Hate Government Spending? Here’s Why You Should Love A Higher Minimum Wage

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Increasing the minimum wage to $10.10 an hour would give 1.7 million workers enough of a raise that they wouldn’t have to rely as heavily on public programs, reducing spending on those programs by $7.6 billion a year, according to a new report from the Economic Policy Institute.

About 45 percent of today’s workers who would likely see more pay if the minimum wage were bumped up to $10.10 an hour currently receive benefits from at least one of six programs, either directly or through a family member: the Earned Income Tax Credit or EITC, the Supplemental Nutrition Program (SNAP) or food stamps, the Low Income Home Energy Assistance Program (LIHEAP), the Supplemental Nutrition Program for Women, Infants, and Children (WIC), Section 8 housing vouchers, or Temporary Assistance for needy Families (TANF) or welfare cash assistance. In all, low-wage workers rely on $39 billion in income support each year from these programs to get by, although the report notes that this represents a conservative estimate given that it doesn’t take Medicaid into consideration and some benefits are underreported.

But if the minimum wage increased to $10.10 an hour by 2017, more than 27 million workers would get more pay, amounting to $31.8 billion in extra wages. That would mean an average $1.61 raise for a worker affected by the hike. That raise would translate into 1.7 million workers who would no longer need to rely on public assistance, or a 6.3 percentage point decrease, which would reduce spending on these programs by $203 a year for each person, or $7.6 billion in total.

Each dollar counts. For every dollar increase in the wage, the share of workers receiving benefits is shaved by 3.9 percentage points and the benefits that an average worker relies on falls by $126 a year.

A $10.10 minimum wage wouldn’t just free up government spending dollars. It has also been estimated to boost GDP by $22.1 billion. Even a lower $9 wage would boost GDP with any potential job losses taken into effect — although those are pretty unlikely.

A $10.10 wage has also been estimated to lift about 4.6 million people out of poverty immediately, with even bigger effects in the long term. The minimum wage used to be enough to keep a family of three out of poverty, but today it can’t even do that for a single parent. A minimum wage income isn’t enough to make rent in any state in the country.

Democrats have introduced bills to raise the federal wage to $10.10 an hour multiple times, but Republicans have blocked them all despite supporting minimum wage increases under President George W. Bush. States have taken action, however, as ten have raised their wages since January, half above $10 an hour.