Explain the relationship between inflation and an increase in minimum wage?
Answer:
Regardless of emotions...
Wages are a cost to a business. A raise in the minimum wage raises the cost of doing business. Some costs can perhaps be offset by cost reductions or layoffs. Productivity increases from products and services at the minimum wage level is incremental at best...better to discount this mechanism. But, in general, much of the cost will be made up by higher priced goods and services. Thus, the same product or service costs more today than yesterday; this is inflation.
The senior executive pay structure is completely another story. Whether you like it or not, many folks feel the senior executives who own more stock than the average worker, have a far greater interest in the company than the minimum wage earner. In effect, they are much more of an owner than a min. wage. employee. As such, their compensated on completely different criteria than hourly workers. Their compensation is much greater, commiserate with interest in the company. In effect, the employees work for the senior executives as major shareholders. If you follow this, then the company is in business to make the shareholders money. Therefore, the company is in business to make the senior executives ever-more money. The minimum wage employees are costs needed to accomplish that goal. You must understand...companies are in business to make money, NOT employ people. Senior executive salaries are rarely, therefore, negotiable. It sounds a bit harsh, but that's reality. On the flip side, the senior executives have much more at risk in the success of the company. That risk equates to higher compensation.
Explain why you cant do your own homework.
Some economists say that if the wages rise, the manufacturers have to increase prices of goods to make up for the increased wages.
That's a load of crap. They need to cut down on their yearly bonuses and give people a living wage. Plus, prices increase anyway.
Inflation refers to increase in prices of commodities. When there is inflation the purchasing power of a currency is getting lower and that individual budgets of laborers are not yet enough to secure themselves with the prevailing prices of basic commodities so with that, they need to increase their income for them to be able to attend to their needs.
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