Economists Back Minimum Wage Raise

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NEW YORK CITY, N.Y. (CNN) – A Democratic proposal to raise the federal minimum wage to $10.10 an hour got the backing Tuesday of 75 leading economists.

The group includes seven Nobel laureates, among them Joseph Stiglitz and Peter Diamond, and several former Obama and Clinton administration economists.

They lent their support to legislation known as the Fair Minimum Wage Act, introduced in the House by Rep. George Miller and in the Senate by Sen. Tom Harkin.

“The vast majority of employees who would benefit are adults in working families, disproportionately women, who work at least 20 hours a week and depend on these earnings to make ends meet,” the group wrote ina letter to congressional leaders and to President Obama, who backs the Miller-Harkin proposal.

Related: Minimum wage rises in 13 states

The legislation would phase in the minimum wage increase from today’s $7.25 an hour to $8.20 in the first year, then to $9.15 the year after and to $10.10 in the third year. Thereafter, it would be indexed to inflation.

Jason Furman, chairman of the president’s Council of Economic Advisers, noted Tuesday that the minimum wage is effectively lower on an inflation-adjusted basis than it was in 1950, when it was worth $7.28 in today’s dollars.

If the legislation passed, a full-time minimum wage worker would see a bump in pay from about $15,000 a year to roughly $21,000. That could put a family of three above the poverty line.

Only about 1.6 million hourly workers currently earn the minimum wage, according the Congressional Research Service.

But the Economic Policy Institute, a liberal think tank that organized release of the letter, estimates that another 17 million hourly workers who now earn between $7.25 and $10.10 an hour would see higher wages over the three years of a phased-in increase.

And millions more who make above $10.10 would indirectly benefit if employers adjust pay scales commensurate with a minimum wage increase, EPI estimates.

The Miller-Harkin proposal would also raise the hourly base for workers paid in tips. It would increase for one year to $3 from $2.13 currently. Then the proposal calls for the base to be adjusted annually so that it eventually matches 70% of the federal minimum wage. Reaching that 70% peg is expected to take about six years, after which it would be adjusted annually for inflation.

Related: The real low wage issue: Not enough hours

The economists asserted in their letter that “research suggests that [an increase] could have a small stimulative effect on the economy as low-wage workers spend their additional earnings, raising demand and job growth.”

Critics say a higher minimum wage will hurt jobs. Their argument: employers will hire fewer people or reduce their hours. And they may compensate for the extra expense in other ways that can hurt consumers, for instance by raising prices.

Some studies show a negative effect on jobs. But others show a positive effect or no effect at all.

In any case, political analysts don’t think there’s much chance for passage of a minimum wage hike this year.

“I just don’t see it getting through the House,” said Greg Valliere, chief political strategist for the Potomac Research Group.

But the idea is likely to feature prominently in stump speeches during this midterm election year.

“This is all about Democrats positioning to run in the elections on an inequality theme. Republicans are going to have a tough time responding, but I highly doubt the response will be to allow a minimum wage hike,” said Sean West, U.S. policy director for the Eurasia Group.

Rep. Miller and Sen. Harkin are more optimistic. Harkin said Tuesday the Senate may take up minimum wage legislation in a few weeks. If the first attempt fails, it won’t be the only shot this year for Republicans who oppose the increase “to change their mind.”

States don’t have to adopt the federal minimum wage, but in states where the minimum wage is different, “the employee is entitled to the higher wage of the two,” according to CRS.

Just this month, the minimum wage rose in 13 states and four cities.

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Could this help the job market and the economy, or do you think it would hurt? Leave your comments on our Facebook page. We’ll share some of them in our News Pulse at 9.


  • Connie Cooper

    The employers will have to cut back on hours and employees or raise prices. As consumers we will all pay more for goods and services. It is not going to help. The cost of living will rise.

    • Janos Poleretzky

      It will cut back on substandard labor allowing for better employees. Higher paid employees will be able to afford the new costs. More productive employees will increase quality of goods and services. Lazy people will be jobless for awhile.

    • Wake Up

      Using your logic it would be best for consumers if we just paid people 25 cents an hour. Like the other poster said — please learn something about economics before you show your ignorance!

  • Chris

    “And millions more who make above $10.10 would indirectly benefit if employers adjust pay scales commensurate with a minimum wage increase, EPI estimates.” That two letter word in the middle is the key. IF. If, isn’t going to happen. Where does that leave folks who have been working for years and earned those raises to get to $12, $15, $18 per hr? It leaves them paying more for products and services. You see, when employers must pay more for unskilled labor they will raise prices to cover those costs. That “IF” isn’t going to happen. You think the housing market took a dive a few years back? Just stand back and watch what happens if this progresses. The folks who have worked to buy homes and are paying mortgages will loose everything over those two little letters “IF”.

  • Chris

    You may want to study economics yourselves. Start by reading some current articles from Forbes and The Wall Street Journal. I recently read a very well written article in Forbes that covered this very subject. When you are busy running your own business, you find these publications very informative. Your economics course isn’t worth my 42 years of business ownership. I realize this is not the $15 proposal, but it isn’t far from it. Here is a selection from the Forbes article. “There’s our cut off point. 45 to 50% of the average wage: go above that level and we’re harming low paid workers (by making them no longer workers) not helping them. And the median hourly wage for the US is $16.71. The proposal for a $15 an hour minimum wage will make the minimum wage 90% of the median hourly wage: at which point we know very well that we’ll be harming low income workers, not aiding them.” For the whole article look at the September 2013 issue.

    • Wake Up

      The Wall Street Journal became worthless when it was bought by the Fox News corporation. The great thing about economics is that there are economist on both side of the argument. I know that when minimum wage was increased in the past it did not always create higher prices. It is more complex than that!

  • Sissy McCloud

    everybody is so against this.. why not let them live off of not even a dollar a day and see how they like it … the state needs to raise it .. making 7.25 you don’t have enough to pay all the bill’s , insurance , car payment and buy food to live off of .. so yes they need to raise it ..

  • pinky.toes

    Please, people, do some research on economics and real-world examples before commenting. There are several examples of other countries whose minimum wage rates are MUCH higher than ours, and their aggregate price levels are NOT higher than ours in the US. How do the nay-sayers account for that? God forbid we bring a family of 3 above the national poverty rate.

  • Emerald Leann Smith

    How about we cut the salary of these people writing in the white house down to minimum wage for a while. That would save a ton of money and we can see how easily they pay their rent, utilities, car payment, insurance and grocery bill.

  • Polly. Talley

    I think it would help those who need it. Of course it would mean a fiew millions of dollars a year but what the heck out of the billions of dollars they make. (Ex:) American wholesale book company. The only time they don’t show a profit is when it comes to raise time. Then after raises are over with then they boast at how much profit they have made. They need to be forced to pay higher wages because those people are treated like cattle in a slaughter house.

  • Tim

    Burger flipper making $ min wage now filing single on taxes pays about $500 yr to the Irs.. At $15 hr. same burger flipper filing single on taxes will pay about $2700 yr to irs…. That’s a lot more money for politicians to waste…. of coarse they are for raising min wage…. But yet people are fools and believe Obama is trying to do something for them…

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