Our system has a mandate to not let Unemployment get too low

[cthulu2016]

And it probably should.

The Fed is charged to balance employment and inflation. The goal is "full employment."

"Full employment" does mean everyone who wants a job has one. It is an economic term of art meaning that level of unemployment where if it was any lower, it would spark positive-feedback, undesirable inflation.

If anything under 5% unemployment would touch off a wage-price spiral then 5% is "full employment." Same for 3% or 8%.

"Full employment" changes as the economy changes. It is likely that "full employment" today is a higher unemployment number than it used to be. It is thought by some liberal economists that our employment crisis the last many years has probably driven "full employment" in a worse direction, meaning that our employment sweet-spot may now be at levels of unemployment that were once far short of full employment. Like 4-5% versus the old 3-4%.

Given all of that... it is imperative to raise the minimum wage. A lot. It is part of the system!

We maintain, as national policy, a large enough pool of unemployed people to keep inflation in check. And that means we have to have a safety net for those folks, and have to keep a floor under wages so that strategic-unemployment-reserve doesn't compete wages down too much.

In a 1% unemployment world we would have a fair amount of inflation and probably wouldn't need a minimum wage.

But since we cannot, for the overall good of the system, have 1% unemployment then a base wage must be maintained artificially.

In today's world the minimum wage is a necessary compensatory correction because we choose to not allow situations where such increases would happen naturally.

[quinnox]

1. Yep, but the disgusting GOP won't allow it. This is their alamo, they will fight to the death

over giving any more crumbs to their enemies, the poor folk!

[doc03]

2. It's funny the unemployment is at 6.3% now and the MSM

and Republicans like to say that the unemployment is high. If say a year or so from now the unemployment should drop below 6% Wall Street will be calling for interest rates to increase to put people out work in order to keep wages down.

[unblock]

3. i find myself in rare disagreement with you on this one.

i'm certainly a fan of a much higher minimum wage, but i don't care for tying its rationale to an inflation-inducing too-low unemployment rate, if only because that would strongly suggest that the minimum wage isn't appropriate, or at least should be lowered, any time the unemployment rate is higher than that.

moreover, inflation worries have been overplayed for years in other contexts (government budgets in particular); i don't see why we should join in that nonsense. inflation concerns may no longer be so far in the future, but they remain tomorrow's problem, not today's.

[cthulu2016]

4. reading your reply, I think our disagreement may be tangential

I am first in line to say that inflation is not a concern today, or at any point in the last 5-6 years. We should have higher inflation today than we do, and it's a problem on the downside... increasing people's real-dollar debt load, for starters. And I am not literally arguing that the minimum wage is *tied to* the fact that wage pressure is capped by monetary policy.

And the comments about Fed policy and action have almost nothing to do with today. (Whatever our problems today, the Fed inducing a slow-down to stem runaway hiring ain't one of them)

But, hypothetically, if our unemployment rate was 1% the Fed would induce a recession. It would.

And once we recognize that this stuff isn't all just God's will, it appears that workers are bearing the brunt of maintaining price stability. Wage pressure is capped by national policy. There is a ceiling of sorts. And there should also be a floor. There are two sides to stability.

The only point of the OP is that society is full of trade-offs between labor and capital, and that wage pressure is capped by design and simple fairness says the floor damn well ought to be maintained as religiously as the ceiling.