All those dollars low-wage workers spend create an economic ripple effect. Every extra dollar going into the pockets of low-wage workers, standard economic multiplier models tell us, adds about $1.21 to the national economy. Every extra dollar going into the pockets of a high-income American, by contrast, only adds about 39 cents to the GDP.
These pennies add up considerably on $26.7 billion in earnings. If the $26.7 billion Wall Streeters pulled in on bonuses in 2013 had gone to minimum wage workers instead, our GDP would have grown by about $32.3 billion, over triple the $10.4 billion boost expected from the Wall Street bonuses.
Some nice dry references:
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Economic multipliers: Based on the macroeconomic multipliers calculated by Moody’s Analytics Chief Economist Mark Zandi, which estimate the one-year dollar change in GDP for a given dollar reduction in federal tax revenue. For the low-wage worker multiplier, we followed a methodology developed by the Economic Policy Institute and averaged Zandi’s stimulus multipliers for the Earned Income Tax Credit (within the parameters of the American Recovery and Reinvestment Act) and Making Work Pay (ARRA’s refundable tax credit for working individuals and families) for a multiplier of 1.21. For the high-income multiplier, we used Zandi’s multiplier for dividend and capital gains tax cuts, for a multiplier of 0.39. Capital gains are heavily concentrated among very high-income individuals. According to the Tax Policy Center, the top 1 percent of taxpayers received 71 percent of all capital gains in 2012.
*This is the preposition that is wrong, gbaji.