(Cross-posted from Off the Charts - the blog of the Center on Budget and Policy Priorities.)
Raising the minimum wage would help the economy, CBPP Senior Fellow Jared Bernstein writes in the latest edition of the CQ Researcher.
Two well-established facts help back up this argument, Bernstein says:
The first fact is that the American economy is made up of 70 percent consumer spending.
Economists widely agree that an extra dollar earned by a wealthy person is less likely to be spent than an extra dollar earned by a low-income person….
The second fact is that moderate increases in the minimum wage boost the earnings of most low-wage workers without leading to large employment losses. The increase favored by the president and congressional Democrats, which would take the federal minimum wage from $7.25 up to $10.10 in three annual increments, would place the real value of the wage floor back where it was in the late 1960s and would directly affect about 13 percent of the workforce….
In an economy driven in no small measure by consumer spending, moderately boosting the pay of low-wage workers with relatively high propensities to spend their new earnings should produce slightly faster macroeconomic growth.
Raising the minimum wage “is unlikely to be a big deal in terms of the larger growth picture,” Bernstein says, but “it really makes a difference in helping working families toiling at the low end of the service economy get a bit closer to making ends meet.”