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Minimum wage increase will probably promote spending

As the debate rages on whether an increase in the U.S. minimum wage will boost or hinder hiring, one aspect is more unambiguous. It would almost surely lift consumer spending.

By Jeanna Smialek | Updated on February 27, 2014

Feb. 27 (Bloomberg) — As the debate rages on whether an increase in the U.S. minimum wage will boost or hinder hiring, one aspect is more unambiguous. It would almost surely lift consumer spending.

While the effect will probably be positive, the magnitude of the improvement remains up in the air. A pay hike of $1.75 an hour, smaller than currently proposed, would augment purchases by at least $48 billion in the first year, according to a 2013 paper by Federal Reserve Bank of Chicago economists. Analysis by private researchers points to a smaller gain.

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