"What Really Happens When You Raise the Minimum Wage"

[applegrove]

What Really Happens When You Raise the Minimum Wage

by Bryce Covert at Think Progress

http://thinkprogress.org/economy/2014/02/18/3303201/cbo-minimum-wage/#

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But businesses may respond to a higher minimum wage in other ways. In a paper for the Center for Economic and Policy Research, John Schmitt argues that they can benefit from improved efficiency and lower turnover. A higher wage may lead employers to push employees to work harder, which can be preferable to cutting hours or workers. In fact, the majority of fast food restaurants in Georgia and Alabama said they would respond to a minimum wage increase with higher performance standards. A higher wage can also make it easier to recruit and retain workers, which can improve the bottom line. Dealing with turnover can be costly: replacing someone can cost as much as 20 percent of her salary.

Other studies have found that while some job losses may occur, there can still be an economic net gain thanks to the fact that so many workers will have more money to spend. A $10.10 minimum wage would mean a direct raise for 16.7 million workers, according to the Economic Policy Institute, who would then have more money in their pockets to spend on goods and services, boosting the economy. It also found that a gradual increase to $10.10 by 2016 would increase wages by $35 billion, which would boost GDP growth by about $22 billion.

The Federal Reserve Bank of Chicago found that even when potential job losses are taken into account, an increase in the minimum wage to $9, as President Obama proposed in his 2013 State of the Union, would increase household spending by $28 billion, or 0.2 percent of GDP. That extra spending stimulates the economy, which can lead to more job growth.

There is also real world evidence that minimum wage increases don’t hurt jobs. David Madland and Keith Miller analyzed minimum wage increases at the state level over two decades and “found no clear evidence that the minimum-wage increases affect aggregate job creation when unemployment rates are high.” After looking at the increases during times 7 percent unemployment or more, the rate actually declined 52 percent of the time and in a few cases remained unchanged. The authors also point to five other studies that did the same state-level analysis while controlling for other factors that could impact employment and similarly found “no discernable effect on employment levels.”



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[Thinkingabout]

1. One of the things to consider is if we lifted our minimum wage earners out of poverty it also brings

down the number of those receiving food stamps and other social nets and lower the amount of money spent by handling these programs. I have said to have taxpayers supplement corporations like Walmart and McDonalds so they could make larger profits.

[applegrove]

2. Very true.

[redqueen]

3. K&R