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$15 minimum wage would add to inflation pressures

We suspect that President Joe Biden’s plan to more than double the minimum wage within four years would have only a minimal impact on GDP. While there would almost certainly be some job losses as a result, we expect most of the adjustment would come via prices, adding to the upside risks to inflation over the coming years. But the big uncertainty here is how the pandemic would influence the outcomes since minimum wage hikes would affect the sectors hit by virus-related restrictions hardest.
Michael Pearce Senior US Economist
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More from Michael Pearce

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The continued surge in prices last month was again mostly concentrated in sectors reopening or facing intense supply constraints, which allows the Fed to stick with its “largely transitory” story for now. But with signs of cyclical price pressures building and the extremely strong job openings and quits figures pointing to stronger wage pressures, we believe the Fed will eventually have to acknowledge that inflation will remain elevated for much longer.

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US Data Response

ISM Manufacturing Index (May)

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