Raising the Minimum Wage for Working Men and Women in California and the Rest of America

How Does a Federal Minimum Wage Hike Affect Aggregate Household Spending?

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This article finds that a federal minimum wage hike would boost the real income and spending of minimum wage households. The impact could be sufficient to offset increasing consumer prices and declining real spending by most non-minimum-wage households and, therefore, lead to an increase in aggregate household spending. The authors calculate that a $1.75 hike in the hourly federal minimum wage could increase the level of real gross domestic product (GDP) by up to 0.3 percentage points in the near term, but with virtually no effect in the long term.

• Category: National • Tags: Daniel Aaronson, Eric French, PDF