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Raising the Minimum Wage Would Help, Not Hurt, Our Economy

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Read the full column (CAP Action)

Updated January 2, 2014: This column has been revised to include two new paragraphs that clarify the differences between the methodology used for this analysis and the methodologies employed by the academic papers cited and other similar academic analyses.

Raising the minimum wage would be good for our economy. A higher minimum wage not only increases workers’ incomes—which is sorely needed to boost demand and get the economy going—but it also reduces turnover, cuts the costs that low-road employers impose on taxpayers, and pushes businesses toward a high-road, high-human-capital model.

Despite these positive benefits, and the sad fact that the minimum wage is worth far less today than it was in the late 1960s, with the Senate set to vote to raise the federal minimum wage from $7.25 to $10.10 per hour, opponents will likely trot out the same unfounded argument that the minimum wage reduces employment. And with today’s unemployment rate stuck above 7 percent, we anticipate these types of arguments to reach a fevered pitch.

The evidence, however, is clear: Raising the minimum wage does not have the harmful effects that critics claim.

A significant body of academic research finds that raising the minimum wage does not result in job losses, even during periods when the unemployment rate is high. Critics of the minimum wage, however, often hold on to the claim that raising the minimum wage will lead to job losses and ultimately hurt the overall economy, exacerbating the problem of high unemployment. The argument that raising the minimum wage will increase unemployment is somewhat far-fetched, since the minimum wage impacts a relatively small share of the overall workforce, which is itself concentrated in certain industries such as restaurants and demographic groups such as teenagers.

Read the full column (CAP Action)

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