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The great minimum wage debate: how Obama's proposal to increase the minimum wage will impact the economy

Published: Tuesday, Feb. 19 2013 11:05 p.m. MST

Subsequent research by other economists bolsters Card and Krueger’s conclusion that the relationship is not as simple as minimum wage up, employment down. A 2010 study by economists at Berkeley, for example, found that increasing the minimum wage did not result in job loss.

Douglas Hall of the Economic Policy Institute also advocates increasing the minimum wage as a way of stimulating economic growth. Lower income people are more likely to spend the extra money they earn, he said. “If you give $100 to a person who makes minimum wage they are probably going to spend it immediately and locally," spurring economic growth, but the same $100 in the hands of a wealthier person may just sit in the wallet.

Hall calculates that increasing the minimum wage from $7.25 to $9.00 by 2015 would pump $18 billion into the economy and result in the creation of 100,000 jobs. “It's substantial to recognize that impact of [increasing the minimum wage] is a positive figure,” he said, “it helps the economy as a whole.”

While Obama has come out in support of increasing the minimum wage as a way to improve the standard of living of America's working poor, it remains to be seen how Congress will respond.

Many congressional Republicans had negative reactions to Obama's speech, but, as noted by Think Progress blogger John Israel, "six years ago, many of the same Republicans supported a similar proposal backed by Republican President George W. Bush." He said that 67 Republicans who are still in Congress today backed an increase in the minimum wage in some form, including Rep. Paul Ryan, R-Wisconsin, which may suggest the possibility of bipartisan support for the measure.

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