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Raising the Minimum Wage Is Only One Part of Boosting the Economy

Huffington Post

"No one who works full-time should have to raise their children in poverty," Senator Barbara Boxer said. She was talking about raising the minimum wage during aspeech to the Commonwealth Club of California. In addition to citing the moral reason the federal minimum wage deserves a second look, she also made an economic argument. "When working people have a little more in their paychecks, they spend a little more in their communities. So that's what we're trying to do," she added.

Boxer reminisced that during her childhood it was unheard of for people to work two jobs to make ends meet. Yet many Americans today face those circumstances. She added that the decline in America's middle class is a threat to our economy because our economy is consumer driven. If consumers lose purchasing power, our economy suffers. Amy Traub, senior policy analyst at Demos, a think tank in New York, agrees. "We have a lack of demand," which is causing the slow recovery, she said in a phone interview. [...]

Traub thinks that the solution isn't a minimum wage increase at the expense of an increase in the earned income tax credit. "I think both could be strengthened, and we could be more effective in keeping people out of poverty," she said. She added that an earned income tax credit is a government subsidy that allows low-wage earners to survive. But implementing an increase in the earned income tax credit without an increase in minimum wage would let companies off the hook. "What we're saying is that the largest and most profitable companies shouldn't have to pay their employees enough to eat and put a roof over their heads," she said, "and instead, taxpayers should have to pay." That doesn't sit well with her. She added that the earned income tax credit needs to exist but should be complemented by a higher wage.

The Congressional Budget Office released a report on the consequences of increasing the minimum wage to $10.10. It estimates that though about 16.5 million low-wage workers will see their incomes rise, the raise will also cost 500,000 jobs. It also added that 900,000 people would no longer be living in poverty with the wage hike. Traub sees the loss of 500,000 jobs as a weakness in the CBO's report, noting that the CBO arrived at that number by taking data from other studies, instead of conducting one of its own. She added that studies that have examined neighboring states -- one that raised its minimum wage and its neighbor that didn't -- have not found job losses. "In those studies, overwhelmingly they don't find job losses, so I think that's sort of a red herring," she said.