Obama is right; increase minimum wage

February 11, 2014 

In the State of the Union message, the president expressed a wish to increase the minimum wage from $7.25 to $10.10 an hour. Such an increase would have the following budgetary consequences. Of the $2.85 increase, approximately 15 percent or 43 cents would go to the U.S. Treasury every hour an employee works. Annually, the Treasury Department would collect approximately $875 in additional tax revenue from every employee affected by the minimum wage increase. The annual revenue increase to the Treasury Department would be several billion dollars. Additionally, many of these same people, because of their increased wages, would no longer qualify for food stamps or other tax supplements, thus reducing governmental expenses by several billion dollars. The increased wages would now put more disposable income in the pockets of the very people who generally frequent the companies who pay minimum wage and thus add to company sales.

Some folks will argue that increasing the minimum wage will result in jobs being lost. However, history does not support this conclusion. What history does support is increased wages leading to increased demand. Since it is demand that drives supply and it takes more employees to fulfill the increased demand for supplies, it follows that, on a macro basis, increasing wages should increase employment. So if Congress is serious about balancing the budget, increasing the minimum wage should be a no-brainer as employees, companies and the government all benefit.

Wally Hollinger


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