The Pardu

The Pardu
Watchful eyes and ears feed the brain, thus nourishing the brain cells.

Saturday, December 28, 2013

Raising The Minimum Wage Will Not Sink America


We often hear from  the GOP and many conservative economist that raising the minimum wage would lead to job losses and undue expense to companies.  GOP politicians specifically focus their rationale for retaining a lower minimum wage on the small to medium sized employers when they know full well their interest more relates to protection and "moating" of large corporation and the uber wealthy industrialist who fund their campaigns and heavens knows what else. 

Our non-qualified/non-economist opinion has always been and remains the GOP is "full of it" while performing for that flow of contributions for their efforts. 

Apparently, the Economic Policy Institute (EPI) via a recent study validates the GOP "poppycock." On December 19, 2013, the EPI published the results of an analysis of the Fair Minimum Wage Act of 2013. The bill was introduced by Sen. Tom Harkin (D-Iowa) and Rep. George Miller (D-Calif.) and would lead to three incremental increases of $0.95 from its current level of $7.25 per hour to $10.10 per hour. The EPI analysis was as we suspect: an increase in the federal minimum wage would provide a higher quality of life for low income earners and would provide a clear "shot-in-the-arm" to the US economy. A sorely needed shot -in-the-arm, I will add.

Report Excerpts
The EPI
Earlier this year, EPI released an analysis of the Fair Minimum Wage Act of 2013, a bill introduced by Sen. Tom Harkin (D-Iowa) and Rep. George Miller (D-Calif.) that would raise the federal minimum wage in three incremental increases of $0.95 from its current level of $7.25 per hour to $10.10 per hour (see Cooper and Hall 2013). The Harkin-Miller proposal would then index the minimum wage to inflation, so that as prices rise in subsequent years, the minimum would automatically be adjusted to preserve its real value. At the same time, the bill would raise the base wage paid to tipped workers from the current $2.13 per hour—where it has stood since 1991—in incremental increases over six years until it equals 70 percent of the full minimum wage. 
\
Since that analysis was released, five states have raised their state minimum wages: California, Connecticut, New Jersey, New York, and Rhode Island.1 The increases in these states underscore the broad recognition that the current federal minimum wage is too low. These increases slightly alter our earlier estimates of the impact of a federal minimum-wage increase to $10.10 because workers in these states who would have been affected by the federal increase will now have higher wages as a result of their higher state minimums. Yet the conclusion of our previous analysis remains unchanged: Raising the federal minimum wage to $10.10 by 2016 would lift incomes for millions of American workers and provide a modest boost to U.S. GDP. 
SUPPLEMENTARY DATA: State-by-state characteristics of workers who would be affected by increasing the federal minimum wage to $10.10 by July 2016 [PDF] 
This paper provides an update to our original analysis that reflects these higher state minimum wages, and changes in economic conditions over the past year. It begins by providing some context for the current minimum wage and the Harkin-Miller proposal, describing how today’s minimum and the proposed new minimum compare with historical benchmarks. It then provides a demographic overview of the workers who would be affected (both directly and indirectly) by raising the federal minimum wage to $10.10. Finally, it details the GDP and job creation effects that would occur as a result of such an increase.

Key findings include:
  • Raising the federal minimum wage to $10.10 by 2016 would return the federal minimum wage to roughly the same inflation-adjusted value it had in the late 1960s.
  • An increase to $10.10 would either directly or indirectly raise the wages of 27.8 million workers, who would receive about $35 billion in additional wages over the phase-in period.
  • Across the phase-in period of the increase, GDP would grow by about $22 billion, resulting in the creation of roughly 85,000 net new jobs over that period.
  • The workers who would receive a raise do not fit the stereotypes of low-wage workers:
  • Among affected workers, the average age is 35 years old, nearly 88 percent are at least 20 years old, and more than a third (34.5 percent) are at least 40 years old.
  • Of affected workers, about 54 percent work full time, about 69 percent come from families with family incomes less than $60,000, and more than a quarter have children.
  • The average affected worker earns half of his or her family’s total income.
Conclusion
Since our original analysis of the Harkin-Miller proposal, five states—California, Connecticut, New Jersey, New York, and Rhode Island—have adopted higher state minimum wages. By 2014, 21 states plus the District of Columbia will have set minimum wages above the federal minimum of $7.25. At that point, roughly half the U.S. workforce will be in jurisdictions with minimum wages above the federal minimum. These increases in these states, along with those in several cities and counties that have also implemented higher local minimum wages, underscore the growing recognition that the federal minimum wage of $7.25 is no longer an adequate wage floor. While these recent state-level increases—particularly California’s increase to $10 in 2015—slightly alter our original estimates, our conclusion remains the same: Raising the federal minimum wage to $10.10 by 2016 would lift the incomes of millions of working families, boosting their spending power at a time when the U.S. economy is in dire need of increased consumer spending.
We will link the report via the article title below and embed a few critical charts form the analysis.
Raising the Federal Minimum Wage to $10.10 Would Lift Wages for Millions and Provide a Modest Economic Boost 
By David Cooper | December 19, 2013
Excerpt charts.... (after viewing the charts feed your brains by reading the the report, It is not a long read.) 

FIGURE A
Annual minimum-wage earnings and poverty line for families of two to four, 1964–2013 and projected for 2013–2016 under proposal to raise the federal minimum wage to $10.10 by 2016 (2013 dollars)
Annual minimum-wage earnings and poverty line for families of two to four, 1964–2013 and projected for 2013–2016 under proposal to raise the federal minimum wage to $10.10 by 2016 (2013 dollars)
Note: Poverty thresholds for 2013 for family of two (one adult, one child) and three (two adults, one child) and four (two adults, two children) are inflated from 2012 U.S. Census Bureau thresholds by CBO-projected inflation for 2013. The poverty threshold for one adult, two children is slightly higher ($18,794) than for the family of three configuration shown here. Projections are based upon CBO inflation projections and the proposal to raise the minimum wage to $10.10 by 2016. Annual earnings are calculated assuming workers work 40 hours per week, 52 weeks per year.
FIGURE C
Real value of the federal minimum wage, 1968–2013 and 2013–2016 under proposed increase to $10.10 by 2016, compared with its value had it grown at the rate of productivity or average worker wages (2013 dollars)
Real value of the federal minimum wage, 1968–2013 and 2013–2016 under proposed increase to $10.10 by 2016, compared with its value had it grown at the rate of productivity or average worker wages (2013 dollars)
* Productivity and average wage projections from 2013 to 2016 do not include the Harkin-Miller proposal. 

Note: Dollars are deflated using CPI-U-RS and CBO inflation projections. Projected wage values are based on CBO inflation projections, average wage and productivity growth from 2002 to 2006 (the last full regular business cycle), and, in the case of the "real minimum wage" line, the proposal to raise the federal minimum wage to $10.10 by 2016. 

Source: Author's analysis of Total Economy Productivity data from the Bureau of Labor Statistics (BLS) Labor Productivity and Costs program, BLS Current Employment Statistics, Current Population Survey Outgoing Rotation Group microdata, CBO (2013), U.S. Department of Labor Wage and Hour Division (2013), and the Harkin-Miller proposal.
FIGURE E
Gender distribution of workers affected by raising the federal minimum wage to $10.10 by July 2016, and of total employment
Gender distribution of workers affected by raising the federal minimum wage to $10.10 by July 2016, and of total employment
Source: Author's analysis of Harkin-Miller proposal using Current Population Survey Outgoing Rotation Group microdata and BLS Current Employment Statistics (2013)







Raising the Minimum wage will spur economic growth!

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