INCREASING THE MINIMUM WAGE IS SOUND ECONOMICS

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The idea of an honest day’s pay for an honest day’s work is something that all Americans can get behind. As the nation debates raising the minimum wage, ask yourself: How would your family live if you were making the minimum?

Since 1979, the minimum wage has fallen 30 percent in real terms, meaning that in 1979 minimum wage workers could buy about a third more goods and services than minimum wage workers can today. This drop in the purchasing power of the lowest paid workers has greatly worsened the unequal distribution of income.

A lot of people are paid the minimum wage. About 19.5 million workers, over 15 percent of the total labor force, or roughly 1 in every 7 workers, makes a low enough wage that they would be directly affected if the minimum wage were increased to $10.10. The argument that people who receive the minimum wage are part-time teenagers is simply not true. Almost 88 percent are age 20 or older. A majority of minimum wage earners are women, so increasing the minimum addresses directly the gender gap in earnings and helps ensure that men and women are equally paid for commensurate work.

And working people have earned this raise. Despite the increased income inequality since 1979, the productivity of labor has been steadily rising, fueling a dramatic increase in profits for shareholders. This means that working people have been doing their job — and then some! It is certainly fair that people whose productive work helps create the wealth of the nation share in the fruit of their efforts.

Some people say that increasing the minimum wage could kill jobs. Here is why they are mistaken: Increasing the minimum wage kicks off a spiral upward of all wages which filters upward to the middle class. When low-wage and middle class workers get paid more, they spend more. Increased consumer spending significantly boosts overall demand and economic growth. Indeed, consumer spending drives most of our nation’s gross domestic product.

And consider this: Increasing the minimum wage has not been shown to cause unemployment among low-wage workers. This is a remarkable result and on the surface stands in the face of the standard story of supply and demand, which suggests an increase in the minimum wage causes reduced employment and increased unemployment. But over and over, in community after community where minimum wage increases at the state level have been enacted, employment has held steady or increased.

Increasing the federal legal minimum wage to $10.10 per hour would apply across the board to all businesses nationwide. All will be on the same playing field and no one industry or region would be able to gain a competitive advantage by paying lower wages. And once workers start spending these increased wages, businesses will be able to see on their balance sheets first-hand the economic soundness of increasing the minimum wage.

Finally, if low-wage workers are allowed to earn more income, there will be a corresponding drop in demand for government programs such as food stamps. Our private charities will be able to focus their effort on the very neediest, not those who are working but still not earning enough to get by.

Increasing the minimum wage is win-win. On a human level, it is simply the right thing to do and demonstrates that we as a country respect the dignity of work. And the economics are unequivocal. Raising the minimum wage increases the take-home pay of low-wage workers, initiates an upward spiral for all wages, does not cause unemployment, and can actually create jobs by stimulating the economy.

Scott Carter

Scott Carter lives in Oklahoma and is an associate professor of economics at the University of Tulsa.

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