Minimum Wage Increase Good For Economy

2013 starts off with some rare good news for Rhode Island’s lowest paid workers. Or, put more accurately, the bad isn’t as bad as it’s been in years past. Yesterday, the state’s minimum wage went up 35 cents to $7.75 an hour. In other words, about 30,000 Rhode Islanders who were making about $15,000 a year will now be making about $16,000 annually.

But even though this small increase isn’t enough to lift anyone out of abject poverty – or even keep up with inflation since the last time it was raised six years ago – it’s still really good economic news for the state as a whole as we can pretty much rest assured that every single person benefiting from this increase will put their extra earnings directly back into the economy.

“Rhode Island’s modest minimum wage increase this year will help promote economic growth by boosting the exact kind of consumer spending that we need to accelerate the post-recession recovery,” said George Nee, President the Rhode Island AFL-CIO in a press release.

Not only is raising the minimum wage good for the economy, but the companies that tend to employ minimum wage labor can well afford to help out their employees and the economy in this way.

According to this report, “the majority of America’s lowest-paid workers are employed by large corporations, not small businesses, and that most of the largest low-wage employers have recovered from the recession and are in a strong financial position.”

Nee has said he will lobby for another minimum wage increase for the poorest Rhode Islanders, but a federal increase is what is really needed. “Congress should not only learn from Rhode Island’s example by raising the minimum wage, but it should also index the minimum wage to rise automatically with the cost of living so that low-paid workers do not fall further behind each year,” he said.

This from the release from the AFL-CIO:

In real terms, the federal minimum wage is 30 percent lower today than in 1968. The Fair Minimum Wage Act of 2012, introduced in the U.S. Senate and House of Representatives in July, would help recover much of this lost value by raising the federal minimum wage to $9.80 by 2014 and adjusting it annually with rising living costs thereafter.

Related posts:
  1. General Assembly Approves Minimum Wage Increase
  2. Bill would raise minimum wage in Rhode Island

Bob Plain is the editor/publisher of Rhode Island's Future. Previously, he's worked as a reporter for several different news organizations both in Rhode Island and across the country.

28 responses to “Minimum Wage Increase Good For Economy”

  1. jgardner

    “Low wage” does not necessarily mean minimum wage. But of course the people at NELP already knew that when they made the graphic.

    And if increasing the minimum wage to $7.75/hr is good for the economy, then increasing the minimum wage to $500/hr would be fantastic for the economy. Make everyone a millionaire! We could finally declare victory in the “War” on Poverty!

    And you can thank your central bank for inflating away your purchasing power. That type of stealth tax always hits the lowest earners the hardest.

    1. PinkHatLib

      Oh, and if one aspirin is good for you so are a thousand! And if a few glases of water improve health so does a hundred. Great logic there.

      1. jgardner

        why then is $7.75/hr good for the economy, but $500/hr not?

        1. PinkHatLib

          I didn’t say $7.75/hr was good. I’d call that woefully inadequate. So are you saying 100 aspirin aren’t good? I’m confused although my headache is gone.

          1. jgardner

            I know you didn’t… Bob did, see the start of the 4th paragraph.

        2. PinkHatLib

          The question for progressives is at what point could a fulltime worker reasonably be expected to meet expenses. From an economic standpoint this is also the point at which 100% of income is reinvested nearly immediately into the economy. Progressives hold that the multiplier effect of this reinvestment is worth whatever marginal inflationary pressure is created by these low income workers. At $500/hr that would clearly not be the case, although if you picked a lower amount you might have a point… i.e. Why $12/hour? Why not $20?

          1. DeusEx

            Minimum wage law doesn’t just apply to full-time workers; it also applies to part-time workers. Most individuals don’t live on their own and don’t pay all of their own expenses, so what basis to you have for determining what a fair wage is? Why does a teenager living at home have to be paid an arbitrarily high wage above the actual market value of their labor based on living expenses they aren’t even paying? More likely such a high minimum wage would just price them out of the labor force. Besides, many minimum-wage workers are already eligible for various forms of government assistance.

          2. parared

            Out of curiosity, is it a point of faith among leftists that someone must be able to ‘meet expenses’ with at 40 hr work week?  No second part time job?  And this sounds like someone working alone.  Does a married couple need less total income to ‘meet expenses’?

            1. PinkHatLib

              “Out of curiosity, is it a point of faith among leftists that someone must be able to ‘meet expenses’ with at 40 hr work week?”

              No, but neither should it require an 80 hour work week.

              Oh why don’t you work like other folks do?
              How can I get a job when you’re holding down two?

              “Does a married couple need less total income to ‘meet expenses’?”

              Do you not have kids? I had much more disposable income when I was single. Hard to generalize, but actuarials could certainly find a number that works for most (esp. families with children).

              1. parared

                I see and agree with that lack of disposable income ( I have two ).  But, we waited to have kids till we could afford them.  Don’t you think it would be setting up some poor motivations to give more money to single mom’s with kids than the married couple without?

                1. PinkHatLib

                  “Don’t you think it would be setting up some poor motivations to give more money to single mom’s with kids than the married couple without?”

                  My job didn’t ask my marrital status when determining my pay. We’re talkng about wages. Those aren’t a gift. They’re earned. Not sure I’m following here.

                  1. parared

                    perhaps I’m misunderstanding, but it seems the talk here is about raising minimum wage to reflect the needs of someone trying to meet expenses.  And someone mentioned

                    “But even though this small increase isn’t enough to lift anyone out of abject poverty”

                    I’m asking why a single 40hr/wk job should be mandated to supply all of someone’s expenses.  Why shouldn’t people on the bottom of the food chain look to working more hours, and adjusting their living arrangements?

  2. Jonathan Jacobs

    @jgardner: Whose central bank? Mine or Mr. Plain’s. Not yours, right? Is your hyperbolic suggestion of raising the minimum wage to 65 times its current rate an actual constrictive solution or simply a sarcastic emphasis of your distaste for Keynesian economic sensibility? Is there room for actual discussion of bargaining for the collective survival of the American worker? Or should we, as Americans, simply resort to the apex predator mentality of capitalism and pretend that picking one’s teeth with the bones of the nation’s poor is living the american dream?

    1. jgardner

      “Whose central bank?”
      The Federal Reserve. I guess that would make it “our” central bank.

      “Is your hyperbolic suggestion [...] an actual constrictive solution”
      It’s more like a hyperbolic solution. But if $500/hr is too high, what is the “right” minimum wage — not what such a wage allows for, but an actual dollar number — and how do you justify it?

  3. Jonathan Jacobs

    should read “constructive solution.” Freudian slip.

  4. leftyrite

    If you get the chance, read Why Today’s Fiscal Squeeze Imposes Needless Austerity by the progressive economist, Michael Hudson.

    (I don’t know how to create a hot link presently, but just type it into your search engine.)

    Few summaries of the past few years can rival the clarity of this exposition. It leaves one wondering as to how many people of our three hundred million or more understand even the outline of the fact that trillions of dollars are still being spent to buy the toxic economic sludge, in the form of bonds and derivatives transactions, that melted down, and then almost froze, our economy in the first place.

    That is what Bernanke’s “quantitative easing” has been mostly about–printing money to buy absolute junk. 

  5. Jonathan Jacobs

    @jgardner: How much should the federal minimum wage be? Well, of course, states have the right to impose their own minimum wage based on the federal being the absolute minimum. But market information on cost pf living should determine what it takes to support, at the very least, an individual for food, housing and basic necessities. I’m certainly not an economist. However, that probably works in my favor because when economists are actually brought into political conversations of economic legislation, their ideas are treated as heresy. If I were to estimate a number for RI I would say $12.50/H.

    1. DeusEx

      Most people don’t live on their own and aren’t paying all of their own expenses. Why should businesses be required to pay teenagers, for example, such an arbitrarily high wage based on rental, utility, and food expenses they aren’t paying anyway? All a ”living wage” accomplishes is making teenage workers, part-time elderly workers, and low-skill workers less employable than they already are.

  6. davidc

    I’m interested in where Bob comes up with the number of 30,000 Rhode Islanders working full-time for the minimum wage.  I’m interested in seeing data on who gets the minimum wage and for how long. 

    My 19 year old works two jobs, both sufficiently above minumum wage such that she’s not getting a raise this month.

    My daughter did mention, though, that workers at her movie theater are geting their hours cut back in order to ensure that their employer isn’t forced to pay for health insurance. What a surprise. 

    All the workers are upset about losing the income; none (to my knowledge) are concerned about health insurance since they’re covered by parents already. 

    1. PinkHatLib

      “…none (to my knowledge) are concerned about health insurance since they’re covered by parents already.”

      Said without sense of irony (insurers are required by federal mandate to cover adult children such as a 19 year-old until they are 26).

      1. davidc

        Definitely said quite conscious of the irony!  As the parent of young adults, the ACA provision for coverage through age 26 eliminated a big stressor to me as my kids complete college. 

        And now that fewer of them need insurance, many (if not all) of them are  having their hours curbed to below 30  hours per week to avoid the mandate.

      2. Rhody Towny

        For a so-called progressives, many are certainly mighty quick to jump to the defense of Insurance and Financial Industries. 

        Perhaps these are pro-FIRE conservative who has a sympathy to some progressive social cause.

        If you are among them, I’d ask you to check your conscious.

        See where you truly stand.

        Either you want justice for everybody, or only justice for those born into money who are accepting of those living what may be deemed ‘alternative’ lifestyles.

        But at some point, you’ll have to decide where you stand.

        Because the more I read these posts, the more I think people here might like Dick Cheney, would he have taken his daughter’s side early on.

        And that scares me. 

        You are against tax equity.  You are for tax breaks for the rich.  You are for finance.  You vigilantly defend Gina.  You are for insurance profits.  

        But I never hear you come out for the 99%. 

        I never hear you come out for people working real jobs.  Jobs where you sweat.

        And it saddens me. 

        1. parared

          “You are against tax equity.  You are for tax breaks for the rich.”  Sigh … what percentage of the tax burden is born by ‘the rich’?  And ‘real job, where you sweat’?  So, you are talking charity then.

           It should sadden you to see our legal structure no longer view us all as equals.  It should sadden you to be forever trying to get your hands into your neighbor’s pocket.

          1. Rhody Towny

            Sigh yourself.

            It’s not charity to create policies that reward people who do real work for a living rather than reward only bankers in pinstripes.

            They make their millions off of the suffering and economic rent and interest payments of others.

            They are the real leeches, not government employees.  

            Every time we buy a gallon of gas, we have to pay a $1 speculation tax per gallon to the Wall Street crew.

            Every time we buy a pound of copper, we have to pay tribute again.  Every time get a mortgage, or build a school, there they are, extracting wealth that people who do real work should rightfully keep.

            Talk about forever trying to get your hands into your neighbor’s pocket…that’s what banks and insurance companies do best. 


            1. jgardner

              “Every time we buy a gallon of gas, we have to pay a $1 speculation tax per gallon to the Wall Street crew”
              “Every time get a mortgage, or build a school, there they are, extracting wealth that people who do real work should rightfully keep.”
              You can stuff your earnings under your mattress, and you can purchase the school or your home outright without any kind of bank assistance. You are not obligated to trade with banks. 

              Banks serve a necessary purpose, whether or not you believe what they do is “real” work.

              1. Rhody Towny


                Speculation adds $23.39 per barrel of oil according to Forbes.  And they’re not exactly unfriendly to Wall St.

                Before 2005, it used to be that you had to have enough oil tanks to take delivery of at least a quarter of your futures options and swaps on demand.  Then the CFTC eliminated that rule, took over from FERC and prices went through the roof.  Why?  Speculation.  Rampant, pointless speculation.

                There’s nothing wrong with a futures market of onion farmers and restaurants hedging bets on onions.  There’s something wrong with a futures market dominated by greaseballs in Hermes ties in lower Manhattan who don’t know the first thing about farming or the market in general.  They don’t care.  They just want to drive prices up.  So they do.

                What’s the necessary purpose there, huh?  How was deregulating the commodities market good for anyone?  The Airline Industry and CEOs have been asking to curtail the rampant speculation.  Even the CEO of Exxon-Mobil has testified that Wall Street is ruining the oil industry. 

                Where’s the necessary purpose?  How is that real work?

                It’s not.

                It’s just extracting pointless economic rent from the rest of us so that some bratty little ivy league kids can get seven figure trading jobs out of school.

                I for one am tired of that nonsense.  It’s just as much wealth redistribution as taxes.  It is a tax.  Banks are taxes.  We are all forced to pay it.  

                It’s force.  It’s tax.  I thought you libertarians hated these things.

                But, alas, Wall Street can do no wrong in your corporatist eyes. 

                1. jgardner

                  sorry for the delay RT… your comment was being held in moderation (too many links) until today.
                  I’m not a shill for oil speculators… I posted the CNN link to note that futures markets are not inherently evil and do serve a necessary market purpose.
                  “There’s nothing wrong with a futures market of onion farmers and restaurants hedging bets on onions.”
                  Oh c’mon… as if those would even be the people in the futures market for onions.
                  “Banks are taxes.”
                  How so? Are you forced to keep your money in a bank? Do banks not pay you to keep your money there?

            2. parared

              … wow … so . much .. avarice.  instead of concentrating on taking from others, perhaps you should concentrate on making it yourself.

              ‘banker in pinstripes’.  you will find that people generally get paid what they are worth.  anyone can dig a ditch.  try studying for 10 years, and getting a technical job. that’s hard. 

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