How would increasing the miniumum wage for Illinois $1 (Up to $7.50) HELP the economy in Illinois?

Question

I asked this question a few days ago...I was just wondering how it actually HELPS the economy. I kept getting negative answers that agree with also, but its not what I was asking. I also wanted some fresh answers. Thanks for the help guys! :)

Answer 1

It puts more money into the hands of the poorest of the poor. Over the past decade, minimum wage has not kept up with inflation. Thus, many basic goods are practically unaffordable to many people.

Theoretically, however, wage increases and inflation should be equal and opposite in magnitude. Wage increases - in economic terms - are largely psychological (Baye). Reality, though, works quite differently.

With higher wages, people theoretically buy more goods like toothpaste, toilet paper, soap, or automobiles. This, in turn, drives profitability at the local market or auto dealership, who then place more orders with Procter & Gamble (maker of toothpaste, paper products and soap) or General Motors. P&G stock goes up and PG shareholders also gets richer. This stockholder wealth is then used to buy Jaguars and Lear Jets.

The government also hits up $7.50 an hour for taxes, as opposed to only $6.50. These additional tax revenues can be appropriated to wage war in Iraq and buy more bombs and missile defense systems.

However, the logic in all this overlooks the fact that someone has to actually pay the added dollar to employees. This likely means the same grocery store, or Mom & Pop convenience store, that employs the people earning minimum wage. Thus, the price of toothpaste, soap, and automobiles go even higher, causing people like you and I to pay more for the same basic products that we were getting for less prior to the wage hike.

So on reality, wage hikes benefit no one. Thus, Baye makes a articulate point by saying wage increases are largely psychological.

Answer 2

Currently, there is no place in America where one can afford to live working 40 hours a week and making minimum wage. Many areas are assessing what the minumum would be to live there and then raising the minimum wage to reflect that. Sometimes it is called a "living wage." It helps the economy because people stay around and work instead of moving away and finding work in areas that are cheaper to live in. Also, those working at the minimum wage level have more money to spend on certain things like groceries, gas, etc. and that boosts the local economy as well.

Answer 3

I do not see where it would help the economy. An increase in wages without a corresponding increase in productivity is inflationary.
The supply and demand curve for most goods and services is pretty elastic. If prices go up, the demand drops, then supply makes a corresponding drop.
Employers who pay minimum wage do so because that is what they can afford. Faced with higher labor costs, the employer has to choose between raising prices or cutting back on the labor force, or a combination of both. Either cut back hurts productivity and lost productivity causes a loss in income.

Answer 4

Two ways it will help the economy is when people make more, they get taxed more and when people have more money they spend more money. Simple, but true. The more utopia idea is to make the minimum wage in IL a "livable" wage. Personally, I don't see anyone "movin' on up" on 7.50 an hour.

Answer 5

It really doesnt make that much of a difference, because yes the young people whose wages are increasing are putting more money in the economy, but the older folks who have set salaries, their money becomes worth less because of inflation, so it balances out, most likely a political move to appease the next generation of voters

Answer 6

Hasn't helped California