Minimum Wage Increases Don't Hurt Job Growth

Data from the Department of Labor shows that states that increased the minimum wage have experienced job growth:

In a report on Friday, the 13 states that raised their minimum wages on January 1 have added jobs at a faster pace than those that did not. The data run counter to a Congressional Budget Office report in February that said raising the minimum wage to $10.10 an hour, as the White House supports, would cost 500,000 jobs.

Nine states had minimum wage increases tied to inflation (Arizona, Colorado, Florida, Missouri, Montana, Ohio, Oregon, Vermont and Washington), while four more states (Connecticut, New Jersey, New York and Rhode Island) passed legislation for the increases.

Do I think that these increases alone caused greater job growth? No. But they didn't lose jobs as conservative ideology dictates. Why?

Probably because the minimum wage is way too low. It has fallen so far behind inflation, even though inflation hasn't been a real factor for decades, that wages on the low end are a real bargain in the United States.

It's also clear that giving poor people more money has a positive effect on the economy, because those workers spend every penny they get. If you give one million minimum-wage workers a thousand bucks each, that's one billion dollars that are plowed right back into the local economy: they spend it all, on the basic requirements of life. Food, shelter, clothing: that's what minimum-wage spend their money on.

These days, if you give a billionaire an extra billion dollars it doesn't improve the local economy whatsoever. He'll buy some T-bills, try to stage a hostile takeover or merger, or buy some high-yield bonds in Spain or Greece (yep, they're not dead yet). He'll do a joint venture with some Chinese company, or cut a deal with a Russian oil tycoon. He might spend a few million on an fancy apartment in New York, a villa in Majorca, or a yacht in Miami. If he's a sports fan, he might buy a basketball team, and make another billionaire a little bit richer.

What he's not going to do is build a factory in the United States that makes real products, because he doesn't want to pay people salaries that they can live on in the United States. But this is a false choice. Germany has showed that you can pay a decent wage, have unions on corporate boards, have a health care system that covers everyone, while being flooded with immigrants, and still have one of best export economies in the world.

Yes, increasing the minimum wage to some ridiculously high number would cause jobs to be lost. It's also true that rich states can support a higher minimum wage than poor states. But no one is proposing to jack up the minimum wage to 20 bucks across the country. The $10.10 that President Obama has proposed is still far below a living wage: any company that can't pay it has a business model that depends on passing on their labor costs to the federal government in the form of Medicaid, food stamps, welfare and the earned income tax credit.