General Question

pleiades's avatar

After the first quarter of the fiscal year ends in 2014, with the rise of the federal minimum wage, what sort of price increases should we expect?

Asked by pleiades (6406 points ) December 27th, 2013

For instance, in San Diego, gas is about $3.57 per gallon. Should I prepare for it to be $5.57?

How long does it usually take for the rest of the prices to catch up with the minimum wage?

I remember in 2008 it was about 4 months before prices increased and I felt for those first couple of months I had more buying power.

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30 Answers

jerv's avatar

I expect that corporate profits will rise as those that pay minimum wage price-gouge and jack up prices by 30% to cover a 3% increase in costs. Remember how Papa John’s was going to jack up the price of a pizza far more than the 15 cents a pie it would take to cover the costs of Obamacare?

JLeslie's avatar

They’ll go up fast probably and when people complain the business people will say, “we had to with the rise in wages.” Even if that business is not paying one penny more because they never were paying anyone as low as the old minimum they will take advantage of being able to make the excuse. Basically it will mean more profit for them. Not all companies, but a lot will do it. They did it when gas prices went way way up the first time under Bush. Prices went up like crazy, but then when gas prices came back down, the other prices didn’t for well over a year. If the market will pay the higher price the prices will stay high, if we don’t the prices will come back down.

jerv's avatar

@JLeslie And if we re-enact the French Revolution as a result…?

Seek's avatar

The only question is who to behead.

I mean, if milk goes up another dollar a gallon, do we assassinate the dairy farmers or the Congress who chose not to enact a law enforcing a maximumcost on basic foodstuffs?

bolwerk's avatar

Why is there any reason to expect this minimum wage increase will cause prices to increase? Average worker productivity is already more than double the minimum wage, and many of the large businesses that employ large numbers of minimum wage workers (e.g., fast food, big box stores) both are highly profitable and base their business model on maintaining the lowest possible prices.

Seek's avatar

^ Reactionary, unregulated corporations who see dollar signs every time anything gives them an excuse to raise prices?

I’m in Florida, and I’ll tell you all about how it is guaranteed that gas prices will rise 25 cents a gallon or more whenever there is a tropical wave announced off the coast of Africa – because everyone knows THAT is going to be “the big one”.

bolwerk's avatar

Not seeing it. Evidently the authoritarian in charge of “The Road to Liberty” blog sees it, but inflationary pressure on the dollar seems about as impervious to changes in the minimum wage as you can get going back to at least 1980. Even before, monetary policy was certainly overwhelming any impact small changes to the minimum wage had.

Seek's avatar

How much did a gallon of milk cost in 1980? I wasn’t here.

This country is a completely different place than it was 30+ years ago. I really can’t believe that past experience is going to be a great indicator of real world situations in 2014.

The People known as Corporations now know they are impervious to government oversight and regulation. They can do anything they damn well please because they own the government. People who can’t afford basic necessities, well, they brought it on themselves by not being obscenely wealthy. Since this is an equal opportunity country and all, they should have just opted to be rich, and then they wouldn’t have these problems.

Blondesjon's avatar

The People known as Corporations now know they are impervious to government oversight and regulation. They can do anything they damn well please because they own the government. People who can’t afford basic necessities, well, they brought it on themselves by not being obscenely wealthy. Since this is an equal opportunity country and all, they should have just opted to be rich, and then they wouldn’t have these problems.

I was here in the 80’s and it was pretty much like that.

bolwerk's avatar

@Seek_Kolinahr: the U.S. doesn’t regulate many prices anyway, so companies pretty much could always do what they wanted. The only price I can think of that it regulates directly at the federal level is the minimum wage. The last minimum wage increase was in the late 2000 decade. Even that didn’t show an impact on consumer prices. In fact, inflation slowed at least for a time.

All that will happen is employees will get remunerated for their efforts a little more, still far below their productivity.

ragingloli's avatar

Prices would rise anyway, both due to inflation and corporate greed.
What is your method of calculating the part that the minimum wage plays?

bolwerk's avatar

@ragingloli: are you asking me?

ragingloli's avatar

@bolwerk
No, the Op.
The thing is, companies will take any excuse to raise their prices far above the actual increase in costs.
In Germany, companies used the switch from the DM to the €, to do a massive price increase, obfuscated by the conversion.

zenvelo's avatar

It won’t go up from the minimum wage. Previous studies that implicate that have been proved wrong, and other studies on areas of the country that have raised the minimum wage above the Federal level have shown steady prices and overall growth in the economy.

And the hardest part of assigning price increases to a particular factor: Correlation does not mean causation.

bolwerk's avatar

@ragingloli: yeah, but it’s not very surprising in times of economic uncertainty that prices increase. Nobody knew exactly what the euro would do. @Seek_Kolinahr cited weather impacting prices in Florida. Totally makes sense.

The thing is, a U.S. minimum wage increase is a somewhat regular event with pretty predictable consequences we’ve all seen before.

Seek's avatar

Not actual weather in Florida. Potential weather, halfway around the world.

Darth_Algar's avatar

I don’t expect it will effect prices to any real tangible degree. Fuel prices are effected by factors that are far beyond plebeian wages. And the companies that most depend on minimum wages are fast food and big box retail. Companies that push such huge volume that they can be cheap as hell in their retail prices. A hamburger is still going to be $1 at McDonalds and you’ll still be able to get anything and everything at Wal-Mart cheaper than anywhere else.

Darth_Algar's avatar

@Seek_Kolinahr “Not actual weather in Florida. Potential weather, halfway around the world.”

That’s because oil is a speculative market. When you buy gas you’re not paying for what the gas cost them today or yesterday, you’re paying for what they think it’ll cost them next week. A tropical storm front developing off the coast of Africa could end up effecting oil production in the Gulf of Mexico or refinery capacity in Texas (not necessarily will, but could), so they’re going to charge you in advance for that possibility.

Seek's avatar

^

So they jack up the price for potential weather. Then when the weather actually shows up they jack it up again. And then when the damage reports are in, they jack it up again.

Oddly enough, they never seem to think they pre-charged us enough and level it off.

Darth_Algar's avatar

Why would they? There’s no legal price controls in place and there’s no market pressure on them ether. And at any rate our gas is still cheap, compared to what many other countries pay (thanks to nice fat government subsidies on fuel production).

Seek's avatar

That’s entirely my point. The companies will look for any excuse to raise prices, and only consider lowering them if people suddenly decide they don’t need the product anyway.

However, we can’t opt out of petrol or basic foodstuffs, or car insurance, or housing. We’re fish in a barrel.

bolwerk's avatar

@Seek_Kolinahr: not any excuse. The excuse you’re citing is uncertainty, and it’s not entirely unreasonable even if they’re being dicks about it. The weather phenomenon is normal and documented. There is nothing normal about prices increasing at the macro level because of a modest increase in minimum wage. Maybe a huge increase would be a different story though.

pleiades's avatar

@bolwerk You’re right. The price of a bag of chips won’t increase, the quantity per oz will just drastically decrease ;)

bolwerk's avatar

@pleiades: doubtful. The only remotely likely change companies that use lots of minimum wage labor will see their dividends shrink a bit.

Darth_Algar's avatar

@pleiades No. An ounce of potato chips will still be an ounce of potato chips, unless Frito-Lay devises some way to warp physics.

pleiades's avatar

@Darth_Algar I meant the amount of chips in a bag will decrease. Leave me alone smart butt I tend to log onto Fluther late at night for kicks and giggles.

Darth_Algar's avatar

Ok, maybe the quantity of chips will decrease but those chips would be larger. An ounce is an ounce, no way around that.

bolwerk's avatar

For fuck’s sake, it was obvious what he meant. When was the last time anything changed about the under-priced carbs people stuff their pudgy faces with? We see these tired, repetitive, thought-stopping arguments with every minimum wage hike.

Darth_Algar's avatar

Yes, it was obvious what he meant. What he meant, however, made no sense.

bolwerk's avatar

Well, most arguments against incremental minimum wage increases make no sense.

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