An Increased Minimum Wage Is Good Policy Even During Hard Times

Recent Studies Point to Higher Pay but No Job Losses

By T. William Lester, David Madland, and Nick Bunker | July 7, 2011

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Read the full article (CAP Action)

This year legislators in Illinois, Maryland, California, Maine, and Massachusetts have introduced bills to raise their state minimum wages. But policymakers may be reluctant to increase the minimum wage with unemployment hovering around 9 percent. Even during hard times, however, the minimum wage is good for the economy.

Increasing the minimum wage helps ensure employees are rewarded for their hard work and boosts the incomes of low-wage workers—something that is sorely needed to increase consumption and get the economy going. It reduces turnover and helps employers compete on a more level playing field, forcing firms away from a low-road, low-human capital investment model to one where workers stay attached to the workforce and employers make stronger investments in training. Taxpayers are better off because they have to bear fewer of the negative externalities from low-road employers—such as the costs of food stamps and Medicaid.

There is also a growing consensus among economists and academics that raising the minimum wage does not kill jobs even during periods of recession.

Read the full article (CAP Action)