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.