100 Hours: Minimum Wage Increase


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Another part of Nancy Pelosi's promised first 100 hours of the 110th Congress is a promise to pass an increase in the minimum wage.

As I've previously mentioned on this site, I think this is overdue and perhaps should be indexed so as to avoid this fight in the future; but, in any case, the proposed legislation is likely to call for an increase to $7.25/hour.

I do not wish to rehash arguments put forth in my previous article on the topic (link below), except to point out that without an increase by 2008, anyone working full time at minimum wage will be below the poverty line.

As part of this series on the first 100 hours, I want to touch on another aspect of raising the minimum wage: GDP, Taxes and Social Security.

In states where the state minimum wage is higher than the current $5.15 federal minimum, the GDP per working-age capita is $73,369 compared to $62,671 for states at the minimum. In states with a minimum of $7.00 or higher, the GDP per working-age capita rises to $78,950.

The relationship between minimum wage and the working-age GDP per capita is a strong correlation, but admittedly not proof of causality. That is to say, these numbers in and of themselves cannot prove that an increase in the minimum wage will increase GDP. However, that does coincide with the theory of demand-side economics, which basically states that putting more money into the hands of the poorest amongst us fuels the economy as they have the least disposable income to begin with and will therefore put the money right back into circulation.

If an increase in the minimum wage leads to an increase in the GDP, that will lead to an increase in tax revenue, which can help close the budget deficit. Also, an increase in wages will mean an increase in payroll taxes which means a little more liquidity for Social Security.

For reference, here is a table of the states, their GDP, working age population, and effective minimum wage. This data is drawn from a few sources listed below.

State GDP Working Age Pop Minimum Wage
Connecticut 194,470,453,800 2,158,082 7.65
Washington 268,499,884,818 3,966,445 7.63
Oregon 145,350,955,520 2,273,874 7.50
Hawaii 53,709,896,086 794,847 7.25
Vermont 23,133,846,500 392,760 7.25
New York 963,463,175,940 12,011,529 7.15
New Jersey 430,787,545,950 5,401,756 7.15
Alaska 39,872,089,219 423,980 7.15
Rhode Island 43,791,206,599 665,325 7.10
District of Columbia 82,776,888,081 357,839 7.00
California 1,620,382,264,362 22,429,388 6.75
Massachusetts 328,537,060,592 4,020,061 6.75
Illinois 560,133,299,706 7,886,421 6.50
Maine 45,069,928,025 819,158 6.50
Florida 674,040,157,096 10,606,036 6.40
Maryland 244,899,366,852 3,532,707 6.15
Minnesota 233,290,847,349 3,170,068 6.15
Delaware 54,354,155,988 524,551 6.15
Wisconsin 217,539,482,094 3,398,267 5.70
Texas 982,407,124,800 14,134,152 5.15
Pennsylvania 487,166,369,504 7,529,665 5.15
Ohio 442,443,236,948 7,025,003 5.15
Michigan 377,892,670,680 6,236,056 5.15
Georgia 363,946,386,240 5,798,263 5.15
Virginia 352,742,246,045 4,862,069 5.15
North Carolina 344,637,874,980 5,519,149 5.15
Indiana 238,636,028,704 3,871,456 5.15
Tennessee 226,502,997,615 3,760,021 5.15
Missouri 216,067,347,810 3,537,216 5.15
Colorado 216,063,007,578 3,019,972 5.15
Arizona 215,756,660,484 3,583,795 5.15
Louisiana 166,311,183,420 2,765,661 5.15
Alabama 149,796,917,728 2,812,187 5.15
Kentucky 140,359,956,960 2,624,953 5.15
South Carolina 139,770,966,384 2,669,535 5.15
Oklahoma 120,550,002,552 2,161,582 5.15
Iowa 114,289,882,686 1,780,488 5.15
Nevada 110,545,034,846 1,531,754 5.15
Kansas 105,448,129,853 1,653,086 5.15
Utah 89,836,093,545 1,464,442 5.15
Arkansas 86,801,316,882 1,683,057 5.15
Mississippi 80,461,368,960 1,772,321 5.15
Nebraska 70,263,540,650 1,057,398 5.15
New Mexico 69,323,476,416 1,164,260 5.15
New Hampshire 55,689,479,220 824,954 5.15
West Virginia 53,782,571,312 1,134,371 5.15
Idaho 47,177,317,152 860,368 5.15
South Dakota 31,066,029,521 456,470 5.15
Montana 29,850,680,010 571,635 5.15
Wyoming 27,421,916,842 316,867 5.15
North Dakota 24,177,809,075 383,546 5.15

Sources:

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