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NELP: January 1 minimum wage increase in seven states will help strengthen the economy

December 28th, 2010  |  Connie Eyer

On January 1, 2011, approximately 647,000 minimum wage earners in Arizona, Colorado, Montana, Ohio, Oregon, Vermont and Washington will receive a modest boost to their income. The New Year’s Day increases– automatic adjustments that reflect annual changes in regional or national inflation rates that will range from nine to twelve cents– are the result of ballot initiatives in all of the states except Vermont, which enacted the increase through legislation in 2005.

The National Employment Law Project (NELP) hailed the upcoming increases as an essential move to help workers keep up with the rising cost of living, increase consumer spending at local businesses and promote the kind of good jobs that will be critical to the nation’s economic recovery.

“Regular increases in the minimum wage that help workers keep up with rising living costs are critical during tough economic times and directly benefit workers and state economies,” said Christine Owens, executive director of NELP. “These small increases mean that thousands of minimum wage earners like health aides, child care workers, restaurant workers and retail clerks will be better able to put food on the table, provide for their children, and keep a roof over their head. Congress and other states should follow this smart policy of indexing the minimum wage to keep pace with the rising cost of living.”

“In addition to helping working families in the states make ends meet, raising wages for the lowest-paid workers will help sustain consumer spending and spur economic recovery. Minimum wage increases go directly to workers who spend them immediately – because they have to –on basic necessities like food, gas, rent, and clothing,” said Owens.

Despite objections to the upcoming minimum wage increases by business groups, NELP notes that studies have found that a strong minimum wage boosting the earnings of low-paid workers reduces turnover and absenteeism, while increasing morale and productivity. One study highlighted by NELP, to be published in April 2011 in the journal Industrial Relations, finds that even during times of high unemployment, minimum wage increases have not led to job loss. Examining the effect of minimum wage increases during the three recessions of the past two decades, including the Great Recession of 2007 to 2009, economists from the University of California and University of Massachusetts again find that minimum wage increases boost workers’ incomes without reducing employment.