My first job ever was working for my dad at his convenience store in West Vancouver. My first REAL job was being a busser (what they called service assistants or SAs) at a Bread Garden. The work was menial and the pay was low… just like anyone would expect from a job requiring no pre-requisite skills or knowledge. If you could spell your name, you’re in.
You ever notice no matter how much money you seem to make, it never seems to be quite enough? At first, I thought this was a phenomenon caused by a lack of discipline. And while that’s certainly a large aspect, there’s another player involved, and it’s called inflation.
Everyone knows that. Inflation, for those that don’t know, is the word used to describe the devaluing of money. And so you can see how making more money wouldn’t necessarily mean a better lifestyle. While this fact may seem obvious, what isn’t so obvious is the relation that minimum wage has on inflation and the impact it has on people’s day-to-day lives.
Raising Minimum Wage
BC minimum wage was recently raised to $10.25/hour (an increase of approx. $2.00/hour). Minister Of Labour Margaret McDiarmid said, “British Columbians who made $8.00 per hour last year could now have more than an additional $4,000 in their pockets this year. That’s good news for individuals and families– and that’s good news for the economy.”
That sounds alright on paper. It makes complete sense that raising minimum wage would be good for the province. More money in people’s pockets means a stronger economy, since people are spending more. So, why the stagnant lifestyle? As I mentioned, it has to do with inflation and here’s why.
What’s Inflation Got To Do With It?
Okay, so it’s not exactly inflation per se. It’s the effect of inflation. Inflation is the weakening of the dollar. This happens when more dollars are brought into existence. The increase of minimum wage does exactly the same thing. When you consider that 10% of the workforce in BC will have their wages affected by that increase to $10.25, that’s a big enough influence on the economy to affect the demand for products and services in the province.
More people will be buying iPhones, eating out more, and otherwise buying things they can’t afford since the more money they have, the more confident they feel about paying down debt. So, what happens to the farmer who’s working just as hard as he was before, but now there are more people who can more easily and afford his goods?
He raises his prices.
And there you have it. The correlation between inflation and the increase in minimum wage. And this is a phenomenon not exclusive to farmers. It happens clear across the board. When it’s that easy for money to enter the economy, the price of commodities skyrocket.
Minimum Wage Isn’t Salvation
While the onus of making ends meet still weighs heavily on the individual, you can see why simply increasing minimum wage and organizing your finances may not be enough. If the goal of financial gain is important to you, you need to take a page out of Warren Buffett’s book:
“The best hedge against inflation is to constantly increase your earning power.”