Recently the government increased the minimum wage from $4,280 per week to $5,300 per week. The inflation rate during the same period was 9%. What is the impact on real wages ?
4280 x 1.09 = real wage if constant from period x to period y. Let's call this number Z.
Find the relationship between Z and the government's wage increase. If 5300 / Z < 1 then the total effect of wage increase/inflation's devaluation of real salary is negative. If the relationship is above one (5300/Z > 1) then the effect is positive for the workers.
