Continue from previous post on "New Minimum Wage Policy", here we analyze the impact from an economics perspective. Many people said the new policy will jack-up the inflation figures due to higher production costs. Subsequently, it will dampen the GDP growth numbers. Is it true?
The impact on inflation and GDP growth is ambiguous. Setting a minimum wage would boost wages and consumption for workers who remain employed (likely to be the more productive workers, working in companies that have higher profit margin), but would hurt the profitability of businesses that are labor intensive and could potentially lead to higher unemployment rate.