6 Ways A $12 Minimum Wage Would Help The Economy

Walmart employees and their supporters protest in a parking lot after they were asked to move from the side of the front entr
Walmart employees and their supporters protest in a parking lot after they were asked to move from the side of the front entrance to a Walmart store in Paramount, California on November 23, 2012. Unhappy Walmart employees are protesting across the US, seeking to make their demands for better pay and benefits more visible to the Americans flocking to the Black Friday shopping frenzy. AFP PHOTO / Frederic J. BROWN (Photo credit should read FREDERIC J. BROWN/AFP/Getty Images)

After the D.C. Council approved a bill that requires large retailers to pay their workers a "living wage" of $12.50 -- and Walmart retreated from the capital in protest -- we thought it'd be worth considering what that requirement could do for the economy.

A report from non-partisan public policy center Demos released in 2012 looked into the effect of large retailers raising wages to pay the equivalent of $25,000 per year, or $12.25 per hour, for full-time, year-round workers. The study revealed that the wage hike could benefit not only workers, but also retailers and the economy at large.

Walmart, for its part, disputes the findings of Demos's reports, and the company questioned its validity in an email to The Huffington Post.

Here are some key takeaways from the report:

  1. More than 700,000 American workers would be lifted out of poverty
  2. More than 1 million retail workers and their family members live in or close to poverty. By raising the minimum wage of full-time workers to the equivalent of $12.25 per hour, 734,075 people would be lifted out of poverty and an additional 769,191 people living near the poverty line would see their incomes rise to more than 150 percent above the poverty line.

  • GDP would rise by as much as $15.2 billion
  • A wage increase to $12.25 an hour would impact more than 5 million workers and their families. As these families have access to more money, they will spend more, translating to as much as $15.2 billion in new economic activity, according to Demos.

  • 132,000 new jobs could be created
  • If the increase in economic activity reached $15.2 billion, retailers would need 132,000 new employees.

  • The wage increase would actually only cost retailers about 1 percent of total sales
  • Large retailers would need to absorb the higher labor cost for the 3.5 million workers earning less than $12.25 per hour. But according to Demos, most of this increase in costs would be returned to the firm in the form of productivity gains and increased revenues, amounting to only 1 percent of their total yearly sales.

  • It would generate as much as $5 billion in additional retail revenue
  • In fact, assuming that low-income families spend rather than save the money from the wage increase, retailers could expect at least 20 cents in new revenue for every additional payroll dollar. That would have added up to as much as $5 billion in 2012.

  • The average shopper would pay just 15 cents more per shopping trip at most
  • Even if the nation's largest retailers decided to pass off the cost of a $12.25 minimum wage increase entirely to customers, Demos found that an average household would spend just 7 to 15 cents more per shopping trip.


    Countries With A Higher Minimum Wage Than U.S.