The standard argument against raising the minimum wage is that it kills jobs by making workers more expensive to hire. Whether or not that's true has been the subject of a century-long economics debate that probably won't be resolved any time soon. But lately, some liberals have been attempting to flip the old criticism on its head. Higher minimum wages, they say, don't destroy jobs. Higher minimum wages create jobs!
This week, for instance, the Economic Policy Institute released a report estimating that raising the federal minimum wage to $10.10 an hour, up from $7.25 today, would add an additional 85,000 jobs to the economy, a finding that's been covered in liberal-leaning outlets like The Huffington Post.
It's not an entirely crazy notion. But it's also less exciting than you might think.
When economists study the minimum wage, they generally find that it either creates a small number of job losses, or leaves employment untouched. But once in a blue moon, their math does suggest a link between a higher-wage floor and job creation.
Why might that be? There are a few potential explanations. But the one we care about today frames the minimum wage as a kind of economic stimulus. The key is that poor and middle class families tend to spend more of their income than the wealthy, since they're often struggling to meet basic needs. So by taking money from businesses and giving it to their worst paid employees, raising the minimum wage might, in theory, increase consumer spending—which in turn boosts the economy and creates jobs.