IMF's Lagarde: Hike the U.S. Minimum Wage and Economy Will Benefit

IMF Managing Director Christine Lagarde weighs in on a range of topics from the global economy, the U.S. job market, the Syrian refugee crisis and Britain’s potential exit from the European Union.

“The trends are a little bit on the downside and what is most concerning is that we see risks likely to high on the horizon and bigger.  And those risks are the Chinese slowdown in growth, the low commodity prices for longer and the financial tightening we are seeing as a result of monetary policies across the globe producing this effect both on exchange rates and on monetary policies,” Lagarde told the FOX Business Network’s Maria Bartiromo about the state of the global economy.

Lagarde weighed in specifically on the state of the U.S. economy.

“We believe that having 50 million Americans living in poverty, 40% of whom actually have a job is not particularly satisfactory.  And with growth being, not low, but not particularly high in the U.S.  You know north of 2% is okay but it is not great,” said Lagarde.

Lagarde then discussed how raising the minimum wage could potentially boost U.S. economic growth.

And with the job market where it is we believe that it’s time to actually look at those minimum wage issues with a view to increasing growth, with a view to producing a demand effect in the short term and hopefully supporting the economy,” Lagarde said.

With the influx of Syrian refugees to Europe, Lagarde discussed the potential economic implications and why it could be an economic benefit if handled correctly.

“Difficult to say because it’s a bit early on to actually measure the economic impacts of these million plus refugees coming into Europe, predominantly in Germany.  But our study shows that if there is good integration, meaning language training, skills retraining eventually, housing support facility to enter the job market, the benefits can be quite significant.  We figure that it would be a plus 0.2% of the whole of the Euro area and plus 0.5% for Germany alone,”

But despite the potential long-term economic benefits, Lagarde pointed to the short-term humanitarian crisis that needs to be addressed.

“It’s first and foremost a massive humanitarian challenge that the Europeans are facing at the moment which needs to be addressed everywhere,” Lagarde said.

Lagarde then weighed in on the potential implications if Britain leaves the European Union.

“It’s hard to say for me now, because we are currently completing the study of that particular project.  But it’s very likely to be a net negative and a big concern because it’s uncertainty, it opens the door to what will be the next regime in place for trade between the U.K. and the rest of the European Union.   What will happen to the financial center of London if it works in isolation relative to the continent?  Those are unanswered questions which open big uncertainties,” said Lagarde.