By: Abby Lane, FellowPosted on July 24, 2012 Issues: Minimum Wage Poverty & Economic Security

True or false: raising the minimum wage is bad for the economy.

False. While many opponents of raising the minimum wage would have you believe otherwise, the truth of the matter is that raising the minimum wage is good for the economy. So the next time you run into a critic of raising the minimum wage, here are three points to help you set the record straight.

  1. Raising the minimum wage does not cause job loss, even during periods of recession. A recent report by the Economic Policy Institute (EPI) reviewed several studies that found that minimum wage increases do not have negative effects on the labor market. The most recent study by Allegretto, Dube, and Reich (2011) looked at the impact of raising the minimum wage at different phases of the business cycle between 1999 and 2009. The study didn’t find evidence that minimum wage increases caused any job loss, even during the Great Recession of 2007-2009.
  2. Raising the minimum wage would boost economic activity and create jobs. EPI estimates that by the third year of its implementation, the minimum wage increase in the Rebuild America Act would actually generate about $25 billion in additional economic activity and around 100,000 jobs– and that’s after accounting for business expenses related to raising the minimum wage.

    That’s because raising the minimum wage puts money into the pockets of low-wage workers and their families. Low-wage workers usually need to spend any additional money they make to support themselves and their families – and that means money that goes right back into the economy, boosting demand for the products and services other workers produce. Someone working full time, year round at the current federal minimum wage will make just $14,500 this year. The $5,100 annual boost this worker would receive from raising the minimum wage to $9.80 per hour will make a big difference in their ability to contribute to their family income. The extra earnings can go a long way in helping pay rent or put healthy food on the dinner table. This spending stimulates the economy and the labor market. Research indicates that for every $1 added to the minimum wage, low-wage worker households spent an additional $2,800 the following year. So far from a job killer, raising the minimum wage can be a job creator.

  3. Raising the minimum wage doesn’t just increase jobs and economic activity, it makes better employees. Paying low-wage workers higher wages helps reduce employee turnover, boosts worker efforts, and encourages employers to invest in their workers. All of these things are good for business.

In the past 30 years, Congress has only raised the minimum wage three times. The Rebuild America Act (S. 2252, H.R. 5727) would raise the federal minimum wage to $9.80 over three years – giving minimum wage workers their first raise since 2009, when the federal minimum wage reached its current rate of $7.25 per hour. Minimum wage workers need and deserve a raise – it’s time for Congress to act.

After all, don’t they understand the facts above? Raising the minimum wage is good for workers, women, and their families. And it’s good for the economy.