Dube finds that a 10% increase in the minimum wage reduces nonelderly poverty by somewhere between 2% and 4%. Minimum wage increases are extremely popular. The arguments for raising the minimum wages include - reduced in-work poverty, a reduction in inequality, an incentive to increase labour productivity and higher wages leading to increased economic growth. As Derenoncourt (2020) has observed, the 1963 March on Washingtons demand would be equivalent to about $15.00 today after adjusting for inflation (see Figure D). Figure H also shows that the unemployed favor raising the minimum wage by an 11 percentage-point margin over those already employed. Minimum wage workers in Chicago received a 40-cent boost, bringing their hourly pay to $15.80. To calculate this poverty reduction, we apply poverty reduction estimates from Dube (2019b) to the average minimum wage increase expected under the Raise the Wage Act. Copy the code below to embed this chart on your website. !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. In each case, the percentage difference between the federal minimum wage and the subminimum wage would be maintained after the implementation period ends. On the negative side, increasing minimum wages too fast could cause a rise in . 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 $15. Directly affected workers will see their wages rise as the new minimum wage rate exceeds their existing hourly pay. 2020. They also include the effects of legislation enacted through April 8, 2022. After adjusting the 2017$ values in the Family Budget Calculator to 2021$, only Lucas County, Ohio ($14.80), .and Cameron County, Texas ($14.96), have family budget thresholds below $15 an hour for a single adult without children. Minimum Wages and the Distribution of Family Incomes. American Economic Journal: Applied Economics 11, no. Those affected workers represent 21% of the projected workforce of 151.7 million in 2025. Effects would generally be greater if the minimum-wage change affected more workers, if it led to larger mandated increases for directly affected workers, if firms had more time to respond (for example, because the change was phased in over a longer period), and if the minimum wage was indexed to inflation or wage growth. Specifically, we define indirectly affected workers as those with a wage rate between the new minimum wage and 115% of the new minimum wage. Civil rights leaders and advocates have long recognized the value of higher wage standards in reducing inequality. In the second row, we consider critical infrastructure occupations defined by the Labor Market Information Institute (LMI Institute 2020), where infrastructure includes a broad set of workers covering a majority of the workforce, including those in energy, health care, law enforcement, telecommunications, and other occupations. Totals may not sum due to rounding. 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. The federal minimum wage would rise by varying amounts each year until it reached the target amount in the year specified for full implementation. Raise the Wage Act of 2021. Sanders Push for $17 Minimum Wage Resurrects Pay Raise Roadblock Washington, DC 20005 Most Americans support a $15 federal minimum wage On average, an affected low-wage worker who works year round would see an annual pay increase of more than $3,300 (see Appendix Table 2). Raising the Minimum Wage Would Boost an Economic Recoveryand Reduce Essential Workers: Who Should Get the Coronavirus Vaccine First? New York Times, December 5, 2020. Minimum Wage on the Ballot (web page). Figure A compares the trajectory of the minimum wage at face value (known in economics as the nominal minimum wage) with the inflation-adjusted or real value of the minimum wage (representing its purchasing power) and with the real value of the minimum wage had it risen with productivity after 1948. Table 2 also shows that the majority of workers who would receive a raise come from families with limited means. 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. This past January, the Raise the Wage Act of 2021 (H.R., 603 S.53) was introduced in both the U.S. House and Senate. 2021. National Womens Law Center. 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. Using already scheduled state and local minimum wage increases, we estimate the employment-weighted minimum wage (with no change in the federal minimum) will be $11.53 in 2025. Congressional Budget Office (CBO). By boosting the income of low-wage workers who have jobs, a higher minimum wage would raise their families real income (that is, income adjusted to remove the effects of inflation), lifting some of those families out of poverty. According to the report, increasing the federal minimum wage to $15 by 2025 will do a lot of good: Lift 900,000 people out of poverty. Wage changes resulting from scheduled state and local minimum wage laws are accounted for by EPI's Minimum Wage Simulation Model. Changes in real family income include increases in earnings for workers who receive a higher wage, decreases in earnings for workers who lose their job, losses in income for business owners, and decreases in purchasing power because of increases in prices. Philippines to Raise Private Workers' Minimum Wage in Capital As we describe below, a $15 minimum wage by 2025 would disproportionately benefit Black and Hispanic workers and women, raise the pay of essential and front-line workers, and reduce the number of people living in poverty. The second definition comes from our classification based on Current Population Survey data collected during the pandemic, specifically the employment share of occupations that were not teleworking during the months of May through December 2021. Even in a struggling economy, studies have shown that increasing the minimum wages doesn't damage job growthin fact, a landmark study . Essential Workers: Who Should Get the Coronavirus Vaccine First? After reaching their targets, both minimums are indexed to changes in median hourly wages. As the figure shows, rising costs of living since the last increase in the nominal minimum wage in 2009 have diminished the purchasing power of the federal minimum wage (the middle line for most of the graph), which had declined by 17% as of 2020 and 18% as of 2021 (not shown), a devastating fall in the earnings of the lowest-wage workers. Historically, median hourly wages have grown faster than the CPI, and CBO expects that pattern to continue over the next 10 years (starting in 2023). Should We Raise The Minimum Wage? - NPR In June 2022, Nabeel Alsalam, Elizabeth Ash, William Carrington, Justin Falk, Julia Heinzel, Junghoon Lee, and Brooks Pierce updated the tool with guidance from Xiaotong Niu and Julie Topoleski. They will receive a raise as employer pay scales are adjusted upward to reflect the new minimum wage. EPIs research helps policymakers, opinion leaders, advocates, journalists, and the public understand the bread-and-butter issues affecting ordinary Americans. Who Are Essential Workers? Ending the separate, tipped wage would especially benefit women of color, as they are more likely to work in tipped jobs and be paid subminimum wages. Notes: Values reflect the result of the proposed change in the federal minimum wage. This was part of a three-phased increase enacted by Congress in 2007. In our analysis, we find that a majority of workers who would benefit from the Raise the Wage Act are essential or front-line workers. Automatically increasing or indexing the minimum wage to the median wage guarantees regular and predictable raises and prevents growing pay inequality between the lowest paid workers and the middle class. For teenage workers, the minimum wage is currently $4.25 per hour during their first 90 days of employment; for disabled workers whose employers are certified by the Department of Labor, wages are based on analyses of prevailing wages and worker productivity. Tipped workers in particular would benefit from having a regular paycheck so that they would not need to rely exclusively on volatile tips that can be particularly susceptible to discrimination and wage theft (Lynn et al. Ballotpedia. Source:Economic Policy Institute Wage Simulation Model; see Technical Methodology by Cooper, Mokhiber, and Zipperer (2019). Twenty-six U.S. states will raise their minimum wage in 2022, but many workers will see more significant pay gains from employers that are raising their pay floor. Many studies have found little or no effect, but many others have found substantial reductions in employment. Gould, Elise, Tanyell Cooke, and Will Kimball. Several years later, Congress expanded the coverage of the minimum wage and eventually raised it to its historical high point of $1.60 in 1968, or $10.59 in 2021 dollars. In fact, voters have approved every one of 22 state-level minimum wage increases on the ballot over the last two decades.10. Pitts, Steven C., and Sylvia Allegretto. Indirectly affected workers have a wage rate just above the new minimum wage (between the new minimum wage and 115% of the new minimum). Wage changes resulting from scheduled state and local minimum wage laws are accounted for by EPIs Minimum Wage Simulation Model. Shares calculated from unrounded values. 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. Economic Policy Institute, June 16, 2020. Executive Order on Increasing the Minimum Wage for Federal Shares calculated from unrounded values. Wage increase totals are cumulative of all preceding steps. 2020. One well-known downside of the official poverty measures is that they are an incomplete measure of economic security for families. Changes in employment would be seen in the number of jobless, not just unemployed, workers. 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). The federal minimum wage of $7.25 an hour hasn't changed since 2009. 2016 Times Series Study. September 4, 2019 version. The act has three key components: These three components of the Raise the Wage Act would ensure that the lowest paid workers are sharing in the productivity gains of the economy. A level of $15 in 2025 would finally raise the living standards of the lowest-wage workers above levels those workers experienced 50 years ago. 2019. https://doi.org/10.1111/j.1559-1816.2008.00338.x. 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. The underlying data are based on CBOs May 2022 economic forecast, which was developed by the staff of CBOs Macroeconomic Analysis Division. Sojourner, Aaron. According to this statistic, the highwater 1968 national minimum wage is remarkably similar to the Raise the Wage Act. Essential Workers Comprise About Half of All Workers in Low-Paid Occupations. Note: Directly affected workers will see their wages rise to the new minimum wage; indirectly affected workers have wages just above the new minimum and (up to 115% of the new minimum) and will receive a raise as employer pay scales are adjusted upward. Values reflect the population likely to be affected by the proposed change in the federal minimum wage. The Economic Policy Institute staff is unionized with the We can expect that the Family Budget thresholds for both counties will exceed a $15 hourly equivalent by 2022. What Families Need to Get By: EPIs 2015 Family Budget Calculator. 11. New research, insightful graphics, and event invites in your inbox every week. First, future wage growth under current law is uncertain. Just calculated the inflation-adjusted natl MW demanded by the March on Washington in August 1963 ($2/hr). Twitter, @EDerenoncourt, July 23, 2020, 3:42 p.m. Derenoncourt, Ellora, and Claire Montialoux.

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