MEDIA RELEASE: Minimum wage increase to stimulate economy, benefit working families

Minimum wage increase to stimulate economy, benefit working families
Friday's increase in the minimum wage could not come at a better time, boosting the economy without increasing government spending

RALEIGH (July 24, 2009) - When the minimum wage increases Friday, North Carolina's economic outlook will also increase.

Analysts say that putting more money into the pockets of working families will stimulate the economy while at the same time improving life for millions of low-wage workers. The federal minimum wage rises by 70 cents to $7.25 an hour on July 24.

This will raise the pay of the lowest-paid workers and, as a result, boost the economy.

"The minimum wage increase is a very efficient form of economic stimulus, since low-wage workers are more likely to spend when they receive an increase in their pay than better-paid workers are," said Louisa Warren, an analyst with the NC Justice Center.

This consumer spending generated by a minimum wage increase benefits far more than the 167,000 North Carolinians currently earning the minimum wage or the 10s of thousands more with wages just above it.

Studies show that workers who benefit from the increase will spend it in their local communities. Research by the Economic Policy Institute found that the modest 70-cent increase will generate $5.5 billion in consumer spending over the next year -- providing a boost to the economy without any increase in government spending.

Unfortunately, the new minimum wage is still lower than the real value of the minimum wage thirty years ago. This is the first minimum wage increases passed by Congress in a decade. In the ensuing 10 years, inflation eroded real income for workers.

"This experience shows us that indexing the minimum wage to inflation is a critical reform for working families," said Warren. "It would prevent further erosion of buying power, enabling workers to live better lives and contribute more to the economy."

Even with the increase, workers will have a tough time making ends meet. Full-time minimum wage workers will earn less than $15,000 a year, and most will have no health insurance, retirement plan, paid vacation or sick days. Three-quarters of North Carolina workers affected by the increase are adults over age 20, and the average minimum-wage worker brings home more than half of his or her family's weekly earnings.

"The increase in the minimum wage is a modest step, but an important one," Warren said. "By increasing pay for workers and boosting consumer spending, the minimum wage increase is another step toward getting us out of recession and toward and economy that works for everyone."
FOR MORE INFORMATION, CONTACT: Louisa Warren, 919.856.2183.