And . The Economic Policy Institutes Family Budget Calculator: Technical Documentation. The federal minimum wage hasn't risen in almost 13 years and US workers are paying the price Opinion by Gina Cummings for CNN Business Perspectives Published 11:10 AM EDT, Tue March 22, 2022. For these families, every additional dollar they receive has a meaningful impact on their ability to make ends meet. For the default policy based on the Raise the Wage Act of 2021, the subminimum wage would be $4.95 in 2023, $6.95 in 2024, $8.95 in 2025, $10.95 in 2026, $12.95 in 2027, $14.95 in 2028, and equal to the federal minimum wage thereafter. State of Working America Wages 2019: A Story of Slow, Uneven, and Unequal Wage Growth over the Last 40 Years, Economic Policy Institute, February 2020. Source: Economic Policy Institute Wage Simulation Model; seeTechnical Methodology by Cooper, Mokhiber, and Zipperer (2019). During the COVID-19 pandemic, essential and front-line workers have kept the economy running at great risk to their health and their families. Wage increase totals are cumulative of all preceding steps. Economic Policy Institute, August 2015. Economic Policy Institute, September 2016. 2018. Democrats have proposed raising the wage to $15 an hour in the next stimulus package. For example, they do not account for savings of any kind, such as for emergencies or retirement, or for any entertainmentthey are simple calculations of what it takes to cover basic necessities on a month-to-month basis. In fact, the data show that most of the workers who would benefit from a federal increase to $15 are older and full-time workers. A minimum-wage increase that saw 42,000 California workers lose jobs or hours would barely register in the noisy employment statistics but if the people who lost wages also lost their housing . Notes: Inflation measured using the CPI-U-RS and CBO CPI-U projections. The data below can be saved or copied directly into Excel. Some of these studies and more recent research show that there have been little to no employment losses for even the highest minimum wages enacted at state or local levels. Tech companies block wage increase for New York City delivery workers Starting January 30, 2022 all agencies will need to incorporate a $15 minimum wage in new contract solicitations, and by. Extra dollars in the pockets of millions of working families would help by boosting aggregate demand. The current federal minimum wage is $7.25, but the minimum can vary at the state level for example, New Jersey and Illinois have enacted legislation to increase their minimum wage to $15. A $15 minimum wage by 2025 would reduce the number of people living in poverty by up to 3.7 million (see Figure F). The default option in this interactive closely models the Raise the Wage Act of 2021, which CBO examined in its February 2021 report. Demonstrators call for a union and $15 minimum wage at a McDonald's in Charleston, S.C., in February 2020. When will the Minimum Wage be raised? Notes: AAPI refers to Asian American/Pacific Islander. The Fair Labor Standards Act was enacted in 1938 to protect this Nation from the evils and dangers resulting from wages too low to buy the bare necessities of life.3 Thirty years later, higher wages were one of five key demands of the Economic Bill of Rights of the 1968 Poor Peoples Campaign (Johnson 2018). Kinder and Stateler (2021) found that in 2018, essential workers made up nearly half (22.3 million) of the 47.7 million U.S. workers in occupations in which the median wage was less than $15 per hour. To Fight Poverty, Raise the Minimum Wage? Or Abolish It? Despite the doubling of labor productivity, minimum wage workers today are paid substantially less in real terms than their counterparts earned five decades ago. 2015. Gould, Elise. In each case, the percentage difference between the federal minimum wage and the subminimum wage would be maintained after the implementation period ends. As a consequence, a single parent working full time would be in poverty if they earned the federal minimum wage and had no other source of income. One well-known downside of the official poverty measures is that they are an incomplete measure of economic security for families. Minimum Wage Cash Wage for Tipped Workers. Moreover, the FLSA and most state tipped wage laws do not specify the period over which weekly tips are supposed to be calculated, nor do they specify how employers are to treat secondary tippingwhen tipped workers share a portion of their tips with support staff.The opaqueness of tipped wage laws leaves most tipped workers with little knowledge of their rights and particularly open to abuse.. Specifically, Derenoncourt and Montialoux (2021) estimated that, in the year prior to the 1968 increase, 16.1% of the overall workforce and 28.8% of Black workers would be directly affected by the new policy. 2017. Minimum wage: Federal raise to $15 would reduce poverty but - CNN How Increasing the Federal Minimum Wage Could Affect Employment and Family Income, from the Congressional Budget Office Minimum Wages and Racial Inequality (paywall), by Ellora Derenoncourt. Raising the minimum wage pays social dividends that stretch beyond any debate about the discrepancies between workers' wages and CEO's wages. Values calculated using the listed states share of total U.S. nonfarm employment in calendar year 2019 (prior to the COVID-19 pandemic). Raising the US minimum wage: what just happened and what comes next 11. Economists generally recognize that low-wage workers are more likely than any other income group to spend any extra earnings immediately on previously unaffordable basic needs or services. Dingel, Jonathan I., and Brent Neiman. Are Minimum Wage Effects Greater in Low-Wage Areas? Industrial Relations, January 2021. 1, February. Raising the Federal Minimum Wage to $15 by 2024 Would Lift Pay for Nearly 40 Million Workers. The Philippines will raise the minimum wage of private sector workers in the capital region starting July 16, the Labor Department said Thursday. Gould, Cooke, and Kimball (2015) observe that official poverty rate methodology was designed in 1963 and has only been adjusted to account for overall inflation, and they contrast poverty thresholds and Family Budget thresholds. How did CBO estimate the effects on family income? Economic Policy Institute (EPI). 2021. In 2025, the Raise the Wage Act would raise the wages of 32.2 million workers (Figure B). We apply that difference to the range of long-run poverty rate elasticities in Table 7 of Dube (2019b), or -0.220 to -0.459, and to the nonelderly poverty rates in Table B-1 of Census (2020). Source:Authors' calculations using the following occupation definitions: critical infrastructure occupations (LMI Institute 2020); pre-pandemicteleworkableoccupations (Dingel and Neiman 2020); and during pandemicteleworking occupations(authors calculationsfrom2020 Current Population Survey data). The first effect would tend to be larger than the second, so the number of people in poverty would generally fall. These updates can all be viewed in EPI's interactive How Many Jobs Can Be Done at Home? Journal of Public Economics 189, September 2020. Definitions of essential workers vary because the U.S. has no single uniform guidance and because it is difficult to map a given set of job characteristics to coarse data on occupations. Labor Market Information Institute (LMI Institute). Events 2019. Only some of those workers would have increased earnings. Second, because CBO (2021) also estimated that a $15 minimum wage in 2025 would raise the earnings of 27 million workers, even accepting at face value the job loss estimate implies that about 95% of the low-wage workforce would benefit from the policy. Minimum wage workers in Chicago received a 40-cent boost, bringing their hourly pay to $15.80. Raising the minimum wage would increase the cost of employing low-wage workers. In 1963, the federal minimum wage was $1.15 an hour, and there was no minimum wage at all for agriculture, nursing homes, restaurants, and other service industries that disproportionately employed Black workers. The legislature last increased the . As a consequence, indexing the minimum wage to median hourly wages would lead to slightly larger effects on employment, wages, and family income. 2. On July 18, 2019, the U.S. House of Representatives passed an amended version of the Raise the Wage Act of 2019, which would gradually increase the federal minimum wage to $15 an hour by. 2021. Dube, Arindrajit, and Attila Lindner. Since then, minimum wages have continued to play a substantial role in reducing racial earnings inequality. According to one study, "higher wages for low-income individuals reduce crime by providing viable and sustainable employment raising the minimum wage to $12 by 2020 would result in a 3 to 5 percent crime decrease (250,000 to 540,000 crimes) and a societal benefit of $8 to $17 billion dollars.". 1225 Eye St. NW, Suite 600 According to BLS surveys, about 392,000 workers earned the minimum wage of $7.25 in 2019 and 1.2 million workers were paid a wage below the federal minimum. They Deserve a $15 Minimum Wage. The Avenue, The Brookings Institution, February 5, 2021. An analysis of the 2016 American National Election Survey by Aaron Sojourner estimates that more than seven in 10 unemployed workers approved of raising the minimum wage (Sojourner 2021). Regardless of the specific definition, it is clear that tens of millions of essential and front-line workers are underpaid and would benefit from a much higher minimum wage. One Fair Wage: Women Fare Better in States with Equal Treatment for Tipped Workers. 2021. 2020). Lynn, M., M. Sturman, C. Ganley, E. Adams, M. Douglas, and J. McNeil. However, for certain workers or in some circumstances, employment could increase. Nabeel Alsalam, William Carrington, Justin Falk, and Kevin Perese produced the initial estimates for this interactive tool with guidance from Molly Dahl and Joseph Kile. Second, the responsiveness of employment to an increase in the minimum wage is uncertain. See Ballotpedia (2021). Like previous increases in the minimum wage, the options presented here would take a number of years to be fully implemented. New research, insightful graphics, and event invites in your inbox every week. 2013. That increase in productivity might occur through various channels, such as a reduction in employee turnover. Jeffrey Kling and Robert Sunshine reviewed it, Christine Bogusz edited it, and Maria Aquino integrated it into CBOs website and prepared it for release. Federal efforts to increase the minimum wage The federal minimum wage will remain at $7.25, a rate that hasn't moved since it began in 2009. How Increasing the Federal Minimum Wage Could Affect Employment and Another measure of the bite of the minimum wage is the share of the workforce affected by the policy. Users of this interactive tool can leave the minimum wage unchanged after the end of the phase-in period or change it in one of two ways. Directly affected workers will see their wages rise as the new minimum wage rate exceeds their existing hourly pay. Productivity is measured as total economy productivity net depreciation. Shares calculated from unrounded values. Yet to meet their Family Budget thresholds, today, in all but two of the 3,000+ counties in the U.S.both urban and rurala single adult without children must earn more than $15 per hour and work full-time, all year long (see Figure G).6. In CBOs assessment, there is a two-thirds chance that the effect would be within that range. The U.S. Senate has voted to prohibit an increase in the federal minimum wage during the . Economic Policy Institute, February 2019. Cooper, David, and Teresa Kroeger. Minimum Wage Raise 2023 - When will the Minimum Wage be raised? About 22.0 million critical infrastructure workers would receive pay increases due to the Raise the Wage Act, and they constitute about 68.3% of the total number of all affected workers. They will receive a raise as employer pay scales are adjusted upward to reflect the new minimum wage. Indeed, research by Cooper, Luengo-Prado, and Parker (2019) finds that minimum wage increases are associated with higher consumer spending, particularly in places with higher concentrations of low-wage workers. First, workers who are affected by a minimum wage increase see immediate and significant health benefits for themselves and for society. Newsroom Economic Policy Institute, March 2018. CBO projects that in 2026, average income will be $12,500 for families with income less than the poverty threshold; $33,500 for families with income 1.0 to 1.49 times the poverty threshold; $47,400 for families with income 1.5 to 1.99 times the poverty threshold; $68,400 for families with income 2.0 to 2.99 times the poverty threshold; $117,100 for families with income 3.0 to 5.99 times the poverty threshold; and $297,900 for families with income 6.0 or more times the poverty threshold. Civil rights leaders and advocates have long recognized the value of higher wage standards in reducing inequality. The Effect of Minimum Wages on Low-Wage Jobs. The Quarterly Journal of Economics 134, no. Current Population Survey Extracts, Version 1.0.13, https://microdata.epi.org. They Deserve a $15 Minimum Wage, Many U.S. Workers in Critical Occupations in the Fight Against COVID-19, https://doi.org/10.1111/j.1559-1816.2008.00338.x, Who Are Essential Workers? The Pros and Cons of Raising the Minimum Wage | LendingTree The Raise the Wage Act of 2021 would gradually raise the federal minimum wage to $15 an hour by 2025 and narrow racial and gender pay gaps. City Limits: What Do Local-Area Minimum Wages Do? Very few essential workers receive hazard pay to compensate for their now-more dangerous work, and low pay among essential and front-line workers continues to be pervasive (Dorman and Mishel 2020; McNicholas and Poydock 2020, Table 3). Shares calculated from unrounded values. Washington, DC 20005 President Biden signed the order on April 27, 2021. 1. Cooper and Kroeger (2017) explain how the tipped minimum wage is supposed to work and the problems with it: In most states and under federal law, employers of workers who customarily receive tipssuch as restaurant servers and nail salon attendantsmay credit workers tips against their required minimum wage. Families are grouped on the basis of their income relative to the poverty threshold. Pros and cons of raising the minimum wage - Economics Help Sanders Push for $17 Minimum Wage Resurrects Pay Raise Roadblock 2020. Racial Inequality and Minimum Wages in Frictional Labor Markets. IRLE Working Paper 101-21, February. 2016. Estimates from Derenoncourt and Montialoux (2021) suggest that the 1968 policy directly affected an estimated 16.1% of the overall workforce and 28.8% of Black workers.9 Above we estimate similar shares for a $15 minimum wage in 2025: 14.5% of all workers and 23.2% of Black workers would be directly affected. Thus, some workers in CBOs analysis are out of work for nearly an entire year, whereas others are jobless for shortersometimes much shorterperiods. Raising the Minimum Wage | AFL-CIO The Budgetary Effects of the Raise the Wage Act of 2021, The Effects on Employment and Family Income of Increasing the Federal Minimum Wage, Computer Code on Employment Elasticities (.zip file), CBO Updates Its Interactive Tool for Analyzing the Effects of Federal Minimum-Wage Increases, The Effects of a Minimum-Wage Increase on Employment and Family Income, Privacy, Security, and Copyright Policies. Wage changes resulting from scheduled state and local minimum wage laws are accounted for by EPIs Minimum Wage Simulation Model. Copy the code below to embed this chart on your website. The link between increases in the minimum wage and decreases in racial earnings gaps also means that the erosion of the federal minimum wage over this period increased racial earnings gaps. For recent minimum wage changes, see the Economic Policy Institute Minimum Wage Tracker, https://www.epi.org/minimum-wage-tracker/. 2018. Sources: Authors' calculations of federal minimum wage values (adjusted for inflation using the CPI-U-RS and inflation projections from the Congressional Budget Office 2020), and 2019 weighted average poverty thresholds from U.S. Census Bureau 2020, adjusted to 2021 dollars. They will receive a raise as employer pay scales are adjusted upward to reflect the new minimum wage. 2019. Derenoncourt and Montialoux (2021) demonstrated that highest national minimum wage weve hadin 1968, the equivalent of $10.59 per hour in 2021 dollarsalso raised wages and significantly reduced Blackwhite earnings inequality without employment losses. 9 Introduction of this legislation, along with support from the Biden . H.R.603 - Raise the Wage Act of 2021 - Congress.gov 2020. Notes: Values reflect the population likely to be affected by the proposed changes in the federal minimum wage. This was part of a three-phased increase enacted by Congress in 2007. Congressional Budget Office (CBO). Notably among minimum wage workers struggling to get by are those whose incomes are so low they fall under the federal poverty threshold. Notes: Values reflect the results of the proposed changes in the federal minimum wage under the Raise the Wage Act of 2021. It could come up for a final vote as soon as next week. Figure H also shows that the unemployed favor raising the minimum wage by an 11 percentage-point margin over those already employed. Economic Policy Institute (EPI). Sojourner, Aaron. How do taxes and spending work, and where do you fit in? Policy. 10. $15 minimum wage debate: Everything you need to know - CNN The US is proposing an increase from $7.50 to $15 by 2024. Why Raising the Minimum Wage to $15 Is Good for the US - Business Insider If wages grew more slowly than CBO projects, the effects would be larger. That is partly because CBO projects that employment will be near the level that it was at in the baseline projections underlying the 2019 report. Economic Policy Institute, June 16, 2020. Midterm results: Nebraska votes to raise minimum wage with inflation - CNBC Though the federal minimum wage has remained at $7.25 for more than a decade, 23 states increased their hourly base pay at the start of 2023. 1923: In a case called Adkins v. Children's Hospital of D. C., the U.S. Supreme Court rules that imposing a minimum wage violates employers' and workers' liberty of contract right under the. 2020. Last updated March 2018. Chicago (Cook County, $20.42), Miami (Miami-Dade County, $20.63), Phoenix (Maricopa County, $20.80). Updated, Tuesday 4:30 p.m.: In a party-line vote, Democrats on the Pennsylvania House Labor and Industy Committee passed a bill that would increase the state's minimum wage to $15 by 2026, tying future increases to the rate of inflation. 2021b. Table 1 shows the projected total workforce in 2025 and affected workers under the Raise the Wage Act. Donate. Specifically, we define indirectly affected workers as those with a wage rate between the new minimum wage and 115% of the new minimum wage. Minimum Wages and Racial Inequality. Quarterly Journal of Economics 136, no. Wage changes resulting from scheduled state and local minimum wage laws are accounted for by EPIs Minimum Wage Simulation Model. They also include the effects of legislation enacted through April 8, 2022. Nevertheless, using a variety of different occupation-based definitions we consistently find that most of the workers who would see a pay increase due to the Raise the Wage Act are essential or front-line workers. Total economy productivity data from the Bureau of Labor Statistics Labor Productivity and Costs program. Essential Workers Comprise About Half of All Workers in Low-Paid Occupations. Notes: Values reflect the results of the proposed changes in the federal minimum wage under the Raise the Wage Act of 2021. This interactive tooldeveloped and updated by the Congressional Budget Officeallows users to explore the effects of policies that would increase the federal minimum wage, which is $7.25 per hour and has not changed since 2009. How did CBO estimate the effects on the number of people in poverty? The bill, introduced last month by Rep. Jason Dawkins and Rep. Patty Kim, would gradually raise the state's minimum wage over the next three years, beginning with a jump to $11 per hour in 2024 . Philippines to Raise Private Workers' Minimum Wage in Capital Tweets by @EconomicPolicy At the other extreme, a large group of workers might shuffle regularly in and out of employment, experiencing short spells of joblessness but receiving higher wages during the weeks they were employed. 2021. In fact, voters have approved every one of 22 state-level minimum wage increases on the ballot over the last two decades.10. Senate Says No To $15 Minimum Wage For Now; Democrats Vow To Push On - NPR Figure C shows that while the raise would increase wages for less than one out of five (18.4%) white workers, about one in three (31.3%) Black workers and one in four (26.0%) Hispanic workers would receive a pay increase. 2020. Notes: Values reflect the population likely to be affected by the proposed change in the federal minimum wage. Raising the minimum wage to $15 by 2025, as called for in the Raise the Wage Act of 2021, is an important step toward reversing the erosion of the minimum wage's buying power andas detailed later in this reportachieving greater racial and gender pay equity, as well as fairer wages for those workers most affected by the COVID-19 pandemic. Effects on wage rates include increases in the wages of workers who would have earned slightly more than the proposed minimum wage in the absence of the policy. Table 2 also shows that the majority of workers who would receive a raise come from families with limited means. Third, the focus on job loss gives the misleading impression that the policy would cause many workers to have no income over the course of a year; but because of the high degree of churn in the low-wage labor market, what is measured as job losses will actually be low-wage workers spending more time in between jobs, but earning more when they do work (Cooper, Mishel, and Zipperer 2018). Family Budget Calculator(interactive tool). The 1963 March on Washington for Jobs and Freedom (the March on Washington) called for a $2.00 minimum wage (Pitts and Allegretto 2013). !function(d,s,id){var js,fjs=d.getElementsByTagName(s)[0];if(!d.getElementById(id)){js=d.createElement(s);js.id=id;js.src="//platform.twitter.com/widgets.js";fjs.parentNode.insertBefore(js,fjs);}}(document,"script","twitter-wjs"); EPI is an independent, nonprofit think tank that researches the impact of economic trends and policies on working people in the United States. Workers whose wages would otherwise be between the previously applicable minimum (state or federal) and the proposed minimum and who would either be jobless or see increases in their earnings in an average week. Black adults in particular stand out for their support: 89% favor raising the minimum wage to $15 an hour, including 73% who support the idea strongly. How would increasing the minimum wage affect the number of people in poverty? Notes: Using already scheduled state and local minimum wage increases, we estimate the employment-weighted minimum wage would be $11.53 in 2025 without the Raise the Wage Act, or $15.19 with the Raise the Wage Act, a log difference of 0.276. Minimum wage workers in these states and localities just got a raise But that was not always the case: In the 1950s and 1960s, Congress raised the minimum wage more frequently such that it rose roughly in line with the pace of economywide productivity. Totals may not sum due to rounding. Wilson, Valerie, and William M. Rodgers III. (For details, see The Effects on Employment and Family Income of Increasing the Federal Minimum Wage.). Wage changes resulting from scheduled state and local minimum wage laws are accounted for by EPIs Minimum Wage Simulation Model. The Effect of Minimum Wages on Low-Wage Jobs, Budget and Economic Data: 10-Year Economic Projections, The Local Aggregate Effects of Minimum Wage Increases, Employers Steal Billions from Workers Paychecks Each Year, Just calculated the inflation-adjusted natl MW demanded by the March on Washington in August 1963 ($2/hr). One such measure is the ratio of the minimum-to-median wage, with the median of course representing the worker at the very middle of the wage distribution. Indirectly affected workers have a wage rate just above the new minimum wage (between the new minimum wage and 115% of the new minimum). Kinder, Molly, and Laura Stateler. The current federal tipped minimum wage . After years of arguments and a near-deal in 2019, Democrats in the Pennsylvania legislature say it's now just a matter of time before Republicans agree to vote in favor of raising the state's minimum wage. Using data from low-wage counties, where minimum wage increases have raised labor costs much more than in high-wage labor markets, Godoey and Reich (2021) found that the policies significantly reduced poverty and had essentially no employment impact. See related work on Poverty, Children, Inequality and Poverty, Black Americans, Asian Americans, Women, Tipped minimum wage, Minimum Wage, and Wage, hour, and safety laws.