Higher Minimum Wage?

By Vince Bruni

In his 2013 State of the Union Address, President Obama made news by calling for an increase to the federal minimum wage to $9 per hour. The issue has been one of contention for years. After the President’s speech, law makers, splitting mostly down party lines, both supported and opposed the idea. The opposition has often stated that an increase in the federal minimum wage will lead to lower employment and high inflation. Recent data, however, does not seem to support these concerns.

A new study by the Center for Economic and Policy Research shows that modest increases in minimum wage lead to negligible effects on employment numbers.  These effects are  partly due to the fact that low wage earners tend to spend more when they receive a higher wage, increasing product demand and boosting  local economies. The study also shows that current inflation rates are not as alarming as the opposition contends. The same study shows that a 10% increase in low wages leads to a .4%-.7% increase in prices. These numbers offset one another because employers are continuously implementing procedures to increase productivity.  As a result, worker productivity has steadily increased in the U.S. for the last several decades while wages have remained stagnant. If wages had kept pace with productivity, the minimum wage would now be $21.72 per hour.

It seems like the public is starting to catch on. Over the last three years, support for raising the minimum wage rose. In 2011, a survey showed that 67% of Americans supported a minimum wage increase to $10 per hour. According to a 2013 survey, that number has now risen to 73%. Law makers are also starting to take up the issue. After the President’s speech, congressional leaders began introducing and debating an increase. Elizabeth Warren has led the charge arguing for a $10 per hour minimum wage that will be chained to inflation. However, with a conservative House of Representatives, any increase will be a long-shot.