It's a great idea, one I've espoused on these very pages. The president suggested raising the federal minimum from its current level of $7.25 up to $9 by 2015 and then index it to inflation. An increase of that magnitude would directly lift the wages of 15 million low-wage workers, according to the WH.
Clearly, in an economy where for decades growth has failed to reach our lowest wage workers, it's time to raise the wage floor to ensure that low-wage workers have a decent shot at a fair wage.
From the WH fact sheet:
Raising the minimum wage mostly benefits adults, and especially working women: Around 60 percent of workers benefiting from a higher minimum wage are women, and few are teenagers -- less than 20 percent.
Raising the minimum wage helps parents: The average worker who would benefit from a rise in the minimum wage to $9 an hour brought home 46 percent of his or her household's total wage and salary income in 2011, according to the Current Population Survey.
For a working family earning $20,000 - $30,000, the extra $3,500 per year from raising the minimum wage would cover:
The family's spending on groceries for a year; or
The family's spending on utilities for a year; or
The family's spending on gasoline and clothing for a year; or
Six months of housing.
Raising the minimum wage will boost wages without jeopardizing jobs while improving turnover and productivity: A range of economic studies show that modestly raising the minimum wage increases earnings and reduces poverty without measurably reducing employment, and that in fact employers may see a more stable workforce due to reduced turnover and increased productivity:
Numerous careful economic studies have shown that increasing the minimum wage has no negative effect on employment. Recent comprehensive studies have built on earlier research and confirmed that higher wages do not reduce employment, potentially because they increase employers' ability to attract, retain, and motivate workers. And they benefit workers by increasing the reward to work. For example, one recent study found that when states like New York, Rhode Island, California, and Vermont raised their minimum wage, their workers benefited relative to workers in neighboring states that did not raise their minimum wage. This study concluded: "These estimates suggest no detectable employment losses from the kind of minimum wage increases we have seen in the United States." [Arindrajit Dube, T. William Lester, and Michael Reich, 2010, "Minimum Wage Effects Across State Borders: Estimates Using Contiguous Counties," Review of Economics and Statistics.]
In 2006, the Congressional Budget Office analyzed a2 increase in the minimum wage and found that "the potential employment and unemployment impacts of raising the federal minimum wage rate... are difficult to predict, but are likely to be small."
This post originally appeared at Jared Bernstein's On The Economy blog.