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Home Publications Blogs CEPR Blog Three Years with No Increase in the Federal Minimum Wage

Three Years with No Increase in the Federal Minimum Wage

Written by John Schmitt   
Tuesday, 24 July 2012 10:00

Today makes three years since the last increase in the federal minimum wage — to $7.25 per hour on July 24, 2009. Since then, the value of the minimum wage — adjusted for inflation — has fallen about six percent.

Yesterday, a group of top economists signed a letter urging Congress to raise the minimum wage in three steps to $9.80 by 2014. They estimate that a bump in the federal minimum would benefit 29 million workers. About 20 million low-wage workers would receive direct pay increases and another 9 million, who earn just above the new legal minimum, would capture some “spillover” as employers adjusted relative wages within firms. The “vast majority” of these beneficiaries, the economists say, would be “adults in working families.”

The letter writers also argue that a boost in the minimum wage might even help on the jobs front, by providing much-needed stimulus:

“In recent years there have been important developments in the academic literature on the effect of increases in the minimum wage on employment, with the weight of evidence now showing that increases in the minimum wage have had little or no negative effect on the employment of minimum wage workers, even during times of weakness in the labor market. A minimum wage increase can also serve to stimulate the economy as low-wage workers spend their additional earnings potentially raising demand and job growth.”

The economists who signed the letter include: Nobel Laureate, Joseph Stiglitz; John Bates Clark Medal winner, Daron Acemoglu; former Labor Secretary, Robert Reich; former chair of the Council of Economic Advisors, Laura Tyson; as well as, Jeffrey Sachs, Robert Frank, Richard Freeman, Lawrence Katz, Michael Reich, and Economic Policy Institute president Lawrence Mishel.

As CEPR research has demonstrated, an increase to $9.80 by 2014 would be a very modest proposal relative to any reasonable benchmark.

Tags: economy | employment | low-wage work | minimum wage

Comments (1)Add Comment
Eliminate Min Wage Now
written by Dean Swomley, August 02, 2012 9:54
The minimum wage is one of the single greatest barriers to economic recovery and clearing markets. It is anti market and has never been good economics as a going system. It blocks persons with no/low/wrong skills from finding any employment that could allow them a chance to gain skills and get into the mix. From a macro-economic standpoint what happens is that owners/managers hire fewer people than they would, those employed people are less than optimally utilized because they are performing lower skill tasks than they are qualified for, the company then makes less profit which pressures wages, and the U.S. becomes less attractive for business contributing to growth in countries elsewhere while growth here stagnates. The min wage is a friend to unions temporarily until the business goes under, but it is the enemy of the poor and economic mobility.

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