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Monday, July 17, 2006 

Minimum Wage and Business Growth

A lot has been said about the social justices and moral issues behind the campaign to raise the minimum wage. Let Justice Roll and others are promoting the minimum wage during thier Faith in Action week. This Sunday, Churches and people of faith will be talking about the importance of raising the wage, passing around petitions and holding rallys in support of raising the minimum wage to $6.85 all over Ohio. They’ll quote Martin Luther King and the prophet Amos stating that the minimum wage law is just the “right thing to do”.

They are probably right - the Minimum Wage raise does seem like the right thing to do morally but what will be the eventual consequenses on businesses and the already devasted Ohio economy? Well - A recent study found that:

States with higher minimum wages have generally performed as well or better economically than states with lower minimums since 1997. This is in keeping with most recent empirical research on the minimum wage. A higher minimum wage will help 719,000 Ohio workers better support themselves and their families, and is unlikely to lead to aggregate employment loss, payroll loss or establishment closure among small business. A high minimum wage is consistent with a thriving economy that works better for all Ohioans.


Which does seem to make sense. Why wouldn’t the economy grow? Workers who earn more spend more on the goods and services that grow the economy and make the community successful. This hold especially true when you consider that a 1999 study found that a minimum wage raise has spill over effects to higher paying jobs while having little effect on the basic cost of rent and other necessities.

Perhaps these studies were performed in 20 states that are already well performing and Ohio won’t have the growth effect that these studies claim. I doubt it. But, while noone can see the future - These studies do seem to point in a positive direction and makes the minimum wage opponents claims of “certain economic ruin” seem preposterous.

Sometimes the “right thing to do” benefits everyone in the community - including the business owner.

More facts and bullet points from the study at AsOhioGoes:

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If your objective is to help the working poor, an expansion of the Earned Income Tax Credit would be a much more effective and equitable way of doing so than raising the minimum wage.

No that wasn't my objective - i was focusing on the studies that linked a raise in the minimum wage with economic improvement.

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