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U.S. minimum wage hike a stimulus to economy: report

U.S. minimum wage hike a stimulus to economy: report

A higher U.S. minimum wage is providing a cushion to the economy when it is most needed, according to a report released on Thursday.

The Economic Policy Institute, a liberal think-tank based in Washington, said recent rises in the minimum wage have acted as a "stealth stimulus," preventing the worst recession in generations from spiraling out of control.

The study found that the bottom-rung pay increases will boost spending by $4.9 billion.

Such findings counter conventional wisdom among economists, who tend to argue that mandated wage increases hurt businesses' bottom line, putting a crimp on hiring.

On the contrary, say EPI analysts, who argued that further growth in low-end incomes would go a long way toward engendering an economic recovery.

"An increase in the minimum wage would not only benefit low-income working families, but it would also provide a boost to consumer spending and the broader economy," said Kai Filion, an analyst at EPI.

In the first increase in over a decade, the minimum wage was raised to $5.85 two years ago after a tough battle in Congress.

The EPI study found the July 2007 minimum wage hike benefited over 700,000 families and added $1.7 billion in additional spending over the following year.

A July 2008 increase benefited over 1.3 million families and added $3.1 billion in additional spending over the following year, the EPI analysts added.
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