Increasing the federal minimum wage from $7.25 to $9.80 per hour would give more than 28 million workers a raise while generating approximately 100,000 new jobs over 3 years, finds a new Economic Policy Institute (EPI) Issue Brief.
In How raising the federal minimum wage would help working families and give the economy a boost, EPI researchers Douglas Hall and David Cooper show that raising the minimum wage would provide a substantial lift to the economy and benefit workers still reeling from the effects of the recession, generating almost $40 billion in increased wages.
According to the EPI press release, in contrast to prevailing myths about minimum-wage workers, raising the minimum wage would benefit millions of workers across demographic groups, not just teenage part-time workers. Almost 88 percent of workers who would be affected are at least 20 years old. Female and nonminority workers would benefit disproportionately from the increase; women comprise nearly 55 percent of those affected, and non-Hispanic white workers make up about 56 percent.
While increasing the minimum wage immediately benefits the lowest-paid workers through boosted earnings, it also yields positive effects on the larger economy. Raising the federal minimum wage to $9.80 would put nearly $40 billion in the hands of directly and indirectly affected families when they need it most, augmenting their spending power in the local economy. In return, these families would be more likely than any other income group to spend these extra earnings immediately on basic needs or services they could not previously afford.
This additional spending power would be a useful tool to spur job growth, as employers would need to hire new staff to keep up with heightened demand for goods and services. In fact, an increase in the federal minimum wage from $7.25 to $9.80 per hour would result in a net increase in economic activity of approximately $25 billion, generating approximately 100,000 new jobs. This hike would have a positive impact across the country, with job creation in every state.
“With the national unemployment rate not budging below 8.0 percent, now is the perfect time to raise the minimum wage,” said Douglas Hall. “Not only will it generate billions of new dollars for the economy while adding new jobs when we sorely need them, it will begin to address the wage stagnation working families have faced during the last 4 decades, while putting more money in their hands when they need it most.”