$10.10 Minimum Wage Would Actually Create New Jobs: Study

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Raising the minimum wage would help the working poor and give the entire economy a boost, a new analysis finds.

If the minimum wage rose to $10.10 per hour, as Senate Democrats and President Barack Obama propose, 27.8 million workers would see their wages go up as a direct or indirect result of the boost, according to the Economic Policy Institute, a left-leaning think tank. These workers would take home about $35 billion in additional wages and they would probably spend it, as low-income people living with little financial cushion tend to do.

The result: During the initial phase-in period, the U.S. economy would grow by about $22 billion, EPI found. The growth in the U.S. economy would result in about 85,000 new jobs, according to EPI. That counters arguments from conservative economists that raising the minimum wage could actually hurt the working poor by making employers hesitant to hire more workers. (A notion that’s been proven wrong by some economists and remains hotly debated.)

The analysis is an update to a similar report released by EPI earlier this year. It takes into account the fact that five states recently raised their minimum wage, meaning workers living in those states would feel less of an impact from a federal minimum wage boost than when EPI published the original research in March.

“A lot of states and even a lot of municipalities have all boosted their minimum wages out of a recognition that the federal minimum wage is just too low,” David Cooper, an economic analyst with EPI and the author of the report told The Huffington Post. “Because Congressional action is so hard to come by these days, they’re not going to wait.”

EPI's report adds to a growing body of evidence indicating that raising the federal minimum wage from its current $7.25 per hour would help a large swath of Americans. A June study from Restaurant Opportunities Centers United found that a $10.10 minimum wage would have been enough to push more than half of the nation’s 10 million-plus working poor out of poverty in 2011.

Today’s minimum wage isn’t enough for a family of two to live above the poverty line, according to the EPI study. In fact, it takes an hourly wage of $10.20 per hour for a single person to afford basic needs in America’s cheapest county, according to a July analysis from Wider Opportunities for Women. That wasn’t always the case, as Cooper noted: “The increase that is proposed would get us back to almost exactly what we would had as a real value of the minimum wage in the 1960’s.”

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Lawmakers would have to propose a minimum wage increase even well beyond the $15 minimum wage that fast food workers demanded in protests earlier this year in order to establish a minimum wage that’s kept up with productivity. Some researchers estimate the wage floor would be as high as $21.72 per hour if it kept up with increases in worker productivity. The chart below from EPI pegs it at about $18.30 per hour.

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And perhaps that’s something lawmakers should consider, after all this latest minimum wage proposal is smaller in percentage terms than past increases, EPI found. “(The bill) is a modest proposal but its a step in the right direction towards restoring the value in the minimum wage,” Cooper said.

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