Amid the grim outlook on the “fiscal cliff” and what failure to resolve the taxing stalemate may mean to household budgets, Ohio workers who are paid the minimum wage have a little reason for cheer. They are due for a raise on New Year’s Day, courtesy of the constitutional amendment in 2006 authorizing annual adjustments to the minimum wage to keep pace with inflation.
The 15-cent raise will bump up the minimum wage in Ohio to $7.85 an hour. For the 199,000 low-wage workers who will benefit directly, that translates into an additional $340 a year on average. As modest as the raise is, research indicates that low-wage earners are more likely to spend extra funds on immediate needs. In short, they circulate the funds quickly, giving a boost to local economies.
All too often, efforts to raise the minimum wage meet with resistance and concern that the expense causes employers to stop hiring or reduce jobs, hours or benefits, all to the detriment of those who most need those low-wage positions. Yet, according to an analysis by the Economic Policy Institute cited by Ohio Policy Matters, the wage increase will have the overall impact of adding to the state’s gross domestic product — by $43.4 million, among other things, the increased economic activity resulting in more jobs and work hours.
Economists say the recovery is limping along in large part because consumer demand is not sufficiently robust. Adjusting the minimum wage upward is a sure way to fuel demand, putting a few more dollars in the pockets of the estimated 215,000 workers who are direct and indirect beneficiaries of the raise.