Forced wage hikes may bring inflation?

According to an article in La Prensa this morning, many local businesses are concerned about the pay raise increasing the likely hood of inflation. I find it interesting that some would talk about controlling this man made imbalance  through price controls on goods or to mandate productivity increases as if the government can pull various levers and make people perform. When will we learn that you cannot suspend reality and make forced adjustments in some areas without an adverse affect in others. This is nothing but a form socialism. If the government can tell you how much to pay it will soon tell you what to make, how much it should cost, who can make it, etc. etc..

This last line in the article is especially telling. "Minister of Labor and Workforce Development, Alma Cortez, said that under the decree regulating the minimum wage includes a permanent session to discuss productivity, wage enforcement and the possible effects of inflation, in order to know the impacts."

So the government decrees the increase and then they do a study to see what adverse impact it might have. My 8 year old sees the logic in this.

XENIA DE LEON
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 Two realities could face the job market and the local economy after the government announced minimum wage increases: inflation and informality.

  Both trends, which were accentuated with the economic slowdown since last year, concern for workers and the business sector.

  The increase in the template could generate additional costs are difficult to handle for some companies, but also assuming that you have more cash available could raise prices of basic food basket.

The minimum wage increase for the region one, which includes Panama, Colon, San Miguelito and David, went from $ 357 to $ 416.  And for zone two, which encompasses the rest of the country, the increases were 31 to $ 95, which places the minimum wage between 349 and $ 416.

"What the Government proposes to increase the level of informality in our economy, destroy jobs in the country and reduce the competitiveness of companies that have products that compete,"  said Garcia de Paredes, president of the National Council of Private Enterprise .

  Rafael Chavarria, of the General Confederation of Workers of the Republic of Panama, said they are not very happy with the salary increase. They expected that the minimum wage be raised to $ 650.

  Moreover, they worry that the government did not freeze the prices of essential items and have not agreed  on a measures to control inflation, which makes workers lose purchasing power.

  Minister of Labor and Workforce Development, Alma Cortez, said that under the decree regulating the minimum wage includes a permanent session to discuss productivity, wage enforcement and the possible effects of inflation, in order to know the impacts.