A higher minimum wage allows people to be financially stable and that will reduce government welfare spending. The idea is that if more people get a higher wage they make a higher income. Consequently, they will not be eligible for government assistance programs like food stamp. Rachel West, a master of public policy candidate at the Goldman School of Public Policy joined Michael Reich, professor of economics and director of the Institute for Research on Labor and Employment at the University of California at Berkeley, to publish the journal “The Effects of Minimum Wages on Food Stamp Enrollment and Expenditures.” in order to back up the controversial claim of raising the minimum wage will lower government spending in welfare. Several data were collected for their research. One of the many included the data where the minimum wage was dissected by state and time to examine their effects on SNAP enrollments and expenditures. (West, Reich 2015) There was also the usage of family-level data from 1990 through 2012, collected data from the March CPS (West, Reich 2015). They estimated effect at two levels: allowing for both family-level and state-level variation, and then allowing only for state-level variation. West and Reich also employed Demographic controls, like family size and composition, race, and ethnicity was also employed (West, Reich 2015).
Table 7 summarizes their predictions, where expenditure predictions are generated from the enrollment models while enrollment predictions were generated from the expenditure model with the assumptions that expenditures for each enrolled family remain the same before and after the minimum-wage change (West, Reich 2015). According to their calculation, there is a decline in SNAP activity for the entire nation, that would result from the effects of the minimum-wage increase. As seen below in the table, enrollment is subjected to fall between 3.1 million units to 3.6 million units, representing 7.5 percent to 8.7 percent of current enrollment. The expected reduction in program expenditures would be nearly $4.6 billion, or 6.1 percent of program expenditures.
Table 8 showcases the expected SNAP changes for the United States under different wage scenarios that are calculated using the state-level models discussed previously. If every state were restricted to set their minimum wages independently, like the federal minimum is set to $7.25, about 514,000 more people across the United States would receive SNAP. This will cost an additional program cost of nearly three-quarters of a billion dollars. (West, Reich 2015) On the other hand, applying the proposal of a higher minimum wage suggest better outcomes economically. A federal wage floor of $11 per hour would decrease enrollment in SNAP by more than 10 percent and decrease program costs by 8.3 percent (West, Reich 2015) Thus
increasing the minimum wage helps cut cost for government assisting programs.
Along with helping the government, raising the minimum wage would help increase economic activity and promote job growth. This is the belief of researcher David Cooper from the Economy Policy. He claims ” that an increase in minimum wage from the current rate of $7.25 an hour to $10.10 would inject $22.1 billion net into the economy and create about 85,000 new jobs over a three-year phase-in period”(Cooper 2013). In his research with Economic Policy Institute, he shows this by noting patterns in history. According to his article “Raising the federal minimum wage to $10.10 would give overall economy, a much-needed boost” Cooper states “the federal minimum wage will have the same inflation-adjusted value it had in the late 1960s. Though there is no direct correlation, over the phase-in period, this rise would push up the wages of 27.8 million workers, who would receive about $35 billion in additional wages.” These workers are likely to then spend that additional income in the economy. This projected rise in consumption would then push up the U.S. GDP, even after considering the increased labor cost to businesses and the potential for small price increases for consumers. Using standard fiscal multipliers, Cooper expects that increasing the federal minimum wage from $7.25 to $10.10 would generate a net increase in economic activity of $22.1 billion across the phase-in period. GDP would grow by $22 billion and result in the opening of 85,000 new jobs this will promote economic growth,
Though one might argue raising the minimum wage drops employment as argued by the three economists David Neumark, Mark Schweitzer and William Wascher above, the reality is not only shown in the immediate benefits with the increase in minimum-wage boosting earnings of the lowest-paid workers, but its positive effects go beyond just extra income.despite skeptics’ claims, raising the minimum wage does not cause job loss. According to Washington state Department of Employment Security, 16% increase in the minimum wage (that is applied at that time going from $11-$12.53) reveals that unemployment rate fell from 4.9% to 4.2%. They also revealed the increase of 100,000 jobs opened up statewide between 2016 and 2017.
Throughout the nation, a minimum-wage increase under current labor market conditions would create jobs, raise income and ultimately shift from relying on government assistance programs. Raising the minimum wage allows access to money for working families when they need it most. Therefore by increasing the spending power of the people who only survive on minimum wage, they are more likely than any other income group to spend extra earnings (if any) immediately on basic needs or services that was unaffordable before, helping in economic growth. They also will have enough to live by so government assistance will not be necessary, (also they may not qualify). It should be clear now that the minimum wage should be revisited again, with the intention of a rise in the minimum wage, for the United States to prosper economically and financially.