Increases in the minimum wage have led to increased spending and sustained economic expansion.

The federal minimum wage is still $7.25. However, different states and localities have passed legislation, often pushing the minimum wage to $15. That has led to increased wage growth for the nation’s bottom earners, which has had powerful effects on the economy.

Income inequality in the U.S. has constrained economic growth. That is because those whose income has grown the most, the nation’s top 10% of earners, are more likely to save than the rest of the nation. Thus, more and more money has been funneled to individuals who will not spend it.

Extending credit lines to lower wage earners has boosted spending, but that spending has come with caveats. More specifically, spending while increasing debt creates the conditions for widespread default and economic contraction.

Instead, the increased spending that is paired with increased wages is free of those caveats and is not in tangent with increased debt. For those reasons it is safe to say that increasing the wages of those who earn the lowest in the country has helped fuel the past 128 months of economic expansion in the U.S.

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Economics, Finance and Investing