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

Daniel Aaronson and Eric French

Chicago Fed Letter, 2013, issue Aug, No 313

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.

Keywords: Minimum; wage (search for similar items in EconPapers)
Date: 2013
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