Subscribe to Dollars & Sense magazine. Recent articles related to the financial crisis. Min. wage increases boost consumer spendingThe most recent economic snapshot from the Economic Policy Institute fits nicely with an article from our March/April issue, Should We Be Talking About Living Wages Now?, in which Jeannette Wicks-Lim of the Political Economy Research Institute argues that a recession and financial crisis is not a time to abandon living wage campaigns and policies. We'll have another article by Wicks-Lim in our July/August issue, as part of our continuing series of articles from PERI researchers. —csIncreases in minimum wage boost consumer spending Economic Snapshot for May 27, 2009 By Kai Filion The recently enacted American Recovery and Reinvestment Act included policies to help struggling families and create jobs. But an extremely effective and simple policy that achieves both of these goals is often overlooked: increases in the minimum wage. Each increase provides financial relief directly to minimum wage workers and their families and helps stimulate the economy. By increasing families' take-home pay, workers gain both financial security and an increased ability to purchase goods and services, thus creating jobs for other Americans.  A three-step federal minimum wage increase was passed by Congress in 2007. The first step took place in July of 2007, with a year between each step. In a forthcoming paper, we estimate the total impact of each increase using results from a study by economists at the Federal Reserve Bank of Chicago (Aaronson et al. 2008) that measures the effect of minimum wage increases on spending. The first two increases in July 2007 and July 2008 will have generated an estimated $4.9 billion of spending by July 2009, precisely when our economy needs it the most (see Figure). Furthermore, the final increase in July 2009 is expected to generate another $5.5 billion over the following year. The paper also shows that if the minimum wage were increased to $9.50 in 2011, as President Obama promised during the election, an estimated $60 billion of additional spending would be generated over two years. (This assumes a two-step increase, first to $8.25, then to $9.50 a year later.) These results demonstrate that an increase in the minimum wage would not only benefit low-income working families, but it would also provide a boost to consumer spending and the broader economy. Reference: Aaronson, Daniel, Sumit Agarwal, and Eric French. 2008. The Spending and Debt Response to Minimum Wage Hikes. Working Paper. Chicago, Ill: Federal Reserve of Chicago. Read the original snapshot. Labels: Economic Policy Institute, living wage, minimum wage Please consider donating to Dollars & Sense and/or subscribing to the magazine (both print and e-subscriptions now available!). Federal government trails 23 states on minimum wageThe latest Economic Snapshot from the Economic Policy Institute:The second part of a multi-stage hike in the federal minimum wage takes effect July 24, raising the wage from $5.85 to $6.55 per hour. But many states and the District of Columbia are a step ahead of the federal government when it comes to guaranteeing a fair wage. This week's Economic Snapshot illustrates which states have a higher-than-federal minimum wage. Read the rest of the Snapshot. Labels: Economic Policy Institute, minimum wage Please consider donating to Dollars & Sense and/or subscribing to the magazine (both print and e-subscriptions now available!). The Heritage Foundation Still Won't Set You FreeWe just received our free review copy of the 2008 Index of Economic Freedom, the annual ode to meaningless statistics and ideological blather put out by the Heritage Foundation and the Wall Street Journal. We were very fortunate that we didn't have to spend $24.95 to purchase the report, although the shopping cart on the Heritage Foundation website seems to be broken anyway (too much freedom is a dangerous thing it seems).We'll spare you the suspense: The United States has stayed in the top ten (80.6 percent free!), after having fallen out of the top spots back in 2005. Estonia, the WSJ's poster child for freedom a few years ago has fallen from fourth place in 2005 to twelfth place today (2.8 percent less free than the US). If you missed it the first time, read John Miller's brilliant evisceration of the Index's methodology. This year, for instance, the study authors take the United States Congress to task for raising the minimum wage "which has harmed labor freedom," yet has failed to lower corporate taxes. The authors also dock points for the "intrusive nature" of government regulations like Sarbanes-Oxley, but not for the lack of controls that facilitated the current sub-prime mortgage crisis. Want to know more about the global economy? Check out Real World Globalization from our bookstore. Labels: Disaster Capitalism, Estonia, freedom, Heritage Foundation, ideology, Index of Economic Freedom, minimum wage, Wall Street Journal Please consider donating to Dollars & Sense and/or subscribing to the magazine (both print and e-subscriptions now available!). |
