UNDERNEWS

Undernews is the online report of the Progressive Review, edited by Sam Smith, who covered Washington during all or part of one quarter of America's presidencies and edited alternative journals since 1964. The Review has been on the web since 1995. See main page for full contents

June 11, 2009

HIGHER MINIMUM WAGE AS A STIMULUS

DMI Blog - A new research brief from Kai Filion at the Economic Policy Institute highlights the stimulative impact of raising the minimum wage. Back in 2007, Congress obliged President Bush to sign a long-delayed minimum wage increase into law by attaching it to a must-pass war appropriations measure. After ten years in which the value of the minimum wage was continuously eroded by inflation, Congress raised the minimum from $5.15 to $5.85 an hour in 2007. In 2008, it went up to $6.55. Next month, it's headed up to $7.25. And the economy is benefiting. So far, minimum wage increases have generated $4.9 billion in spending according to Filion, while the next increase will produce $5.5 billion in additional spending. As Filion succinctly explains "by increasing workers' take-home pay, families gain both financial security and an increased ability to purchase goods and services, thus creating jobs for other Americans."

The issue brief also takes on the most familiar minimum wage misconception - that raising pay inherently means increasing unemployment. Surveying a bevy of recent studies that have failed to detect significant increases in unemployment when the minimum wage rises, the issue brief considers factors like improved productivity, better employee retention and the stimulative effect of increased spending which may help explain why, in practice, jobs don't disappear when low pay gets a mandatory boost.

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