Tuesday, June 7, 2011

Expert Economic Study Reveals Raising Minimum Wage Would Help Economy

A group of economists for the Center for American Progress (CAP) revealed the results of 15 years' worth of research and concluded that raising the federal and state minimum wages across the country would boost the stagnant economy and improve the standard of living among low-wage earners. From The Huffington Post article on the study:

Michael Reich, an economics professor and director of the Institute for Research on Labor and Employment at the University of California, Berkeley, said his research has shown that businesses don't suffer from having to dish out slightly higher wages to their lowest-paid employees. In fact, he argued there are benefits to employers.

"The labor market absorbs the minimum wage," said Reich. "Turnover goes way down when there's a minimum-wage increase. Employees -- when they stay longer, they'll be more experienced and more productive. And the employers will have lower turnover costs."

The economists made their argument at a time when the American economy remains stubbornly sluggish. On Friday, the federal government released a disappointing report showing that the economy hasn't been adding jobs at the pace it needs to for a robust recovery. The unemployment rate has risen to 9.1 percent, and many experts believe it will be several years before it drops to pre-recession levels. Many of the jobs being added also happen to be lower-wage positions.

The current federal minimum wage is $7.25, or about $15,000 a year for a full-time worker. The minimum wage had been stuck at $5.15 for over 10 years until 2007, when a series of increases were put into effect. Seventeen states currently have a minimum wage set higher than the federal standard, and a number of states are considering giving their lowest-paid workers another raise.

The economists arguing for a minimum-wage boost compared it to stimulus action, saying that it pumps money into local economies and can even lead to job growth. Such an increase is like food stamps or unemployment benefits in that the recipients, who tend to be low-wage workers and their family members, usually have to spend the money rather than sock it away.

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