Why do Republicans assert that minimum wage increases are damaging to the economy?

March 23, 2019 by stephenshubert

Quite the contrary, minimum wage increases have repeatedly shown economic improvement with beneficial effects  for the lives of low income people. It has been widely demonstrated that raises to low income persons directly translate into increased spending, improving the general community and decreasing stress on the recipients.  According to Arindrajit Dube, Ph.D. Assistant Professor of Economics University of Massachusetts in his testimony before the United States Senate. He testified:

  1.  The minimum wage has failed to keep pace with productivity, while top pay and corporate profitability have grown rapidly.
  2. Minimum wages have not kept pace with cost of living.
  3. Minimum wages have also lost ground in comparison to median wages.
  4. For the range of minimum wage increases we have seen in the U.S. over the past two decades, recent evidence based on credible methodologies do not find job losses of any sizable magnitude.
  5. While employment may not fall from moderate increases in minimum wages, both separation and hires fall, lowering the turnover rate.
  6. Based on existing evidence, we can expect some increases in restaurant prices from a minimum wage increase. However, the overall price level is unlikely to change noticeably, and there is little risk of wage-price spirals from indexation.
  7. The best evidence suggests that minimum wage increases lead to moderate reductions in the poverty rate, especially together with the Earned Income Tax Credit.

Summary: The minimum wage has failed to keep pace with productivity, while top pay and corporate profitability have grown rapidly.• A falling minimum wage has contributed to rising inequality, explaining around half the rise in inequality in the bottom half of the pay distribution, and more so for women.
• Raising and indexing the minimum wage would reduce the gap between those at the
bottom and the rest of the workforce.

He concludes: In new work, I find very similar results using a 22 year period and all individuals under 65 years of age. I, too, find that a 10% increase in minimum wages would reduce poverty by around 3%

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