Raise Minimum Wage In Idaho To $10.00 Dollars An Hour

Earlier this year, EPI released an analysis of the Fair Minimum Wage Act of 2013, a bill introduced by Sen. Tom Harkin (D-Iowa) and Rep. George Miller (D-Calif.) that would raise the federal minimum wage in three incremental increases of $0.95 from its current level of $7.25 per hour to $10.10 per hour (see Cooper and Hall 2013).

The Harkin-Miller proposal would then index the minimum wage to inflation, so that as prices rise in subsequent years, the minimum would automatically be adjusted to preserve its real value. At the same time, the bill would raise the base wage paid to tipped workers from the current $2.13 per hour—where it has stood since 1991—in incremental increases over six years until it equals 70 percent of the full minimum wage.

Since that analysis was released, five states have raised their state minimum wages: California, Connecticut, New Jersey, New York, and Rhode Island.1 The increases in these states underscore the broad recognition that the current federal minimum wage is too low. These increases slightly alter our earlier estimates of the impact of a federal minimum-wage increase to $10.10 because workers in these states who would have been affected by the federal increase will now have higher wages as a result of their higher state minimums. Yet the conclusion of our previous analysis remains unchanged: Raising the federal minimum wage to $10.10 by 2016 would lift incomes for millions of American workers and provide a modest boost to U.S. GDP.

SUPPLEMENTARY DATA: State-by-state characteristics of workers who would be affected by increasing the federal minimum wage to $10.10 by July 2016 [PDF]
This paper provides an update to our original analysis that reflects these higher state minimum wages, and changes in economic conditions over the past year. It begins by providing some context for the current minimum wage and the Harkin-Miller proposal, describing how today’s minimum and the proposed new minimum compare with historical benchmarks. It then provides a demographic overview of the workers who would be affected (both directly and indirectly) by raising the federal minimum wage to $10.10. Finally, it details the GDP and job creation effects that would occur as a result of such an increase.

Key findings include:

Raising the federal minimum wage to $10.10 by 2016 would return the federal minimum wage to roughly the same inflation-adjusted value it had in the late 1960s.

An increase to $10.10 would either directly or indirectly raise the wages of 27.8 million workers, who would receive about $35 billion in additional wages over the phase-in period.

Across the phase-in period of the increase, GDP would grow by about $22 billion, resulting in the creation of roughly 85,000 net new jobs over that period.
The workers who would receive a raise do not fit the stereotypes of low-wage workers:

Among affected workers, the average age is 35 years old, nearly 88 percent are at least 20 years old, and more than a third (34.5 percent) are at least 40 years old.

Of affected workers, about 54 percent work full time, about 69 percent come from families with family incomes less than $60,000, and more than a quarter have children.

The average affected worker earns half of his or her family’s total income.

The minimum wage in context
Every year that the minimum wage remains the same in nominal dollars, inflation slowly erodes its real (i.e., inflation-adjusted) value, leaving minimum-wage workers with a paycheck that cannot buy as much as it did in years past. This, of course, threatens the material well-being of minimum-wage workers in low-income families who rely on every dollar of income just to afford basic necessities.

At the current federal minimum wage of $7.25, a parent who works full time, year round, does not earn enough to be above the federal poverty line. This was not always the case. As shown in Figure A, throughout the 1960s and 1970s, a full-time, full-year minimum-wage income was above the poverty line for a family of two. At its high point in real value in the late 1960s, a full-time, full-year minimum-wage income was enough to keep a family of three above the poverty line, although it still fell shy of the poverty line for a family of four.

FIGURE A
Annual minimum-wage earnings and poverty line for families of two to four, 1964–2013 and projected for 2013–2016 under proposal to raise the federal minimum wage to $10.10 by 2016 (2013 dollars)

Annual minimum-wage earnings and poverty line for families of two to four, 1964–2013 and projected for 2013–2016 under proposal to raise the federal minimum wage to $10.10 by 2016 (2013 dollars).
Note: Poverty thresholds for 2013 for family of two (one adult, one child) and three (two adults, one child) and four (two adults, two children) are inflated from 2012 U.S. Census Bureau thresholds by CBO-projected inflation for 2013. The poverty threshold for one adult, two children is slightly higher ($18,794) than for the family of three configuration shown here. Projections are based upon CBO inflation projections and the proposal to raise the minimum wage to $10.10 by 2016. Annual earnings are calculated assuming workers work 40 hours per week, 52 weeks per year.

Source: Author's analysis of Harkin-Miller proposal, U.S. Census Bureau (2012), CBO (2013), and U.S. Department of Labor Wage and Hour Division (2013)
The black dotted line in the figure shows what a full-time minimum-wage worker would earn if the minimum wage were raised to $10.10 by 2016, as the Harkin-Miller bill proposes. Such an increase would return a full-time minimum-wage income to a level sufficient to protect a family of three from poverty. Because the Harkin-Miller bill would also index the minimum wage to inflation, full-time minimum-wage workers would never again fall below this threshold.

The declining real value of the minimum wage has also significantly contributed to the enormous growth in U.S. income inequality (Mishel 2013). The gap between the minimum wage and the average wage of typical American workers used to be much smaller than it is today. Figure B depicts the value of the minimum wage as a percentage of the average wage of production, non-supervisory workers. From the mid-1960s up until the early 1980s, minimum-wage workers earned a wage equal to roughly half that of the typical American worker. Today’s minimum wage is equal to only 36 percent of the average production, non-supervisory worker wage. Raising the minimum wage to $10.10 by 2016 would return the minimum wage to roughly 50 percent of the average production worker wage.

FIGURE B
Federal minimum wage as a percentage of the average U.S. wage of production/nonsupervisory workers, 1964–2013 and projected for 2013–2016 under proposal to raise the federal minimum wage to $10.10 by July 2016

Federal minimum wage as a percentage of the average U.S. wage of production/nonsupervisory workers, 1964–2013 and projected for 2013–2016 under proposal to raise the federal minimum wage to $10.10 by July 2016
Source: Author's analysis of Harkin-Miller proposal, Current Population Survey Outgoing Rotation Group microdata, and U.S. Department of Labor Wage and Hour Division (2013).

It is important to also recognize that today’s minimum wage has not fallen to exceptional lows out of economic necessity. Over the past 45 years, the U.S. economy has vastly expanded, and productivity (our ability to produce goods and services for the same amount of work) has more than doubled. Yet the minimum wage—our agreed-upon standard for the minimum amount a worker in our society should be paid—has been left to stagnate and decline. Figure C shows the value of the minimum wage since 1968, compared with what it might have been had it grown at the same rate as average wages or total economy productivity (i.e., how much we can produce for an hour’s worth of work).

FIGURE C
Real value of the federal minimum wage, 1968–2013 and 2013–2016 under proposed increase to $10.10 by 2016, compared with its value had it grown at the rate of productivity or average worker wages (2013 dollars)

Real value of the federal minimum wage, 1968–2013 and 2013–2016 under proposed increase to $10.10 by 2016, compared with its value had it grown at the rate of productivity or average worker wages (2013 dollars)
* Productivity and average wage projections from 2013 to 2016 do not include the Harkin-Miller proposal.

Note: Dollars are deflated using CPI-U-RS and CBO inflation projections. Projected wage values are based on CBO inflation projections, average wage and productivity growth from 2002 to 2006 (the last full regular business cycle), and, in the case of the "real minimum wage" line, the proposal to raise the federal minimum wage to $10.10 by 2016.

Source: Author's analysis of Total Economy Productivity data from the Bureau of Labor Statistics (BLS) Labor Productivity and Costs program, BLS Current Employment Statistics, Current Population Survey Outgoing Rotation Group microdata, CBO (2013), U.S. Department of Labor Wage and Hour Division (2013), and the Harkin-Miller proposal.

As the figure shows, the minimum wage in 1968 equaled roughly $9.40 in today’s dollars. Had it grown from that point at the same rate as growth in wages for the typical American worker, it would be about $10.65 today, and projected to be about $10.89 by 2016. If the minimum wage had grown at the same rate as productivity, it would be $18.30 today, and close to $19 per hour by 2016 (under reasonable expectations for productivity growth). As depicted by the dotted black line, the Harkin-Miller proposal to raise the minimum wage to $10.10 by 2016 would lift the minimum to just above its real value from 1968 (in 2013 dollars)—a worthwhile improvement, yet still well below what the economy could sustain, given economic growth and technological progress since that time.

Demographic characteristics of affected workers
Increasing the minimum wage to $10.10 per hour by 2016 would lift incomes for millions of American workers, most of whom do not fit the prevailing impressions of low-wage workers as teenagers working part-time jobs for extra spending money. Figure D shows the number of workers who would be directly and indirectly affected in each year of the proposed incremental increases.

FIGURE D
Number of workers (in millions) affected by raising the federal minimum wage to $10.10 by July 2016

Number of workers (in millions) affected by raising the federal minimum wage to $10.10 by July 2016
Source: Author's analysis of Harkin-Miller proposal using Current Population Survey Outgoing Rotation Group microdata
With the initial increase to $8.20 per hour, 7.0 million workers would be directly affected. These are workers who currently earn between $7.25 and $8.20 per hour. Another 2.7 million workers with wages just above $8.20 per hour would be indirectly affected by the “ripple effect” of the increase, receiving a raise as employers adjust their overall pay ladders (Shierholz 2009). In the second year, as the federal minimum wage is increased to $9.15 per hour, 11.1 million workers would be directly affected, and another 6.5 million would be indirectly affected. In the final increase to $10.10 one year later, a total of 27.8 million American workers would see their pay increase, with 16.7 million workers directly affected and another 11.1 million indirectly affected.

We now examine the demographic characteristics—in terms of gender, age, work hours, family income, and family composition—of the workers who would be directly and indirectly affected.

Gender

While raising the minimum wage would benefit both men and women, it would disproportionately affect women. As depicted in Figure E, women account for 49.2 percent of total U.S. employment, yet comprise 55.0 percent of the workers whose incomes would rise by increasing the minimum wage to $10.10. The share of those affected who are women varies somewhat by state, from a low of 47.7 percent in California to a high of 63.3 percent in Mississippi.

FIGURE E
Gender distribution of workers affected by raising the federal minimum wage to $10.10 by July 2016, and of total employment

Gender distribution of workers affected by raising the federal minimum wage to $10.10 by July 2016, and of total employment
Source: Author's analysis of Harkin-Miller proposal using Current Population Survey Outgoing Rotation Group microdata and BLS Current Employment Statistics (2013)
Age

Perhaps the most common incorrect perception of low-wage workers is that they are largely teenagers and almost entirely young people. While there certainly are a number of low-wage workers who fit this description, young workers comprise only a small fraction of the workers who would be affected by an increase to $10.10. Of the workers who would receive a raise if the minimum wage were lifted to $10.10 by 2016, only 12.5 percent are teens. In fact, of those affected, more are age 55 or older than are teenagers. The average age among affected workers is 35 years old, more than half of all affected workers are at least 30, and more than a third (34.5 percent) are at least 40 (see Figure F).

FIGURE F
Age of workers affected by raising the federal minimum wage to $10.10 by July 2016
Age of workers affected by raising the federal minimum wage to $10.10 by July 2016
Source: Author's analysis of Harkin-Miller proposal using Current Population Survey Outgoing Rotation Group microdata

Work hours
Among those who would be affected by increasing the minimum wage to $10.10, only 14.2 percent work fewer than 20 hours per week. As seen in Figure G, more than half (53.8 percent) work full time (35 or more hours per week), and 32.0 percent work between 20 and 34 hours per week.

FIGURE G Interactive
Work status of workers affected by raising the federal minimum wage to $10.10 by July 2016

Share of affected workers
Part time (< 20 hours) 14.2%
Mid time (20-34 hours) 32.0%
Full time (35+ hours) 53.8%
Part time (< 20 hours): 14.2%
Mid time (20-34 hours): 32.0%
Full time (35+ hours): 53.8%
Source: Author's analysis of Harkin-Miller proposal using Current Population Survey Outgoing Rotation Group microdata
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The report’s supplementary state tables (available at http://www.epi.org/files/2013/minimum-wage-state-tables.pdf) provide demographic information on affected workers by state. The data show that Southern states tend to have higher shares of affected workers who work full time. Arkansas (66.1 percent), Louisiana (65.4 percent), Texas (64.0 percent), and Georgia (62.2 percent) have the highest shares, with more than 60 percent of affected individuals working full time. States in New England and the Midwest have the smallest shares of affected workers who work full time, with Connecticut (36.4 percent), Minnesota (38.3 percent), and New Hampshire (39.3 percent) having shares below 40 percent.

Family income

Those who would be affected come largely from families with low to moderate income levels. As shown in Figure H, 68.9 percent of affected workers have total family incomes of less than $60,000 per year, and nearly a quarter (23.1 percent) have family incomes below $20,000 per year. Among all U.S. families, the median family income in 2012 was $62,527 (according to data from the American Community Survey), which means that nearly 70 percent of affected workers come from families in the bottom half of the income distribution.

FIGURE H
Family income of workers affected by raising the federal minimum wage to $10.10 by July 2016

Family income of workers affected by raising the federal minimum wage to $10.10 by July 2016
Source: Author's analysis of Harkin-Miller proposal using Current Population Survey Outgoing Rotation Group microdata
The share of workers affected by increasing the federal minimum wage to $10.10 with family income below $60,000 varies considerably by state, ranging from a low of 46.9 percent in New Hampshire to a high of 80.2 percent in Montana (and 80.4 percent in the District of Columbia).

Low- and minimum-wage workers are often dismissed as “secondary earners,” implying that the income earned by these workers is primarily discretionary income, unessential to their family’s well-being. This is patently false: The workers who would be affected by increasing the minimum wage to $10.10 earn, on average, 50 percent of their family’s total income. As shown in Figure I, this percentage varies from a low of 32.9 percent in New Hampshire to a high of 60.3 percent in Louisiana.

FIGURE I Interactive
Average share of family income provided by worker affected by raising the federal minimum wage to $10.10 by 2016, by state

State Share
New Hampshire 32.9%
Connecticut 35.6%
New Jersey 38.7%
Maryland 39.1%
Vermont 39.3%
Alaska 39.5%
Massachusetts 39.8%
Minnesota 41.0%
Rhode Island 41.3%
Pennsylvania 41.7%
Maine 42.6%
Hawaii 42.9%
Utah 43.4%
Wisconsin 43.9%
Washington 45.4%
Ohio 45.8%
Iowa 45.9%
Michigan 46.0%
Illinois 46.1%
Nebraska 46.3%
New York 46.8%
Delaware 46.8%
Virginia 46.8%
North Dakota 47.1%
Colorado 47.4%
Indiana 48.0%
Nevada 48.7%
United States 50.0%
Oregon 50.1%
Missouri 50.2%
Arizona 51.7%
Idaho 51.7%
Wyoming 52.2%
New Mexico 53.2%
California 53.2%
South Dakota 53.4%
South Carolina 54.0%
Tennessee 54.1%
Florida 54.4%
West Virginia 54.6%
Kentucky 55.0%
Kansas 55.1%
Alabama 55.2%
Montana 55.4%
Georgia 55.5%
Texas 55.7%
North Carolina 56.3%
Mississippi 57.0%
Oklahoma 57.1%
Arkansas 58.9%
District of Columbia 59.8%
Louisiana 60.3%
......

Source: Author's analysis of Harkin-Miller proposal using Current Population Survey Outgoing Rotation Group microdata
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Family composition

Nationally, more than a quarter (26.5 percent) of those who would be affected by increasing the minimum wage to $10.10 are parents. In fact, of the nation’s roughly 75 million children, nearly one-fifth (18.7 percent) have at least one parent who would receive a raise if the minimum wage were increased to $10.10. This percentage varies from 10.8 percent in Alaska (and 9.7 percent in the District of Columbia) to 25.7 percent in Texas, as shown in Figure J. Including Texas, there are 12 states where more than one-fifth of children have a parent who would benefit from the minimum-wage increase: Idaho (25.0 percent), Arkansas (24.6 percent), South Carolina (24.1 percent), Louisiana (23.3 percent), Kentucky (22.3 percent), North Carolina (21.9 percent), Florida (21.3 percent), Alabama (21.0 percent), Tennessee (20.9 percent), Utah (20.7 percent), and Nevada (20.3 percent). Of these 12 states, all but Idaho, Utah, and Nevada had child poverty rates of 25 percent or more in 2012 (Annie E. Casey Foundation 2013).

FIGURE J Interactive
Share of children with at least one parent affected by raising the federal minimum wage to $10.10 by July 2016, by state

State name Share of state kids
District of Columbia 9.7%
Alaska 10.8%
Connecticut 11.0%
Maine 11.9%
Vermont 12.1%
Washington 12.3%
New Hampshire 12.8%
Minnesota 13.0%
Maryland 13.4%
Wyoming 13.7%
North Dakota 13.8%
New Jersey 13.9%
Massachusetts 14.3%
Oregon 14.7%
Michigan 14.9%
Hawaii 15.0%
Oklahoma 15.3%
New York 15.9%
New Mexico 16.3%
Iowa 16.8%
Colorado 17.0%
Nebraska 17.0%
Wisconsin 17.2%
West Virginia 17.6%
California 17.6%
Arizona 17.9%
Rhode Island 18.2%
Pennsylvania 18.4%
United States 18.7%
Delaware 18.9%
Indiana 18.9%
Illinois 18.9%
Kansas 19.0%
South Dakota 19.1%
Virginia 19.1%
Georgia 19.3%
Ohio 19.4%
Montana 19.6%
Mississippi 19.6%
Missouri 19.9%
Nevada 20.3%
Utah 20.7%
Tennessee 20.9%
Alabama 21.0%
Florida 21.3%
North Carolina 21.9%
Kentucky 22.3%
Louisiana 23.3%
South Carolina 24.1%
Arkansas 24.6%
Idaho 25.0%
Texas 25.7%
.....

Source: Author's analysis of Harkin-Miller proposal using Current Population Survey Outgoing Rotation Group microdata
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Raising the minimum wage to spur economic growth
As explained in our original analysis of the Harkin-Miller proposal (Cooper and Hall 2013), raising the minimum wage would provide immediate benefits not only to affected workers (whose incomes would rise), but to the broader economy as well. Research over the past two decades has shown that, despite skeptics’ claims, modest increases in the minimum wage have little to no negative impact on jobs2 (Schmitt 2013). In fact, under current labor market conditions, where tepid consumer demand is a major factor holding businesses back from expanding their payrolls, raising the minimum wage can provide a catalyst for new hiring.

Economists generally agree that low-wage workers are more likely than any other income group to spend any additional earnings they receive, largely because they must in order to meet their basic needs. Higher-income individuals, corporations, and beneficiaries of corporate profits are more likely to save at least a portion of any additional income. Thus, in a period of depressed consumer demand, raising the minimum wage can provide a modest boost to overall economic activity because it shifts income to workers who are very likely to spend it immediately. Indeed, recent research from the Federal Reserve Bank of Chicago finds that raising the federal minimum wage to $10 could increase U.S. GDP by up to 0.3 percentage points in the near term3 (Aaronson and French 2013).

Our research shows that raising the federal minimum wage to $10.10 by 2016 would provide an additional $35 billion in wages over the phase-in period to directly and indirectly affected workers, who are likely to then spend that additional income. This projected rise in consumer spending would provide a modest boost to U.S. GDP, even after accounting for the increased labor cost to businesses and the potential for small price increases for consumers. Using standard fiscal multipliers, we would expect that increasing the federal minimum wage from $7.25 to $10.10 would generate a net increase in economic activity of $22.1 billion over the phase-in period. This additional GDP would support roughly 85,000 new jobs.4 As shown in Appendix Table 1, increasing the federal minimum wage would generate jobs in every state. (As noted previously, detailed state-level demographic information on each state’s affected workers is available at http://www.epi.org/files/2013/minimum-wage-state-tables.pdf.) Appendix Table 2 details the economic effects of each of the three incremental increases.

Conclusion
Since our original analysis of the Harkin-Miller proposal, five states—California, Connecticut, New Jersey, New York, and Rhode Island—have adopted higher state minimum wages. By 2014, 21 states plus the District of Columbia will have set minimum wages above the federal minimum of $7.25. At that point, roughly half the U.S. workforce will be in jurisdictions with minimum wages above the federal minimum.

These increases in these states, along with those in several cities and counties that have also implemented higher local minimum wages, underscore the growing recognition that the federal minimum wage of $7.25 is no longer an adequate wage floor. While these recent state-level increases—particularly California’s increase to $10 in 2015—slightly alter our original estimates, our conclusion remains the same: Raising the federal minimum wage to $10.10 by 2016 would lift the incomes of millions of working families, boosting their spending power at a time when the U.S. economy is in dire need of increased consumer spending.

Data and Information referenced from: http://www.epi.org/publication/raising-federal-minimum-wage-to-1010/

By David Cooper | December 19, 2013