Quora Answer: Does Cost of Living Increase because Minimum Wage Increases?

The following is my answer to a Quora question: “Does the cost of living increase because minimum wage increases?  Or, does the cost of living increase regardless?”

The cost of living increases because of the persistent increase in prices fuelled by demand, which we call inflation.  Moderate inflation is the sign of a growing economy, which is good, and that is what much of fiscal and monetary policy aims for.

Increasing the minimum has a negligible effect when we consider the overall size of the economy.  The average professional would, in a healthy economy, earn much more than the minimum wage.  From an ethical perspective, it is important that the minimum wage be a living wage.  The overall cost of a perpetual underclass exceeds the cost of implementing a minimum wage.  From an economic perspective, a reasonable minimum wage, implemented correctly, helps economic growth because it creates a new class of consumers, and stimulates consumption.