Exceptionally Important

WASHINGTON -- A group of economists made the case on Tuesday for raising the federal and state minimum wages across the country as a way to boost the stagnant economy and improve the standard of living among low-wage earners. Backed by what they described as 15 years' worth of research, a panel at progressive think tank the Center for American Progress (CAP) argued that higher minimum wages flush more money into the economy without cutting into job growth -- the latter a long-held contention of busines interests and many conservatives. Michael Reich, an economics professor and director of the Institute for Research on Labor and Employment at the University of California, Berkeley, said his research has shown that businesses don't suffer from having to dish out slightly higher wages to their lowest-paid employees. In fact, he argued there are benefits to employers.

This is not only what the evidence shows, but it's also logically obvious. Since Reaganomics has resulted in the export of our production capacity, our economy is 2/3 consumer spending. Rich people don't spend more with nominal increases in their take home pay. But poor people have no choice but to spend the extra money, they generally spend it on what the businesses sell, and there's lot more poor people in this country than there are rich. So with an increase in the minimum wage, pretty much everybody comes out money ahead.

This is one reason why Clinton's strategy of raising taxes on the rich but cutting them for the poor and middle class turned out so well. It's also the same principal behind why unionized wages work so well for the economy. And it's why raising up the working poor and expanding the middle class is the only way to save our ship. If the poor and the middle class can't spend, the economy can't grow.