Increases lift economy, don’t cause job losses, studies show
THE FEDERAL MINIMUM wage jumped 70 cents July 24 — to $7.25 per hour. It was the third and final 70-cent raise in a three-step hike passed by Congress in 2007. For 10 years the rate had stagnated at $5.15 an hour, until new Democratic majorities in the U.S. House and Senate pushed the increase through. The hike bumped the rate to $5.85 in 2007 and $6.55 in 2008.
An estimated 10 million workers in 31 states will benefit from the hike. Nineteen states and the District of Columbia already have minimum wage rates at $7.25 an hour or higher, so workers there will not be affected. California and Massachusetts, for example, have minimum wage rates of $8; the state of Washington’s is $8.55.
Raising the minimum wage has long been a sore spot with corporate lobbyists, who claim such increases cause job losses. However, studies indicate that’s not true. A 2006 study involving more than 650 economists — including five Nobel laureates — found that raising the minimum wage “significantly improves the lives of low-income workers and their families, without the adverse effects critics have claimed.”
According to the Economic Policy Institute’s Minimum Wage Issue Guide:
- The average minimum wage worker brings home more than half of his or her family’s weekly earnings.
- 76 percent of workers whose wages will be raised by the minimum wage increase are adults.
- 63 percent of workers who will benefit from an increase to $7.25 are women.
- A disproportionate share of minorities will benefit from a minimum wage increase. African-Americans represent 11 percent of the total workforce, but are 18 percent of the workers affected by an increase. Similarly, 14 percent of the total workforce is Hispanic, but Hispanics are 19 percent affected by an increase.
The EPI also projects that increasing the minimum wage to $7.25 an hour will stimulate the economy, boosting consumer spending by $5.5 billion over the next 12 months. Even with an individual earning the current $7.25 in a standard work year, that person would earn $14,500 — slightly below the federal poverty level for a family of two.
The minimum wage first became law in 1938 as part of the Fair Labor Standards Act, when Pres. Franklin D. Roosevelt promoted the measure as part of his plan to end the Great Depression. The initial rate was set at 25 cents an hour.
