Wage increases stabilize the economy.
Lily Roberts 21, the acting vice president for Inclusive Economy at American Progress. Her work focuses on raising wages; combating economic inequality linked to race, gender, and geography; and building wealth and stability for American families. She is the former managing director for economic policy and director of economic mobility at American Progress. She has appeared on CNBC, NPR, and Politico to discuss economic justice and the labor market. Prior to joining American Progress, Roberts worked at Mathematica Policy Research, where she researched federal strategies to support low- and middle-income families. Roberts received a master’s degree in social work, focusing on community development, from Case Western Reserve University. Her undergraduate degree in military history and English is from the University of North Carolina at Chapel Hill. Roberts has served as a case manager at a Washington, D.C., social services nonprofit and was previously an advisory neighborhood commissioner in Shaw. Ben Olinsky, January 27th, 2021, "Raising the Minimum Wage Would Boost an Economic Recovery—and Reduce Taxpayer Subsidization of Low-Wage Work," Center for American Progress, https://www.americanprogress.org/article/raising-minimum-wage-boost-economic-recovery-reduce-taxpayer-subsidization-low-wage-work/ ---ML
Since 2014, CAP has demonstrated that an increase in the minimum wage would significantly decrease the use of the Supplemental Nutrition Assistance Program (SNAP), as millions of workers are currently paid so little that they must rely on the public social safety net. Indeed, an increase to the federal minimum wage (and the elimination of the subminimum wage for people who work for tips and people with disabilities) would have broad benefits for the economy beyond the wages of affected workers. Wage increases—particularly for those at the bottom of the income spectrum—increase community-level economic activity and support local businesses; reduce the amount by which taxpayers subsidize corporations for the low wages they pay; and reduce the pay inequalities for women and people of color that depress overall economic growth.
An increase to the minimum wage would be far from divisive: American voters have repeatedly signaled broad, bipartisan support for raising the minimum wage to $15. In November, 61 percent of Florida voters supported a ballot measure to do just that, even as the state’s voters backed Donald Trump for reelection. The percentage of Americans who say that they support raising the minimum wage has grown during the pandemic—66 percent of Americans supported raising the minimum wage in February 2020, while 72 percent supported it by August 2020.
The failure of the Senate in recent years to pass minimum wage legislation has meant real, tangible harm to American families. The last time Congress passed an increase to the minimum wage was in 2007, which fully phased in by 2009. Since 2009, America’s minimum wage workers have endured the longest period since 1938 without a pay raise, while the rising cost of living simultaneously eroded the value of the minimum wage by more than 17 percent. Last year, CAP put this into sharp relief by highlighting how much workers are losing each day the Senate fails to act:
While the Raise the Wage Act languishes in the Senate, workers lose $62 every eight-hour workday earning an hourly wage of $7.25 instead of $15. That’s $310 a week, $1,348 a month, and $16,174 a year. Eliminating these losses would also be a crucial step toward reducing existing pay gaps for women and particularly women of color, who disproportionately work in low-wage and tipped occupations.
As Congress works on coronavirus rescue legislation and a subsequent package to rebuild the economy, the minimum wage should not be dismissed. Raising the wages of low-income workers will stimulate the economy; substantially lower the amount the country spends on social safety net programs such as SNAP; and reduce economic inequality, thereby unleashing additional economic growth in a period of recovery.
Stimulate the economy by putting more money in workers’ wallets
Phasing in a minimum wage increase between 2021 and 2025 would boost consumer spending and economic growth as the country recovers from the public health and economic crises.
Different methodological approaches predict varying aggregate effects of minimum wage increases. However, calculations uniformly point toward wage increases begetting stimulus, especially wage increases for low-wage workers:
The Federal Reserve of Chicago determined that low-wage worker households spent an additional $2,800 in the year after a $1-per-hour increase to the minimum wage.
The most recent analysis from the Economic Policy Institute found that increasing the minimum wage to $15 by 2025 would generate $107 billion in higher wages. Their earlier analysis indicates that an increase from $7.25 to $9.80 per hour between 2012 and 2014 would have generated “approximately 100,000 new jobs.”
The Institute for Policy Studies calculates that for every extra dollar going into the wallet of a low-wage worker, about $1.21 is added to the overall economy.