Phasing in a minimum wage increase between and would boost consumer spending and economic growth as the country recovers from the public health and economic crises. Different methodological approaches predict varying aggregate effects of minimum wage increases. However, calculations uniformly point toward wage increases begetting stimulus, especially wage increases for low-wage workers:. Broad consensus in the academic research over the past 30 years has debunked the idea that raising the minimum wage causes employers to employ fewer people.
Dozens of careful studies have explored how minimum wage laws affect earnings and employment, influenced by the seminal work of David Card and Alan Krueger. In spring , prominent economists in the US and the UK published an analysis of state-level minimum wage changes since , finding that the overall number of low-wage jobs remained unchanged after the increase and that low-wage workers who were already earning above the minimum also saw modest wage increases.
In fact, in , the 13 states that raised their minimum wages added jobs at a faster rate than the states that did not, according to the U. Department of Labor. New analysis from CAP Distinguished Senior Fellow Austan Goolsbee shows that individual consumer choices driven by fear of COVID infection—not legal closures or stay-at-home orders—largely drove changes in consumer traffic and spending.
This indicates that once vaccination rates increase and fear of exposure decreases, consumer spending patterns will readjust if consumers have sufficient funds to spend.
The post-pandemic economy will provide a strategic moment to ensure that those in low-income households who are more likely to spend each additional dollar they receive in pay than higher-income people will be able to increase their consumption as needed. This category of increased spending would be particularly beneficial to a recovering restaurant sector.
Paltry pay with ever-decreasing purchasing power ensures that many people who work full-time for minimum wage pay rely on programs such as SNAP and Medicaid to provide food and health care for their families.
Fast-food restaurants suffered from chronic turnover and vacancies, and when wages increased, more people were willing to take the jobs. The backlash drew in some of the biggest names in the field, with criticism that was unusually fierce.
The late Nobel laureate James Buchanan, for example, wrote in the Wall Street Journal that Card and Krueger were damaging the fundamental credibility of economics. As the years have passed, however, a new generation of economists have affirmed and expanded on the work of Krueger and Card, and even former critics have come to accept their insights.
Opinions based on the old conventional wisdom die hard, he said. These are households with very little cushion, and minimum wage really does make a huge difference. Department of Labor under President Barack Obama, described it as a poverty wage:. Most are adults, and a disproportionate number are Black and Latinx workers.
Not until did federal law require restaurants and bars to pay a minimum wage. Jayaraman is an authority on restaurant labor and economics. In addition to her academic posts at Berkeley, she is the co-founder and president of One Fair Wage , a grassroots advocacy organization of restaurant workers.
Restaurants feature the largest concentration of minimum and low-wage workers, she said, and these workers provide a startling view into the lives of the working poor.
Jayaraman traces the custom that allows restaurant owners to pay their servers little or nothing, and forces the workers to be dependent on tips, to the midth century, when women and ex-slaves were entering the restaurant workforce.
Today, U. Who is most harmed by this law? In testimony before the Illinois Senate last November, Jayaraman had a clear answer: women, and especially women of color. It is not intended to constitute legal advice nor does it create a client-lawyer relationship between Jackson Lewis and any recipient.
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Efficiency wages occur when employers pay higher than the minimum to attract skilled workers, boost productivity, and increase loyalty.
What Is a Living Wage? Living wage refers to a theoretical wage level that allows an individual to afford adequate shelter, food, and other necessities. What Is a Maximum Wage?
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