Raising the Minimum Wage Could Help Close the Income Gap

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Julian Omidi discuses a new study that finds that raising the federal minimum wage to $10.10 an hour could help lift nearly 5 million people out of poverty.

A study released from University of Massachusetts-Amherst economist Arindrajit Dube finds that if Congress were to go through with a plan backed by President Barack Obama to raise the minimum wage from $7.25 an hour to $10.10 an hour would reduce the poverty rate among Americans between the ages of 18 and 64. That would bring about 4.6 million people out of poverty directly and reduce the ranks of the nation’s poor by 6.8 million, accounting for longer-term effects.

To come up with his findings, Dube analyzed 23 years’ worth of data on past minimum wage increases, controlling for things such as regional differences. For comparison, he also reviewed previous literature on the average drop in the poverty rate after minimum wage increase and calculated the average of those averages.

Economist have debated that for some time over how much minimum wage increase affects the poverty rate, arguing that raising the minimum wage would barely make a dent in reducing poverty because many minimum wage workers are young people just working to make extra money.

Co-Director of the Center for Economic Policy Research, Dean Baker, says “…No, actually most of the people we see in the minimum wage are not in that boat. We’re looking at a lot of people that are the sole supporter for the family or main support of their family. There’s a large overlap between the poverty population and the people who would be benefited by the minimum wage increase.”

In addition to reducing poverty, raising the minimum wage to $10.10 an hour would offer other benefits. During the initial phase-in period of the increase, the U.S. economy would grow by $22 billion, resulting in 85,000 new jobs, according to the Economic Policy Institute. It could also help close the income gap.

“If we’re interested in reducing inequality of family incomes, the minimum wage can plan an important role,” Dube said.

By Julian Omidi

SOURCE: http://www.huffingtonpost.com/2014/01/02/1010-minimum-wage_n_4532723.html

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