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How does a federal minimum wage hike affect aggregate household spending?

Author

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  • Daniel Aaronson
  • Eric French

Abstract

This article finds that a federal minimum wage hike would boost the real income and spending of minimum wage households. The impact could be sufficient to offset increasing consumer prices and declining real spending by most non-minimum-wage households and, therefore, lead to an increase in aggregate household spending. The authors calculate that a $1.75 hike in the hourly federal minimum wage could increase the level of real gross domestic product (GDP) by up to 0.3 percentage points in the near term, but with virtually no effect in the long term.

Suggested Citation

  • Daniel Aaronson & Eric French, 2013. "How does a federal minimum wage hike affect aggregate household spending?," Chicago Fed Letter, Federal Reserve Bank of Chicago, issue Aug.
    • Handle: RePEc:fip:fedhle:y:2013:i:aug:n:313
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    File URL: http://www.chicagofed.org/digital_assets/publications/chicago_fed_letter/2013/cflaugust2013_313.pdf
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    Citations

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    Cited by:

    1. Gordon G. Sollars & Fred Englander, 2018. "Sweatshops: Economic Analysis and Exploitation as Unfairness," Journal of Business Ethics, Springer, vol. 149(1), pages 15-29, April.
    2. V. Kumar & Nita Umashankar & Kihyun Hannah Kim & Yashoda Bhagwat, 2014. "Assessing the Influence of Economic and Customer Experience Factors on Service Purchase Behaviors," Marketing Science, INFORMS, vol. 33(5), pages 673-692, September.
    3. Reich, MIchael & Jacobs, Ken & Bernhardt, Annette, 2014. "Local Minimum Wage Laws: Impacts on Workers, Families and Businesses," Institute for Research on Labor and Employment, Working Paper Series qt9pf1225f, Institute of Industrial Relations, UC Berkeley.
    4. Young Cheol Jung & Adian McFarlane & Anupam Das, 2021. "The effect of minimum wages on consumption in Canada," The Economic and Labour Relations Review, , vol. 32(1), pages 65-89, March.
    5. Leila Sabokkhiz & Fatma Guven Lisaniler & Ikechukwu D. Nwaka, 2021. "Minimum Wage and Household Consumption in Canada: Evidence from High and Low Wage Provinces," Sustainability, MDPI, vol. 13(12), pages 1-20, June.

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    Keywords

    Minimum wage;

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