system
Given the following post, respond as if you're commenting on Reddit:
human
ELI5: Wouldn't increasing the minimum wage just cause shops and manufactures to raise their prices?

and just end up in the same situation as before but just more inflated?
gpt
Let's imagine a particular product - Nokia cell phones. For now, we'll assume that Nokia phone manufacturers pay minimum wage too. Let's say that the minimum wage goes up 10%.

So when you go to buy the phone from the store, the store pays low level wages (which go up 10%), electricity, rent, and management salaries (which are too high to be affected by minimum wage), along with the wholesale phone.

The phone manufacturer paid factory labour (10% up), rent, electricity, management salaries, and cost of raw materials.

The raw materials company paid mining/drilling labour (10% up), management salaries, heavy equipment, and cost of land/mining rights.

So while the purchasing power of the poor goes up 10%, most of the contributors to the cost of an item don't go up. Raising minimum wage therefore increases the purchasing power of the poor relative to society, just as intended.