Over the past three years, 18 states plus the District of Columbia have implemented minimum wage increases, joining ten other states that have raised their minimum wages at least once since the last Federal increase in 2009. This column examines the impact of the more recent state increases on wages, weekly earnings, and employment among workers in the low-wage leisure and hospitality Industry. A comparison with states with no minimum wage increase since 2009 suggests that the recent legislation contributed to substantial wage increases with no discernible impact on employment levels or hours worked…..
Source: Low Pay Commission, Report, Autumn 2016
Presented to Parliament by the Secretary of State for Business, Energy and Industrial Strategy by Command of Her Majesty, November 2016
This report sets out the LPC’s recommendations for the minimum wage rates to apply from April 2017. This covers the National Living Wage (NLW) applicable to those aged 25 and over, the 21-24 year old rate, the 18-20 year old rate, the 16-17 year old rate, and the Apprentice Rate.
The report also sets out the evidence on:
– the economic context to our recommendations
– the impact of the introductory rate of the NLW on pay, employment and competitiveness
– what’s happened to the pay and labour market outcomes of young people (16-24 year olds)
– apprentice pay for different age groups and frameworks, and trends in non-compliance with the Apprentice Rate
National Living Wage ‘has not hit employment’
Source: BBC, November 29, 2016
The Low Pay Commission said it had found “no clear evidence” of changes in employment or hours since the higher minimum wage was introduced in April. It said employment had continued to rise even in sectors most obviously affected, such as cleaning, hotels, horticulture and retail. The finding contradicts warnings from economists over the wage’s impact….
Source: Jose Caraballo-Cueto, Industrial Relations Journal, Early View, November 22, 2016
From the abstract:
This research evaluates the repercussions on employment in Puerto Rico of the latest increases in the minimum wage (made between 2007 and 2009). We find that the increases in the minimum wage to $7.25 had a negative impact on employment in a few small sectors only, and that employment was significantly more affected by output.
From the summary:
Education is often lauded as the great equalizer and a solution to the growing income gap. But, as the cost of college breaks family budgets and requires students to take out thousands of dollars in educational loans, wages, even for those with a degree, have not kept pace, and have even declined in many occupations.
Though campaigns to increase the minimum wage have been won in cities and states across the country, current minimum wage rates do not provide a living wage for even a single adult. Research on living wage rates produced by People’s Action Institute shows that, nationally, a living wage for a single adult is $17.28 per hour. For those with student debt, that living wage rises to $18.67 per hour.
Increasing the minimum wage to a living wage and abolishing the tipped subminimum wage will help more workers make ends meet, but student debt forgiveness is also vital. And, because systemic barriers mean women and people of color are disproportionately impacted by low wages and student debt, more must be done to strengthen and enforce equal opportunity statutes.
At a minimum, working full-time should ensure financial stability, including the ability to pay off student loan debt. It’s time for elected officials to take action to make that a reality.
Table 1: Single Adult Living Wage vs Minimum Wage by State
Table 2: Median Student Debt and Monthly Payment for Graduates by State
Table 3: Traditional Single Adult Living Wage vs Student Debt Living Wage by State
From the abstract:
Low-wage work is a central concept in considerable research, yet it lacks an agreed-upon definition. Using data from the Current Population Survey’s Annual Social and Economic Supplement, the analysis presented in this article suggests that defining low-wage work on the basis of alternative hourly wage cutoffs changes the size of the low-wage population, but does not noticeably alter time trends in the rate of change. The analysis also indicates that different definitions capture groups of workers with substantively different demographic, social, and economic characteristics. Although the individuals in any of the categories examined might reasonably be considered low-wage workers, a single definition obscures these distinctions.
The Roy Wilkins Center replicated the techniques used in prevalent economic literature to simulate the relative impact of a local minimum wage increase in the city of Minneapolis and in Hennepin/Ramsey County. These simulated minimum wage changes are at the $12 and $15 per hour levels. The research team finds the following:
– The industries with the largest number of persons likely to be affected by the change in minimum wage are food service, retail, non-hospital health, and administrative support ….
Minimum wage earners in Minneapolis often
o Have at least some college education
o Are not currently in school
o Work at least 35 hours per week
o Are over age 25
Firms that currently pay the $9.50 minimum wage in Minneapolis often
o Are eligible to pay the current lower minimum wage of $7.75 as a small business
o Will increase prices of food by less than 5% to cover labor costs of a $12/$15 minimum wage
o Face lower employee turnover after an increase in the minimum wage
Current literature on the minimum wage suggests
o Increases in average employee monthly earnings vary by industry
o Average employee monthly earnings in the Minneapolis metropolitan area are more sensitive to the minimum wage than the country as a whole
o Most estimates of the change in workforce participation find no statistically significant change after a minimum wage increase
Households with minimum wage earners in Minneapolis
o Are currently less likely than the general public to meet their food needs
o Are likely to spend $27 more a week to meet their food needs after the proposed increase in the
o Would face food insecurity 4-7% less often under the proposed policy
Immigrant workers earning the minimum wage in Minneapolis
o Are slightly more responsive to an increase in the minimum wage than the general population
o Are especially more responsive to an increase in the minimum wage if they are recent immigrants in a low skill job
Nonwhite employees are more likely to be affected by an increase in the minimum wage than white workers, when controlling for the number of workers in each group
o Minority Owned Business Enterprises are, however, likely to face smaller changes in payroll costs after a change in the minimum wage, as fewer minority owned enterprises qualify to pay their workers a reduced minimum wage
Firms within industries with relatively few minimum wage workers are not very likely to see a large change in their operating costs as a result of the proposed minimum wage
Firms within industries with relatively many minimum wage workers may see an increase in their operating costs, however, if employee earnings increase by a smaller rate than we simulate, the change in labor cost would be smaller as well…..
From the abstract:
This study investigates whether minimum wage increases in the United States affect an important non-market outcome: worker health. To study this question, we use data on lesser-skilled workers from the 1993-2014 Behavioral Risk Factor Surveillance Surveys coupled with differences-in-differences and triple-difference models. We find little evidence that minimum wage increases lead to improvements in overall worker health. In fact, we find some evidence that minimum wage increases may decrease some aspects of health, especially among unemployed male workers. We also find evidence that increases reduce mental strain among employed workers.
From the abstract:
U.S. household incomes are rising but disadvantaged workers are still in danger of being left behind, according to this new report from S&P Global’s economists. Even a modest increase in the U.S. federal minimum wage—an investment in the ‘human infrastructure’ of the economy—could encourage more inclusive growth by boosting consumer spending, increasing employee retention and reducing costs associated with worker turnover. These factors lead to improved productivity, the lynchpin of broader prosperity.
Source: John W. Lopresti, Kevin J. Mumford,ILR Review, Vol 69 no. 5, October 2016
From the abstract:
The authors address the question of how a minimum wage increase affects the wages of low-wage workers relative to the wage the worker would have if there had been no minimum wage increase. The authors’ method allows for the effect to depend not only on the initial wage of the worker but also nonlinearly on the size of the minimum wage increase. Results indicate that low-wage workers who experience a small increase in the minimum wage tend to have lower wage growth than if there had been no minimum wage increase. A large increase to the minimum wage not only increases the wages of those workers who previously earned less than the new minimum wage but also spills over to workers with moderately higher wages. Finally, the authors find little evidence of heterogeneity in the effect by age, gender, income, and race.
…..This report looks at the impact that raising the federal minimum wage would have on America’s food insecurity problem, using the Norcross plan as a model. Under this plan, the federal minimum wage would rise to $8.00 in 2016, and then increase a $1 per year, until it reached $15.00 per hour in 2023. (The proposal extends Congressman Bobby Scott and Washington State Senator Patty Murray’s proposal to increase the federal minimum wage to $12.00 per hour by 2020.)….
– In 2014, the U.S. Department of Agriculture estimated that 14 percent of U.S. households were classified as food insecure, and just over 19.2 percent of all households with children were food insecure.
– An increase in the minimum wage significantly improves food security, with larger increases for African-American and Latino, high school graduate, and single-parent households.
– If the federal minimum wage were raised to $15.00 per hour by 2023, almost 1.2 million American households would achieve food security—a major impact on the epidemic of hunger nationwide.