Replies (2) of 1573960
 
There is a very interesting side effect of a significant boost in pay as happened when Oregon boosted their minimum wage. Workers feel more valuable, and actually work harder. Not only that, but they seek out additional work, longer hours, 2'nd jobs, etc. With the added money a wealth effect takes hold, and they start investing in homes, buying newer cars, eating out a bit more, etc. Its kind of like what happens when real estate inflates: people start fixing up homes in neighborhoods that formerly were kind of decaying. That is why its a mistake to think that it just re-normalizes. The dynamic effect of a significant lag between boosted wages and inflation that might result from it is offset by the fact that behavior changes during that time, and changes for the better. The change for the better than ripples through the economy as well, and a permanent increment has been achieved. Of course the opposite can happen in economic slumps, just look at Detroit.
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