welfare vs wages

[Danzig]

http://www.epi.org/publication/bp357...wage-increase/

Raising the minimum wage as a tool for economic growth
The immediate benefits of a minimum-wage increase are in the boosted earnings of the lowest-paid workers, but its positive effects would far exceed this extra income. Recent research reveals that, despite skeptics’ claims, raising the minimum wage does not cause job loss.6 In fact, throughout the nation, a minimum-wage increase under current labor market conditions would create jobs. Like unemployment insurance benefits or tax breaks for low- and middle-income workers, raising the minimum wage puts more money in the pockets of working families when they need it most, thereby augmenting their spending power. Economists generally recognize that low-wage workers are more likely than any other income group to spend any extra earnings immediately on previously unaffordable basic needs or services.

Increasing the federal minimum wage to $10.10 by July 1, 2015, would give an additional $51.5 billion over the phase-in period to directly and indirectly affected workers,7 who would, in turn, spend those extra earnings. Indirectly affected workers—those earning close to, but still above, the proposed new minimum wage—would likely receive a boost in earnings due to the “spillover” effect (Shierholz 2009), giving them more to spend on necessities.

This projected rise in consumer spending is critical to any recovery, especially when weak consumer demand is one of the most significant factors holding back new hiring (Izzo 2011).8 Though the stimulus from a minimum-wage increase is smaller than the boost created by, for example, unemployment insurance benefits, it has the crucial advantage of not imposing costs on the public sector.