Minimum Wage: A Stealth Stimulus

[RSLudlum]

I bet you didn't know that the minimum wage increases have helped the economy.

U.S. minimum wage hike a stimulus to economy: report
Thu May 28, 2009 6:19pm EDT

NEW YORK (Reuters) - A higher U.S. minimum wage is providing a cushion to the economy when it is most needed, according to a report released on Thursday.

The Economic Policy Institute, a liberal think-tank based in Washington, said recent rises in the minimum wage have acted as a "stealth stimulus," preventing the worst recession in generations from spiraling out of control.

The study found that the bottom-rung pay increases will boost spending by $4.9 billion.

Such findings counter conventional wisdom among economists, who tend to argue that mandated wage increases hurt businesses' bottom line, putting a crimp on hiring.

On the contrary, say EPI analysts, who argued that further growth in low-end incomes would go a long way toward engendering an economic recovery.

"An increase in the minimum wage would not only benefit low-income working families, but it would also provide a boost to consumer spending and the broader economy," said Kai Filion, an analyst at EPI.

In the first increase in over a decade, the minimum wage was raised to $5.85 two years ago after a tough battle in Congress.

The EPI study found the July 2007 minimum wage hike benefited over 700,000 families and added $1.7 billion in additional spending over the following year.

A July 2008 increase benefited over 1.3 million families and added $3.1 billion in additional spending over the following year, the EPI analysts added.

http://www.reuters.com/article/domesticNews/idUSTRE54R6YD20090528

 

[Jordan]

...and it also makes sure more people are unemployed and can't pay their bills, causing greater defaults on debt.

 

[Zippyjuan]

While is is true that those at the lowest income levels are more likely to spend all of the additional money they get than those at the highest levels, does giving thirty cents an hour (or whatever it was) to about a million people offset a half a million losing their jobs a month?

 

[TastyWheat]

While is is true that those at the lowest income levels are more likely to spend all of the additional money they get than those at the highest levels, does giving thirty cents an hour (or whatever it was) to about a million people offset a half a million losing their jobs a month?

That is a common economic fallacy. Poorer people may spend a greater percentage of their income on goods and services, but the rich invest more of their money, allowing others to use their capital. Even if a rich person kept all of his or her money in the bank it's still being used to make loans to other people. I would even be so bold as to say that investing money is even more stimulative than simply "spending it".

If you buy a good or a service it is an even exchange: money for the good/service. If you invest money, by purchasing stock let's say, there's no guarantee you'll even get back your original investment.

 

[0zzy]

I say we boost the minimum wage to $50 dollars an hour, that way poor families can get the money they need to survive and no bad will come out of it, it will actually cure this depression from getting out of hand.

"You can't do that! The owner won't be able to pay all of his employees!"

Oh? So why do you force a minimum wage on them?

"Because it's the maximum amount of money that won't effect the owner and still provide enough money for poor families."

Says who?

"The government."

Really? The government? You mean the same people who got us in this mess?

"Capitalist did! And Republicans! And Bush!"

I can't talk to you.



I think I'm schizo.

 

[torchbearer]

$1000/hr minimum wage. we can all be poor.

 

[RSLudlum]

I got a crazy question: If you're self-employed, do you 'legally' have to pay yourself minimum wage?

 

[Brian4Liberty]

I got a crazy question: If you're self-employed, do you 'legally' have to pay yourself minimum wage?

Probably more than that. You have to pay yourself a reasonable wage for the time you put in. They do that so you can't avoid payroll taxes.

For instance, you have (and work full time at) a solo business that nets $100,000 per year. You can't just take that profit like a dividend or retained earning. You have to pay yourself a "reasonable" wage out of that (maybe $30k). But hey, it's a very subjective rule, and only comes into play if they audit you or want to harass you.