Raising the Minimum Wage Is Good for the Economy

Today, low-wage workers and their advocates are gathering together as part of a national day of action for an increase in the minimum wage. Marking four years since the last increase, Americans across the country are making the case for why raising the minimum wage is good for workers and the economy.

Raising the minimum wage was also part of the economic vision that President Obama laid out in Galesburg, Illinois today, as he described what we need to do to support the middle class and those who are trying to join it. In his own words, “because no one who works full-time in America should have to live in poverty, I will keep making the case that we need to raise a minimum wage that in real terms is lower than it was when Ronald Reagan took office. “

Indeed, in his State of the Union earlier this year, President Obama called for bringing the minimum wage back up to the same value it had at the beginning of the Reagan Administration and for permanently indexing it to inflation, so it does not experience the same erosion in purchasing power that has happened over the past three decades. And he called for increasing the minimum wage received by workers who rely mostly on tips – which hasn’t been raised for over two decades.

After all, the economic case for a minimum wage increase is clear. For workers and their families, it provides a boost to their income that both helps them make ends meet and increases spending in the broader economy. (And the impact is particularly significant for women, who make up over 60 percent of those who would benefit from a minimum wage increase – and two-thirds of workers making the tipped minimum wage.) For businesses, it can help reduce “churn,” increasing retention in ways that avoid the cost of hiring and training new workers. Combined with other policies – from job training initiatives to tax credits for working families to investing in early childhood education – it also reflects part of President Obama’s ambitious agenda to reversing the increasing inequality that has marked our economy over recent decades.

So over the coming weeks, as President Obama continues to make his case for his economic vision, he will keep pressing to raise the minimum wage.  As Americans are saying across the country today, it is time for us to take this step.     

Gene Sperling is the Director of the National Economic Council. Alan Krueger is Chairman of the Council of Economic Advisers.