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Aaron Regunberg: Want Economic Development? Raise the Minimum Wage

Friday, February 15, 2013


Should the Minimum Wage be higher? Aaron Regunberg believes so and argues it would spur economic growth.

Barack Obama had a number of memorable points in his State of the Union address on Tuesday. But nothing rang so true as the goal he set to raise the minimum wage. The president said:

“We know our economy is stronger when we reward an honest day’s work with honest wages. But today, a full-time worker making the minimum wage earns $14,500 a year. Even with the tax relief we’ve put in place, a family with two kids that earns the minimum wage still lives below the poverty line. That’s wrong…Tonight, let’s declare that in the wealthiest nation on Earth, no one who works full-time should have to live in poverty, and raise the federal minimum wage to $9.00 an hour. This single step would raise the incomes of millions of working families. It could mean the difference between groceries or the food bank; rent or eviction; scraping by or finally getting ahead. For businesses across the country, it would mean customers with more money in their pockets. In fact, working folks shouldn’t have to wait year after year for the minimum wage to go up while CEO pay has never been higher. So here’s an idea that Governor Romney and I actually agreed on last year: let’s tie the minimum wage to the cost of living, so that it finally becomes a wage you can live on.”

The usual talking points

Of course, these words were immediately followed by a litany of the usual conservative talking points, particularly that raising the minimum wage results in job losses, or that the only people helped by the minimum wage are teenagers working summer jobs.

There have been a number of right-leaning institutions that have released studies supporting these contentions. However, the heavy balance of research on the topic indicates that these conservative claims are empirically incorrect, plain and simple. According to a recent study from the Review of Economics and Statistics, there have been "no detectable employment losses from the kind of minimum wage increases we have seen in the United States." And Jared Bernstein recently wrote that an analysis of all the studies of the job loss effects of minimum wage increases shows that, “the true elasticity of job loss with respect to a minimum wage increase hovers about zero.”

Another worthwhile read is the 2006 survey of studies on this issue from the Economic Policy Institute. This research found that workers affected by a minimum wage increase provide over half their family’s earnings, and 46% of all families with affected workers rely solely on the earnings from those workers. In addition, it found that many minimum wage workers remain in low-wage jobs for substantial periods of time.

This helps

The point is that raising the minimum wage helps people. It helps people who are working hard but whose families are simply not making enough from that work to do anything but struggle to stay afloat.

And you know what that does? That stimulates the economy. If suddenly millions of Americans had more money to spare—and not some one-time tax break or something; I mean the real, steady stream of increased wages—that means that more money is being pumped back into the economy. And it also increases the demand of goods and services, which is the only thing that will ever force businesses to stop sitting on their (in the case of large corporations, record-breaking) profits and reinvest that money into hiring more employees.

The right thing to do

Raising the minimum wage is the right thing to do morally. But it’s also the right thing to do economically. We should all agree, I believe, that nobody who works full-time should live in poverty. But we should also see the macroeconomic light and understand that this is simply good policy. It’s past time to jumpstart our economy. It’s past time for some real, bottom-up economic development. In short, it’s past time to raise the minimum wage.


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Yes--studies conclusively prove that raising the minimum wage does nothing at all to employment opportunities for our youth (well, the studies Aaron reads, anyway). Ignore the fact that youth unemployment is at an all-time high and the massive negative impact the "unaffordable" health care act will have to businesses--this is the perfect time to ratchet up the pain! FORWARD!!!!

Comment #1 by Mike Govern on 2013 02 15

Yes--studies conclusively prove that raising the minimum wage does nothing at all to employment opportunities for our youth (well, the studies Aaron reads, anyway). Ignore the fact that youth unemployment is at an all-time high and the massive negative impact the "unaffordable" health care act will have to businesses--this is the perfect time to ratchet up the pain! FORWARD!!!!

Comment #2 by Mike Govern on 2013 02 15

Raising the minimum wage intuitively feels good.

The reality is that more employers would hire fewer entry-level workers because of it. If employers are forced to raise prices, they'd have fewer customers -- and most likely fire or not hire workers.

With those unintended consequences, raising the minimum wage may not benefit the economy, but hurt it. Government control is good at hurting our economy.

Comment #3 by Art West on 2013 02 15

I find it curious that you criticize “right-leaning institutions that have released studies supporting these contentions” and then turn right around to citing a group of left-leaning institutions and the likes of Jared Bernstein. We need ask whether a $9 minimum wage would actually raise workers out of poverty? Do we have any evidence that raising the minimum wage has ever moved the needle on poverty? If $9 is good why not double down and make it $18 or $36? Would this not do away with poverty? Or would this do away with jobs? BTW large corporations are not big job creators, but good dig at large corporations. It is small businesses that create jobs and I am not sure they are sitting on record breaking profits. It might be good for you to go out and canvas an number of small and medium local businesses and to determine what the impact of a 24% increase in the minimum wage would be on jobs and the economy. One other point on large corporations – only in socialist countries would large corporations (all state owned enterprises) reinvest money to hire more people. Think China 20 years ago and now even they have learned that this is not economically rational. I think you are on the right track with you thoughts on education as being the best path out of poverty. More of that would be good.

Comment #4 by Michael Byrnes on 2013 02 16

Obama's SOTU was a warmed over rerun of his previous SOTUs. There was nothing new, or memorable in the entire thing Green Energy, raise the Minimum Wage, blah blah blah. Next year he shoud send in one of those wheeled robots with the Ipad mounted on a column. He could put a YouTube video of this SOTU on, and go golfing somewhere.

Comment #5 by Michael Trenn on 2013 02 18

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