Wage hike would benefit economy, study indicates

On November 7, voters in six states—Arizona, Colorado, Missouri, Montana, Nevada, and Ohio—will vote on ballot measures that would raise the minimum wage in their home states. While recent polls show voters overwhelmingly support increasing their state’s minimum wage, a new study by the Washington, D.C.–based Economic Policy Institute proves that such initiatives would indeed help the economy, particularly for minimum-wage earners and their families.

The EPI’s findings are reinforced by leading economists, including five Nobel Prize winners and six past presidents of the American Economics Association, who recently signed a joint statement that raising the minimum wage “can significantly improve the lives of low-income workers and their families, without the adverse effects that critics have claimed.” In fact, Nobel Prize-winner and MIT professor Robert Solow explained that most economists today discount claims of employment harm that were once the conventional wisdom. In response to a reporter’s question, he described the current claims of massive job loss due to minimum wage increases as “irresponsible.”

It’s been a decade since Congress last voted to raise the minimum wage and, after adjusting for inflation, the value of the minimum wage is at a 50-year low. Every time the issue has come up in Congress, opponents have raised the same specter of mass unemployment that was part of the fight over Social Security when it was first proposed. For example, in 1996, Colorado’s Republican Senator Hank Brown said that a higher minimum wage would cast teenagers out of work and create more crime causing a juvenile problem of epic proportions.

The new EPI study examines the major research that has been done on the effects of minimum wage raises, and finds that where it was once accepted without question that raising the minimum wage was bad for jobs, experts now agree that any negative effects of a minimum wage raise are negligible and are outweighed by the positive effects for those who would actually get a wage increase.

Pennsylvania voters recently passed a measure to increase their state minimum wage to $7.15, and voters from the six states will vote on increasing the minimum wage by proposals from $1.00 up to $1.70. According to the EPI, a factor largely attributed to the popularity of raising the minimum wage is the rise of income inequality. The American economy has created enough jobs for all Americans to be employed, but many of these jobs do not pay enough to sustain a decent standard of living.

The EPI study notes that the predictions of job losses that are being made today, funded primarily by low-wage paying employers, simply recycle the methodologically uncertain predictions from older studies. While the immediate attention is on the potential benefits to workers in the six states with a minimum wage raise on the ballot, the new EPI paper also lays out the broader impact that a nationwide increase would have:

If the federal minimum wage were increased to $7.25 per hour, it notes that 14.9 million workers would receive a raise, 80% of whom are adults 20 or older, and that income would rise for parents of 7.3 million children.

In addition, the families that would be affected by the raise rely on minimum wage earnings for over half of their total family earnings, and 46% of these families depend entirely on those minimum wage earnings.