Regional Impacts of a Minimum Wage Hike: A Pennsylvania Case Study

Source: Shannon Brobst, Regional Financial Review, May 2018
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Eighteen U.S. states and 20 cities rang in 2018 with increases in their minimum wage, bringing back into the spotlight the debate about whether to raise the federal minimum, which has remained at $7.25 since 2009 (see Chart 1). The question of whether it should be increased receives many different answers from Republicans, Democrats, economists and non-professional observers. Some argue that increasing the cost of labor hurts the economy because it could lead to jobs cuts for low-paid workers. Raising the minimum wage increases businesses’ labor costs, and thus, the cost of producing a good or service. Higher production costs may cause employers to lay off workers in order to contain costs and remain profitable, and could cause marginally profitable small or struggling businesses to close. Others counter this argument stating that a higher minimum wage helps the economy by boosting incomes and does not materially affect employment. This paper examines the positive and negative effects of raising the minimum wage from $7.25 to $12 and $15 in Pennsylvania and discusses policy implications at the local and federal levels.