Center for American Progress

Stimulating Job Creation and Helping American Workers

Stimulating Job Creation and Helping American Workers

CAP Event Looks at Raising the Minimum Wage to Promote Economic Recovery

At an event this week, the Center for American Progress and the National Employment Law Project discussed new research on the effects of raising the minimum wage.

For more on this event, click here.

“Raising the minimum wage is good economics and good politics,” said David Madland, Director of the American Worker Project at the Center for American Progress Action Fund, at a June 7 event co-sponsored by the Center for American Progress and the National Employment Law Project. Madland explained that new cutting-edge economic studies demonstrate the economic benefits of increasing the minimum wage. “Raising the minimum wage does not kill jobs—even during periods of high unemployment,” he said, but instead encourages spending, investment, and economic growth.

Helen Neuborne, director of the Quality Employment Unit of the Ford Foundation, followed Madland’s remarks and underscored the important role a minimum wage increase could play in changing the lives of American workers. “Most minimum wage earners are adults, and 60 percent of them are women,” she said. “And they have families to support.” Raising the minimum wage would help workers cope during the next few years of America’s economic recovery from the Great Recession.

An expert panel discussion followed, featuring Michael Reich, professor of economics and director of the Institute for Research in Labor and Employment at the University of California, Berkeley; Sylvia Allegretto, deputy chair of the Center on Wage and Employment Dynamics, University of California, Berkeley; Celinda Lake, the president of Lake Research Partners, a prominent political research firm; Heidi Shierholz, economist at the Economic Policy Institute; and panel moderator Paul Sonn, the legal co-director of the National Employment Policy Institute.

The panel explained that two major new studies solidify two decades of research that find no negative effects from a minimum wage increase and discredit the economic claims of earlier decades that increases in the minimum wage negatively impact employment. The first study, published in the Review of Economics and Statistics in November 2010 by William Lester, Arindrajit Dube, and expert panelist Michael Reich, drew on 16 years of data to compare employment in every pair of neighboring U.S. counties that straddle a state border with differing minimum wage levels. The second companion study, published by Dube, Reich, and expert panelist Sylvia Allegretto, examined the effect of minimum wage increases during the recessions of the 1990s and 2000s.

In both cases, the investigators found that increases in the minimum wage did not have any discernible impact on job losses or slow rehiring, even during recessions or periods of high unemployment. “Negative employment effects do not materialize,” Allegretto said.

Further, raising the minimum wage has potentially positive effects on the American economy. Heidi Shierholz explained that raising the minimum wage puts money in the hands of American workers, sparking consumer spending crucial to economic recovery. A minimum wage increase would shift money away from corporate entities disinclined to spend money and toward Main Street.

Raising the minimum wage, therefore, could serve as economic stimulus, as well as ameliorate conditions for Americans living in poverty. “An increase of the minimum wage from $7.75 to $8.25,” Shierholz noted, “would give 10 million workers a raise,” and could stimulate economic growth to the tune of 50,000 new jobs.

These findings are poised to turn a minimum wage increase into a major campaign issue in the 2012 elections. “The minimum wage is one of the most intuitive policies to the American voter,” Celinda Lake said. She noted that even among those voters who believe the economy of their state is faltering, a potential minimum wage increase receives broad support. In 2006 a national poll conducted by CNN showed that 86 percent of Americans supported increasing the minimum wage. In a fall 2010 nationwide poll, 67 percent supported raising the minimum wage to $10 an hour. The minimum wage increase’s viability as a political issue also cuts across economic and regional distinctions.

The potential benefits in stimulating the American economy and helping the American worker make such an increase too significant to be ignored.

“This is an issue of massive potential,” Lake said, adding, “Let’s get this show on the road on Capitol Hill.”

For more on this event, click here.

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