Higher Pay is a Gift to the Economy

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Shoppers take advantage of Black Friday sales in the early morning at a Target store Friday, Nov. 26, 2010 in Chicago. (AP Photo/Kiichiro Sato)

With the holiday shopping season fast approaching, Demos has released a new report showing how raising wages in the retail sector would benefit not just workers but the economy as a whole. The study looks at what would happen if the lowest-paid retail employees earned $25,000 a year (the current average is $21,000 for retail sales people and just $18,500 for cashiers).

More than 700,000 Americans would be lifted out of poverty; nearly the same number would rise from near poverty to above 150 percent of the poverty line. Because families living near the poverty line tend to spend almost every penny they have, the additional wages would likely go right back into the economy — Demos estimates that the GDP would increase between $11.8 and $15.2 billion over the next year, leading employers to create an additional 100,000 jobs. The retail sector itself would earn an additional $4 to $5 billion from its own workers. Another way the wage increase might help pay for itself is through greater productivity and higher sales generated by happier workers.

On the flip side, the additional payroll costs for the 15 million workers in the sector would add up to $20.8 billion. If retailers passed half that cost onto their customers, the average household would pay 15 cents more per trip to the store, or $17.73 per year. Sounds like a small price to pay for a more robust economy and a slightly more equitable society.

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