Celinda Lake, Daniel Gotoff, and Matt Price, Lake Research Partners, June 7, 2011
While some elected leaders may be unsure whether the time is right to raise the minimum wage again, public opinion shows no such uncertainty. The public overwhelmingly supports raising the minimum wage and that support is reinforced in the current weak recovery. The public intuitively understands the minimum wage and consistently strongly approves of efforts to raise it by large margins. That support is noticeably deep and broad; in an era where many issues are highly polarized and vigorously debated by different demographic and partisan contingents, raising the minimum wage stands out as one of the most broadly embraced economic policies, with high levels of support across all partisan and demographic groups, bridging the gaps of age, race, education, and income.… Continue reading »
Doug Hall, Economic Policy Institute, May 19, 2011
Since the most recent increase in the federal minimum wage (from $6.55 to $7.25) nearly two years ago, inflation has been eating away at its buying power. The federal minimum wage was at its highest mark in 1968, worth more than 15 percent more than it is today. Since then, its value has followed a downward trend, interrupted by periodic upward adjustments when Congress took action, but never returning to its full previous value.
Today’s minimum-wage workers are better educated and more productive than their predecessors, but their wages are less adequate for meeting their families’ needs. A worker employed full-time at minimum wage earns $15,080, nearly $3,500 less than the federal poverty level for a family of three.… Continue reading »
“Minimum Wage Effects Across State Borders,” a new study by economists Arindrajit Dube, William Lester and Michael Reich published by the respected Review of Economics and Statistics, provides the most rigorous and sophisticated study to date of the effects of increases in the minimum wage on job growth in the United States. Taking advantage of the fact that a record number of states raised their minimum wages during the 1990s and 2000s–creating scores of differing minimum wage rates across the country–the study compares employment levels among every pair of neighboring U.S. counties that had differing minimum wage levels at any time between 1990 and 2006.… Continue reading »
Do Minimum Wages Really Reduce Teen Employment?, an important new study by economists Sylvia Allegretto, Arindrajit Dube and Michael Reich, finds that increases in the minimum wage over the past two decades did not lead to declines in teen employment. Their analysis includes an in depth examination of minimum wage increases during times of high unemployment—including the Great Recession of 2007-2009—and finds that even in these difficult economic periods, increases in the minimum wage did not cause job loss or slow rehiring. Together with a companion study, Minimum Wage Effects Across State Borders, published in November 2010, the study adds a comprehensive new round of evidence to a large and growing body of research spanning more than fifteen years that has found that increases in the minimum wage raise workers’ earnings without reducing employment.… Continue reading »
Ken Jacobs, Dave Graham-Squire, Stephanie Luce, UC Berkeley Center for Labor Research and Education, April 2011
Big box retailers are seeking to expand into major metropolitan areas in the United States. Elected officials and policy makers are struggling to understand the impact these retailers would have on their cities. Some cities are considering “living wage” policies that would establish higher minimum wage standards on retailers of a certain size. As the largest retailer and largest employer in the United States, Walmart’s expansion plans have attracted the most attention and focus from policy makers.
The growth of big box retail is a mixed blessing to local communities. There is strong evidence that jobs created by Walmart in metropolitan areas pay less and are less likely to offer benefits than those they replace. Controlling for differences in geographic location, Walmart workers earn an estimated 12.4 percent less than retail workers as a whole, and 14.5 percent less than workers in large retail in general. Several recent studies have found that the entry of Walmart into a county reduces both average and aggregate earnings of retail workers and reduces the share of retail workers with health coverage on the job. The impact is not only one of substitution of higher wage for lower wage retail jobs, but also a reduction in wages among competitors.… Continue reading »
John Schmitt and David Rosnick, Center for Economic and Policy Research, March 22, 2011
This report analyzes the wage and employment effects of the first three city-specific minimum wages in the United States –San Francisco (2004), Santa Fe (2004), and Washington, DC (1993). We use data from a virtual census of employment in each of the three cities, surrounding suburbs, and nearby metropolitan areas, to estimate the impact of minimum-wage laws on wages and employment in fast food restaurants, food services, retail trade, and other low-wage and small establishments.
We evaluate these impacts using the general approach outlined in Card and Krueger’s (1994, 2000) studies of the 1992 New Jersey state minimum-wage increase. In our setting, the Card and Krueger methodology involves comparing wages and employment before and after the city minimum-wage with changes over the same period in wages and employment in comparable establishments in nearby areas unaffected by the citywide minimum wage.
The results for fast food, food services, retail, and low-wage establishments in San Francisco and Santa Fe support the view that a citywide minimum wages can raise the earnings of low-wage workers, without a discernible impact on their employment. Moreover, the lack of an employment response held for three full years after the implementation of the measures, allaying concerns that the shorter time periods examined in some of the earlier research on the minimum wage was not long enough to capture the true disemployment effects.… Continue reading »
Sylvia A. Allegretto, Kai Filion, Economic Policy Institute & Center on Wage and Employment Dynamics, Briefing Paper #297, February 23, 2011
The minimum wage has been one of the most investigated and debated labor market topics among economists, politicians, business entities, and the public. Much less attention has been paid to the subminimum wage received by tipped workers (referred to as the “tipped minimum wage”). The two-tiered minimum wage system is unknown to many and the existence of the subminimum wage is often a surprise. Did you know that a waiter at a restaurant in Indiana probably earns a base wage of $2.13 per hour; $4.34 for a server in the Colorado Rockies; and $8.67 for wait staff near Olympia National Park in the state of Washington? These pay disparities are created by an obscure and often misunderstood federal provision called a ‘tip credit,’ which allows employers to pay tipped workers below the binding federal or state minimum wage.
This brief seeks to shed light on the subminimum wage, its wide differences from state to state, and its impact on workers and labor markets. First, we present the history and mechanics of the subminimum wage and the tip credit provision along with state-level variations.… Continue reading »
Daniel Aaronson, Sumit Agarwal, Eric French, Federal Reserve Bank of Chicago, February 8, 2011
Following a minimum wage hike, household income rises on average by about $250 per quarter and spending by roughly $700 per quarter for households with minimum wage workers. Most of the spending response is caused by a small number of households who purchase vehicles. Furthermore, we find that the high spending levels are financed through increases in collateralized debt. Our results are consistent with a model where households can borrow against durables and face costs of adjusting their durables stock.… Continue reading »
Social scientists do not agree on the size and nature of the causal impacts of parental income on children’s achievement. We revisit this issue using a set of welfare and antipoverty experiments conducted in the 1990s. We utilize an instrumental variables strategy to leverage the variation in income and achievement that arises from random assignment to the treatment group to estimate the causal effect of income on child achievement. Our estimates suggest that a $1,000 increase in annual income increases young children’s achievement by 5%–6% of a standard deviation. As such, our results suggest that family income has a policy-relevant, positive impact on the eventual school achievement of preschool children.… Continue reading »
How do we define a family-supporting wage? To answer this question JOBS NOW has created family budgets that measure the cost of meeting basic needs for food, housing, health care, clothing, transportation and child care. JOBS NOW defines a family-supporting wage as one that covers the cost of basic needs.
Our Cost of Living budgets are based on a “no-frills” standard of living. No money is included for debt payments or skills training. There is no entertainment budget, no restaurant meals, no vacation, and nothing for emergencies, retirement, or children’s education. There is no money for internet service or cable TV—only basic phone service. The basic needs standard falls short of what is usually called a middle-class standard of living.… Continue reading »
John Schmitt, Center for Economic and Policy Research, October 2009
Since the end of the 1970s, the United States has seen a dramatic increase in economic inequality. While the United States has long been among the most unequal of the world’s rich economies, the economic and social upheaval that began in the 1970s was a striking departure from the movement toward greater equality that began in the Great Depression, continued through World War II, and was a central feature of the first 30 years of the postwar period.
Despite the magnitude of the rise in inequality, the political discourse in the United States refers only obliquely to these developments. The public debate generally acknowledges neither the scale of the increase in inequality nor, except in the most superficial way, the causes of this sudden and sustained turn of events.
This short essay seeks to provide an alternative view of the postwar period in the United States, particularly of the last three decades. My argument is that the high and rising inequality in the United States is the direct result of a set of policies designed first and foremost to increase inequality. These policies, in turn, have their roots in a significant shift in political power against workers and in favor of their employers, a shift that began in the 1970s and continues through today.… Continue reading »
Rajesh D. Nayak, Paul K. Sonn, National Employment Law Project, August 2009
In 2007, Congress finally raised the federal minimum wage for the first time in ten years, giving millions of low-wage workers a modest raise to $7.25 per hour by 2009.1 But for millions more low-income employees like the waitress at your local diner, paychecks have not budged. Workers who rely on tips are subject to a special tipped worker minimum wage, which has remained frozen since 1991 at a meager $2.13 per hour—just $4,430 per year for a full-time worker. Congress has overlooked this little-understood part of our minimum wage system the last few times that it has increased the minimum wage. The result has been to drag down pay for tipped workers in many of our nation’s fast-growing service industries, such as restaurants, hotels, nail salons, and car washes, where millions today spend their careers. The overwhelming majority of tipped workers are adult women—many of them supporting families. They are hurt the most by the frozen tipped worker minimum wage, which is an under-appreciated factor in the unequal pay that working women continue to receive across our economy.… Continue reading »
Kai Filion, Economic Policy Institute, Issue Brief #255, May 28, 2009
The recently enacted American Recovery and Reinvestment Act included policies to help struggling families and create jobs. But an extremely effective and simple policy that achieves both of these goals is often overlooked: increases in the minimum wage. Each increase provides financial relief directly to minimum wage workers and their families and helps to stimulate the economy. By increasing workers’ take-home pay, families gain both financial security and an increased ability to purchase goods and services, thus creating jobs for other Americans.… Continue reading »
Eighty-three of the 100 largest publicly traded U.S. corporations in terms of 2007 revenue reported having subsidiaries in jurisdictions listed as tax havens or financial privacy jurisdictions. Sixty-three of the 100 largest publicly traded U.S. federal contractors in terms of fiscal year 2007 federal contract obligations reported having subsidiaries in such jurisdictions… Continue reading »
NBER Working Paper Series: Working Paper 14624, Milligan, K., & Stabile, M. National Bureau of Economic Research, 2008
We review existing research and policy evidence about income as an essential component to meeting children’s basic needs—that is, income represented as the purest monetary transfer for increasing the purchasing power of low income families. Social scientists have made great methodological strides in establishing whether income has independent effects on the cognitive development of low-income children. Our review of that research suggests that a $1,000 increase in income has positive, but small, effects on children, rarely exceeding 1/10th of a standard deviation change in outcomes for children. We argue that researchers are well-positioned for more rigorous investigations about how and why income affects children, but only first with thoughtful and creative regard for conceptual clarity, and on understanding income’s potentially inter-related influences on socio-emotional development, mental, and physical health. We also argue for more focus on the effects of income transfers, including when conditional on employment, as compared to more targeted direct investments in children. We end with a description of two-generation and cafeteria-style programs as the frontiers of the next generation in income-enhancement policies, and with the promise of insights from behavioral economics.… Continue reading »
Multiple Authors, Economic Policy Institute, Public Statement, October 2006
The minimum wage has been an important part of our nation’s economy for 68 years. It is based on the principle of valuing work by establishing an hourly wage floor beneath which employers cannot pay their workers. In so doing, the minimum wage helps to equalize the imbalance in bargaining power that low-wage workers face in the labor market. The minimum wage is also an important tool in fighting poverty.
The value of the 1997 increase in the federal minimum wage has been fully eroded. The real value of today’s federal minimum wage is less than it has been since 1951. Moreover, the ratio of the minimum wage to the average hourly wage of non-supervisory workers is 31%, its lowest level since World War II. This decline is causing hardship for low-wage workers and their families.… Continue reading »
John Burton, Amy Hanauer, Policy Matters Ohio & the Center for American Progress, May 2006
For 68 years, the minimum wage has been an important part of an economy that works for all Americans. Recently, the federal government has let the minimum wage deteriorate in real value to its lowest point in more than 50 years. In response, twenty states and the District of Columbia have raised their minimum wages above the federal level, up from three in 1996. A grassroots coalition in Ohio is seeking to put an initiative on the November 2006 ballot to raise Ohio’s minimum wage to $6.85 an hour.
This study compares performance of small businesses (establishments under 500 employees) in the 39 states that accepted the federal minimum wage before 2003 to the twelve states (including the District of Columbia) that had minimums above the federal level in January, 2003. Nine new states have joined the high-wage group since.… Continue reading »
Michael Reich, Arindrajit Dube, Suresh Naidu, UC Berkeley Institute of Industrial Relations, September
2005
In November 2003, San Francisco voters passed a ballot proposition to enact a citywide minimum wage by a 60 to 40 margin. This proposition arose in response to the large numbers of low-wage workers in San Francisco, where living costs are among the highest in the nation.
A minimum wage of $8.50 took effect in February 2004, making San Francisco the first major city to implement a citywide minimum wage, other than the District of Columbia. Since that time, Santa Fe, NM and Milwaukee, WI have passed municipal minimum wage laws, and a number of other cities are considering similar policies.
San Francisco’s minimum wage is the highest in the United States and is 28 percent higher than California’s minimum wage of $6.75. The minimum wage is also adjusted annually for cost of living increases. On January 1, 2005, the minimum wage rose from $8.50 to $8.62 in line with this mandated adjustment.
Citywide minimum wage policies cover all employers in the city and differ from living wage policies, which typically apply only to employers with city service contracts. The San Francisco ordinance includes a two year phase-in period, during which nonprofits and businesses with less than 10 employees are not subject to the mandate.… Continue reading »
Candace Howes, Industrial Relations: A Journal of Economy and Society, December 23, 2004
This study records the impact on workforce retention of the nearly doubling of wages for homecare workers in San Francisco County over a 52-month period. Using descriptive statistics and logistic regression analysis the author finds that the annual retention rate of new providers rose from 39 percent to 74 percent following significant wage and benefit increases and that a $1 increase in the wage rate from $8 an hour—the national average wage for homecare—would increase retention by 17 percentage points. The author also shows that adding health insurance increases the retention rate by 21 percentage points.… Continue reading »
Ann Markusen, Jennifer Ebert, Martina Cameron, Project on Regional and Industrial Economics, The Humphrey Institute of Public Affairs, University of Minnesota, Feb. 2004
Over the past three decades, the real value of the minimum wage for Minnesotans earning has fallen precipitously, from $8.27 to $5.15. For many workers with families to support, their earnings at minimum wage now leave them below the poverty line, even when working full-time. The decline has left single individuals as well as families with children far below the “basic needs” budget that Growth & Justice has chosen as its target for standards of living. It discourages people, especially if they face work-related costs like child care, from working.
The easiest, fairest, most dignified and cost-effective way to address the gap is to increase the minimum wage. Minnesota’s minimum wage remains at $5.15 an hour, the national minimum wage floor, despite the fact that many other states with prosperous economies have raised theirs as high as $7.00 and beyond. A minimum wage hike could be accomplished by a simple vote of the legislature, would cost the state nothing while increasing tax revenues and would require negligible administrative costs to deliver, because it would apply universally without eligibility screening.… Continue reading »
Ann Markusen, Jennifer Ebert, Martina Cameron, Project on Regional and Industrial Economics, The Humphrey Institute of Public Affairs, University of Minnesota, September 2003
The minimum wage in Minnesota, once considered to be a living wage and enough to keep a worker out of poverty, has continually eroded in real terms since 1968, falling from $8.27 in real purchasing power to $5.15 today. In other states with comparable economies to ours, voters and/or the legislatures have raised their minimum wages to between $6.50 and $7.00, sometimes with built-in cost of living adjusters. In this brief, we profile the Minnesota individuals and regions that would benefit from a substantial increase in the minimum wage. We summarize what is known about the minimum wage and the impacts of an increase on workers, consumers, businesses, aggregate levels of employment, welfare, training and the state budget. We compare it to another highly acclaimed mechanism for improving the income distribution, the earned income tax credit.… Continue reading »
Michael Reich, Peter Hall, Ken Jacobs, Institute of Industrial Relations, University of California, Berkeley, March 2003
In response to low pay for workers and low service quality for taxpayers, about 100 local governmental entities in the United States have instituted living wage ordinances. Generally, these ordinances apply wage and benefits mandates for employees of contractors conducting services for a municipal government. Some of the ordinances also apply to employers who conduct business on government-owned property.
An innovative and far-reaching living wage ordinance has been implemented at San Francisco International Airport (SFO). Nearly two years before September 11, 2001, SFO adopted a Quality Standards Program (QSP), which was designed to improve safety and security at SFO as well as improve the conditions of the SFO labor market. The program went well beyond the FAA regulations in place at the time, establishing compensation, recruitment and training standards for a wide range of airport employees whose performance affects airport safety and security. Two additional policies in San Francisco in 2000 also restructured the labor market at SFO: a Labor Peace /Card Check Rule and a Minimum Compensation Ordinance (MCO), which places living wage mandates into airport leases and service contracts not covered by the QSP.… Continue reading »
David Card; Alan B. Krueger, The American Economic Review, Vol. 84, No. 4., December 2000
Replication and reanalysis are important endeavors in economics, especially when new findings run counter to conventional wisdom. In their Comment on our 1994 American Economic Review article, David Neumark and William Wascher (2000) challenge our conclusion that the April 1992 increase in the New Jersey minimum wage led to no loss of employment in the fast-food industry. Using data drawn from payroll records for a set of restaurants initially assembled by Richard Berman of the Employment Policies Institute (EPI) and later supplemented by their own data collection efforts, Neumark and Wascher (hereafter, NW) conclude that “… the New Jersey minimum-wage increase led to a relative decline in fast-food employment in New Jersey” compared to Pennsylvania. They attribute the discrepancies between their findings and ours to problems in our fast-food restaurant data set. Specifically, they argue that our use of employment data derived from telephone surveys, rather than from payroll records, led us to draw faulty inferences about the effect of the New Jersey minimum wage.… Continue reading »
David Card, Alan B. Krueger, The American Economic Review, Vol. 84, No.4., September 1994
On April 1, 1992, New Jersey’s minimum wage rose from $4.25 to $5.05 per hour. To evaluate the impact of the law we surveyed 410 fast-food restaurants in New Jersey and eastern Pennsylvania before and after the rise. Comparisons of employment growth at stores in New Jersey and Pennsylvania (where the minimum wage was constant) provide simple estimates of the effect of the higher minimum wage. We also compare employment changes at stores in New Jersey that were initially paying high wages (above $5) to the changes at lower-wage stores. We find no indication that the rise in the minimum wage reduced employment. (JEL 530, 523)… Continue reading »
