Minimum wage increase will help stimulate economy
Increasing the minimum wage will help working families and create jobs, according to analysis by the Economic Policy Institute released Thursday. By increasing families’ take-home pay, workers gain both financial security and an increased ability to purchase goods and services, says the EPI, which examined data from a minimum wage study conducted by economists at the Federal Reserve Bank of Chicago.
The EPI analysis shows that the next federal increase to $7.25 from $6.55 . scheduled for July 24, 2009, could possibly generate $5.5 billion of much needed spending for America’s burdened economy over the following year.
“The size of the impact was surprising,” says Kai Filion, a policy analyst at the EPI. “It is not going to end the recession but it will soften the impact on minimum wage workers.”
In 2007, Congress passed a law that would increase the minimum wage by $2.10 from $5.15 over 26 months. The total impact of the three increases is estimated to be $10.4 billion of additional spending between August 2007 and July 2009, according to the EPI.
“The first two increases had a positive effect on the recession and countered the trend for people to cut back on spending,” says Filion. He also noted that the original study published by the Chicago Federal Reserve found that there was a connection between the minimum wage increase and spending on durables and automobiles.
–Marcia A. Wade