4 Simple Reasons Why Congress Should Raise The Minimum Wage
Photo: Joe Lustri via Flickr
The simmering debate over the minimum wage erupted on Thursday when hundreds of fast-food workers across the country walked out of their jobs in protest of their low wages, and marched in support of raising the minimum wage to $15 per hour from the current rate of $7.25.
While Congress is extremely unlikely to raise the minimum wage to $15 per hour, congressional Democrats are considering a bill written by Senator Tom Harkin (D-IA) and Rep. George Miller (D-CA), which would raise the rate to $10.10 per hour in three increments of 95 cents, then automatically increase it in the future by linking it to changes in the cost of living. The bill reportedly has the support of President Barack Obama, who had previously called for raising the minimum wage to $9 per hour.
Congressional Republicans have shown no interest in raising the minimum wage for the first time since 2007, but that is a major miscalculation. A minimum-wage increase would be good policy, and even better politics. Here are four simple reasons why Congress should ensure a living wage for every working American:
It Would Lift Families Out Of Poverty
A full-time worker making the current minimum wage of $7.25 per hour would make $15,080 for a full 52-week year — 19 percent below the poverty line for a family of three. As this chart from the Economic Policy Institute illustrates, if the minimum wage were raised to $10.10 per hour, it would lift a minimum-wage income back above the poverty line for a family of three for the first time since 1968:
It Wouldn’t Actually Kill Jobs
Photo: Samuel Huron via Flickr
The most commonly heard argument against raising the minimum wage is that such a reform would hurt the economy by causing employers to eliminate jobs. But economic research does not back up this assertion.
John Schmitt, a senior economist at the Center for Economic and Policy Research, recently examined two meta-studies that analyzed hundreds of studies on the employment impact of the minimum wage, and determined “that the minimum wage has little or no discernible effect on the employment prospects of low-wage workers.”
In an open letter from July expressing support for a $10.50 minimum wage, over 100 economists clearly explained how this could be:
Businesses can readily absorb these small cost increases [caused by raising the minimum wage] through minor increases in prices and productivity as well as enabling low-wage workers to receive a slightly larger share of businesses’ total revenues. On average, even fast-food restaurants, which employ a disproportionate share of minimum-wage workers, are likely to see their overall business costs increase by only about 2.7 percent from a rise today to a $10.50 federal minimum wage. That means, for example, that McDonald’s could cover fully half of the cost by raising the price of a Big Mac, on average, from $4.00 to $4.05. The remaining half of the adjustment could come through small productivity gains or a slightly more equal distribution of companies’ total revenues.
It Would Stimulate The Economy
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Research suggests that raising the minimum wage would have a strong stimulating effect on the economy. In July, Federal Reserve Bank of Chicago economists Daniel Aaronson and Eric French explained that raising the minimum wage to $9 per hour could “stimulate economic activity by putting money into the hands of people who are especially likely to spend it.”
Specifically, they found that such a raise would increase aggregate household spending by about $48 billion, or 0.3 percent of 2012 real GDP, in the year following the raise. Although the authors caution that the stimulus would only last for a year or so, it would provide a much-needed shot in the arm for the stagnating economic recovery.
It’s A Political No-Brainer
Image: League of Women Voters of California via Flickr
Raising the minimum wage is simply not a controversial issue — except on Capitol Hill. Poll after poll reveals that huge, bipartisan majorities of Americans support raising the rate. Most recently, a November 11 Gallup survey found that 76 percent of Americans — including 91 percent of Democrats, 76 percent of Independents, and 58 percent of Republicans — support raising the minimum wage to $9 per hour.
The widespread popular support for an increase provides a strong political incentive for each party to move on the issue. For Republicans, raising the minimum wage would be an easy, economically sound way to combat the damaging perception that Republicans don’t care about average Americans. For Democrats, it would be a way to reinforce the party’s self-styled image as protectors of the middle class. And as Congress’ approval rating continues to sink to all-time lows, both parties could desperately use a bipartisan iniative that would not rile their respective bases.