Report | Wages, Incomes, and Wealth

Raising the Minimum Wage to $12 by 2020 Would Lift Wages for 35 Million American Workers

Raising America's Pay

Briefing Paper #405

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Press release

Introduction and key findings

The minimum wage was established in 1938 as part of the Fair Labor Standards Act (FLSA). In addition to prohibiting child labor and mandating the 40-hour workweek, the FLSA established the federal minimum wage to help ensure that all work would be fairly rewarded and that regular employment would provide a decent quality of life. Moreover, regular increases in the minimum wage were meant to ensure that even the lowest-paid workers benefited from broader improvements in wages and living standards.

Yet today, because of decades of infrequent and inadequate adjustment, the federal minimum wage no longer serves as an adequate wage floor. Every year that the minimum wage is left unchanged, rising prices slowly erode its buying power. In 2014, the federal minimum wage of $7.25 was worth nearly 10 percent less than when it was last raised in 2009, after adjusting for inflation. In fact, the real (inflation-adjusted) value of the federal minimum wage in 2014 was 24 percent below its peak value in 1968.

This decline in purchasing power means low-wage workers have to work longer hours just to achieve the standard of living that was considered the bare minimum almost half a century ago. Over that time, the United States has achieved tremendous improvements in labor productivity that could have allowed workers at all pay levels to enjoy a significantly improved quality of life. Instead, because of policymakers’ failure to preserve this basic labor standard, a parent earning the minimum wage today does not earn enough through full-time work to be above the federal poverty line.

In April 2015, Sen. Patty Murray (D-Wash.) and Rep. Robert “Bobby” Scott (D-Va.) introduced the Raise the Wage Act of 2015, a bill that would raise the federal minimum wage in five steps to $12 per hour by 2020. Beginning in 2021, the minimum wage would be “indexed” to median wages so that each year, the minimum wage would automatically be adjusted based upon growth in the median wage. The bill would also gradually increase the subminimum wage for tipped workers (or “tipped minimum wage”), which has been fixed at $2.13 per hour since 1991, until it reaches parity with the regular minimum wage.

This report begins by providing historical context for the current value of the federal minimum wage and the proposed increase to $12 by 2020. It then describes the population of workers likely to receive higher pay under an increase to $12 by 2020, with detailed demographic data that refute a number of common misconceptions about low-wage workers. The report concludes with a discussion of the provisions of the Raise the Wage Act that would index the minimum wage to median wages, and gradually eliminate the subminimum wage for tipped workers.

Key findings include:

  • A $12 minimum wage in 2020 would undo the erosion in value of the minimum wage that took place largely in the 1980s. It would also reverse the growth in wage inequality between low- and middle-wage workers over the past generation.
  • Raising the minimum wage to $12 by 2020 would directly or indirectly lift wages for 35.1 million workers—more than one in four U.S. workers.
  • Over the phase-in period of the increases, affected workers would receive nearly $80 billion in increased wages. Once the increase is fully phased-in, the average affected worker would earn roughly $2,300 more each year than she does today (assuming no change in the number of work hours).
  • The workers who would receive a pay increase do not fit the stereotypes of low-wage workers.
    • The average age of affected workers is 36 years old. A larger share of affected workers are age 55 and older (15.3 percent) than are teens (10.7 percent). About two-thirds of affected workers are 25 years old or older.
    • The majority of affected workers (55.9 percent) are women.
    • Workers of color would disproportionately be affected, with more than one-third of black and Hispanic workers receiving a raise.
    • Of workers who would receive a raise, the majority (57.4 percent) work full time, nearly half (45.1 percent) have at least some college experience, and more than a quarter (27.7 percent) have children.
    • More than one-third (36.5 percent) of single parents who work would receive higher pay, including nearly 40 percent of working single mothers.
    • The workers who would benefit are, on average, the primary breadwinners for their family, earning more than half (54.3 percent) of their family’s total income.
  • Indexing the minimum wage to median wages would ensure that low-wage workers share in broad improvements in U.S. living standards, and would prevent future growth in inequality between low- and middle-wage workers.

The minimum wage in context

Since its inception in 1938, the federal minimum wage has been adjusted through legislated increases nine times—from a nominal (non-inflation-adjusted) value of 25 cents per hour in 1938 to the current $7.25, where it has remained since 2009. These increases have been fairly irregular, varying in size and with differing lengths of time between increases. Yet aside from a few very brief deflationary periods in the postwar era, prices have consistently risen year after year. Each year that the minimum wage remains unchanged, its purchasing power slowly erodes until policymakers enact an increase. This haphazard maintenance of the wage floor has meant that low-wage workers of different generations or in different decades have been protected by significantly different wage standards.

Figure A shows the nominal and real value of the minimum wage from its inception in 1938 to today, as well as U.S. total economy net productivity indexed to 1968. As the figure shows, in the first increase following the end of World War II, the minimum wage rose rather dramatically in real terms, nearly doubling overnight in 1950, followed by regular increases that kept pace with rising labor productivity until the late 1960s. The minimum wage peaked in inflation-adjusted value in 1968, when it was equal to $9.54 in 2014 dollars. Increases in the 1970s essentially held the value of the minimum wage in place despite higher inflation driven by oil and food price shocks. Yet in the 1980s, as inflation remained elevated, the minimum wage was left to deteriorate to 1950s levels. Subsequent increases in the 1990s and late 2000s were not large enough to undo the erosion that took place in the 1980s. As of 2014, the federal minimum wage was worth 24 percent less than in 1968.1

Figure A

Real and nominal value of the federal minimum wage, projected value under the Raise the Wage Act, and total economy productivity, 1938–2014 and 2015–2020 (projected)

Real federal minimum wage (2014$) Projected under RTWA*  Productivity Projected Net Productivity  Nominal minimum wage Projected nominal minimum wage 
1938 $3.67  $       0.25
1939 $4.46  $       0.30
1940 $4.43  $       0.30
1941 $4.22  $       0.30
1942 $3.81  $       0.30
1943 $3.59  $       0.30
1944 $3.53  $       0.30
1945 $4.60  $       0.40
1946 $4.24  $       0.40
1947 $3.71  $       0.40
1948 $3.43 $5.39  $       0.40
1949 $3.48 $5.47  $       0.40
1950 $6.44 $5.89  $       0.75
1951 $5.97 $6.05  $       0.75
1952 $5.85 $6.23  $       0.75
1953 $5.81 $6.44  $       0.75
1954 $5.77 $6.55  $       0.75
1955 $5.79 $6.81  $       0.75
1956 $7.60 $6.82  $       1.00
1957 $7.36 $7.01  $       1.00
1958 $7.16 $7.15  $       1.00
1959 $7.11 $7.41  $       1.00
1960 $6.99 $7.54  $       1.00
1961 $7.96 $7.77  $       1.15
1962 $7.88 $8.07  $       1.15
1963 $8.45 $8.35  $       1.25
1964 $8.34 $8.62  $       1.25
1965 $8.21 $8.88  $       1.25
1966 $7.98 $9.16  $       1.25
1967 $8.67 $9.27  $       1.40
1968 $9.54 $9.54   $       1.60
1969 $9.13 $9.58  $       1.60
1970 $8.71 $9.71  $       1.60
1971 $8.35 $10.08  $       1.60
1972 $8.10 $10.34  $       1.60
1973 $7.62 $10.60  $       1.60
1974 $8.66 $10.43  $       2.00
1975 $8.40 $10.66  $       2.10
1976 $8.70 $10.96  $       2.30
1977 $8.18 $11.08  $       2.30
1978 $8.83 $11.19  $       2.65
1979 $8.81 $11.21  $       2.90
1980 $8.48 $11.12  $       3.10
1981 $8.37 $11.36  $       3.35
1982 $7.89 $11.20  $       3.35
1983 $7.57 $11.53  $       3.35
1984 $7.27 $11.83  $       3.35
1985 $7.03 $12.03  $       3.35
1986 $6.90 $12.28  $       3.35
1987 $6.68 $12.34  $       3.35
1988 $6.44 $12.48  $       3.35
1989 $6.18 $12.58  $       3.35
1990 $6.67 $12.76  $       3.80
1991 $7.20 $12.87  $       4.25
1992 $7.03 $13.33  $       4.25
1993 $6.86 $13.38  $       4.25
1994 $6.71 $13.50  $       4.25
1995 $6.56 $13.51  $       4.25
1996 $7.14 $13.84  $       4.75
1997 $7.57 $14.03  $       5.15
1998 $7.47 $14.31  $       5.15
1999 $7.32 $14.65  $       5.15
2000 $7.08 $15.00  $       5.15
2001 $6.89 $15.23  $       5.15
2002 $6.78 $15.66  $       5.15
2003 $6.63 $16.17  $       5.15
2004 $6.46 $16.60  $       5.15
2005 $6.25 $16.89  $       5.15
2006 $6.05 $17.00  $       5.15
2007 $6.68 $17.12  $       5.85
2008 $7.20 $17.15  $       6.55
2009 $8.00 $17.50  $       7.25
2010 $7.87 $18.01  $       7.25
2011 $7.63 $18.03  $       7.25
2012 $7.48 $18.15  $       7.25
2013 $7.37 $18.33  $       7.25
2014 $7.25 $18.42 $18.42  $       7.25  $       7.25
2015 $7.17 $7.17 $18.79  $       7.25
2016 $7.75 $19.16  $       8.00
2017 $8.52 $19.55  $       9.00
2018 $9.25 $19.94  $     10.00
2019 $9.94 $20.34  $     11.00
2020 $10.58 $20.74 $12
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Note: The productivity series is total economy productivity net depreciation, indexed to the 1968 real value of the minimum wage. Minimum-wage values are in 2014 dollars deflated by the CPI-U-RS. Projections for productivity growth and the real value of the minimum wage under the Raise the Wage Act use CBO (2015).

Source: EPI analysis of Raise the Wage Act, Fair Labor Standards Act and amendments, Current Population Survey Outgoing Rotation Group microdata, unpublished Total Economy Productivity data from Bureau of Labor Statistics Labor Productivity and Costs program, and CBO (2015)

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The dashed lines in the figure show that the Raise the Wage Act would restore the lost purchasing power of the federal minimum wage, bringing it to an estimated $10.58 in 2014 dollars. This would equal an 11 percent increase in purchasing power from the 1968 peak.

Such an increase in purchasing power is decidedly modest when compared with growth in the U.S. economy and in workers’ ability to generate income since that time. As explained in Cooper, Schmitt, and Mishel (2015), increases in average labor productivity represent the potential for higher living standards for workers. However, this potential is realized only if productivity gains translate into higher wages. The dark blue line in the figure shows that average labor productivity has more than doubled since the late 1960s, yet pay for workers generally and for low-wage workers in particular has either stagnated or fallen since the 1970s (Bivens et al. 2014). In the case of low-wage workers, hourly pay has declined in real terms since 1979 as a direct result of the erosion of the minimum wage (Bivens et al. 2014).

A higher minimum wage would direct a small portion of overall labor productivity gains into higher living standards for low-wage workers. Productivity in low-wage work may not have grown as substantially since the 1960s as overall productivity; however, low-wage workers today tend to be older (and are therefore likelier to have greater work experience) and significantly more educated than their counterparts in 1968 (Mishel 2014a). To the extent that workers with more experience and greater education typically earn more than their younger and less-educated counterparts, we would expect low-wage workers today to earn more, not less, than what they earned in the previous generation. In this context, a pay increase for America’s lowest-paid workers of 11 percent over the 52-year span from 1968 to 2020 is indeed modest when compared with projected overall productivity growth of 117 percent over the same period.2

The minimum wage is also a mechanism for combating inequality. As technological progress and increased productivity raise wages for average- or middle-wage workers, a rising minimum wage ensures that the lowest-paid jobs also benefit from these improvements. This is the essence of the “fairness” implied in the name of the Fair Labor Standards Act, the act that established the minimum wage.

Figure B shows how the federal minimum wage has compared with the wages of typical U.S. workers, using two measures of typical wages. The light blue line shows the value of the federal minimum wage as a percentage of the average hourly earnings of nonsupervisory production workers, a group that comprises roughly 80 percent of U.S. workers and excludes highly paid managers and executives. The dark blue line shows the minimum wage as a percentage of the median wage of all full-time workers.

Figure B

Federal minimum wage as a share of the median wage and of the average wage of typical workers, 1967–2014 and 2015–2020 (projected under Raise the Wage Act)

Average wage of nonsupervisory production workers  Projected Average hourly earnings of nonsupervisory production workers  Median wage of full-time workers  Projected Median wage of full-time workers 
1967 49.1% 49.0%
1968 53.0% 52.1%
1969 49.8% 47.9%
1970 47.0% 44.9%
1971 44.2% 43.4%
1972 41.0% 41.1%
1973 38.7% 38.1%
1974 45.1% 43.7%
1975 44.4% 42.8%
1976 45.4% 44.3%
1977 42.3% 41.6%
1978 45.1% 45.0%
1979 45.7% 45.9%
1980 45.3% 45.0%
1981 45.0% 45.0%
1982 42.6% 42.1%
1983 40.9% 40.4%
1984 39.5% 38.5%
1985 38.3% 36.6%
1986 37.5% 35.5%
1987 36.6% 34.7%
1988 35.5% 33.3%
1989 34.2% 32.0%
1990 37.3% 35.1%
1991 40.4% 37.9%
1992 39.4% 36.3%
1993 38.5% 36.1%
1994 37.5% 35.4%
1995 36.5% 34.9%
1996 39.4% 37.9%
1997 41.2% 39.1%
1998 39.6% 37.6%
1999 38.2% 36.1%
2000 36.8% 35.2%
2001 35.4% 33.8%
2002 34.4% 32.9%
2003 33.5% 32.1%
2004 32.8% 31.2%
2005 32.0% 30.6%
2006 30.8% 29.9%
2007 33.6% 32.9%
2008 36.2% 35.2%
2009 39.0% 38.4%
2010 38.0% 38.2%
2011 37.3% 38.1%
2012 36.7% 37.9%
2013 36.0% 37.7%
2014 35.2% 35.2% 37.1% 37.1%
2015 34.8% 36.7%
2016 37.6% 39.6%
2017 41.4% 43.5%
2018 44.9% 47.3%
2019 48.3% 50.8%
2020 51.4% 54.1%
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Source: EPI analysis of Current Population Survey Annual Social and Economic Supplement microdata, Bureau of Labor Statistics data on average hourly earnings of production nonsupervisory workers, and the Raise the Wage Act

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Both series illustrate how as the minimum wage was left to erode, the gap between pay in middle-class jobs and low-wage jobs expanded considerably. Indeed, the declining value of the federal minimum wage is the key driver of the growth in inequality between low-wage workers and middle-wage workers since the late 1970s (see Zipperer 2015a or Mishel 2014b). In 1968, the federal minimum wage was equal to roughly half the wage of the typical U.S. worker: 53.0 percent of the average hourly earnings of production workers, and 52.1 percent of the median wage of all full-time workers. In 2014, the minimum wage was equal to just over one-third of the wage of the typical worker: 35.2 percent of the average production worker wage, and 37.1 percent of the median wage of all full-time workers.

The dotted lines in the figure show that the Raise the Wage Act would essentially restore the relationship that existed in the late 1960s between the minimum wage and wages of typical workers. A $12 minimum wage in 2020 is projected to equal 54.1 percent of the median full-time wage, and 51.4 percent of the average production worker wage. These projections make the conservative assumption that wages of typical workers will not grow any faster than inflation in the coming years. If, instead, the wages of typical workers were to grow just 0.5 percent per year faster than inflation between 2014 and 2020, a $12 minimum wage in 2020 would equal less than half the median wage.3

When set at an adequate level, the minimum wage also ensures that work is a means to a minimally decent quality of life. By establishing a wage floor, the minimum wage prevents unscrupulous employers from reducing wages to destitution levels during periods of economic distress, thereby helping to prevent the exploitation of workers who may have limited job options. Unfortunately, the erosion of the minimum wage has effectively negated this protection, as evidenced in the Great Recession and its aftermath. During and after the recession, millions of previously better-paid workers were forced to take lower-paying jobs. Unable to make ends meet on the wages from these jobs, millions of workers—roughly half of whom work full time—have had to rely on public assistance programs to supplement their inadequate pay (Cooper 2014).

As shown in Figure C, a parent working full time while earning the minimum wage today earns too little to be above the federal poverty line. In contrast, at its high point in 1968, the minimum wage was sufficient to keep a family of three out of poverty. As the dark blue dotted line in the figure shows, the Raise the Wage Act would bring full-time minimum-wage earnings back above the poverty line for a family of three. In fact, when coupled with income from refundable tax credits, a full-time worker at the minimum wage would be lifted above the poverty line for a family of four.4

Figure C

Annual wage income for a full-time minimum-wage worker, compared with various poverty thresholds, 1964–2014 and 2015–2020 (projected under Raise the Wage Act)

Year Poverty line for a family of 2  Poverty line for a family of 3 Poverty line for a family of 4 Annual full-time minimum-wage earnings  Annual full-time minimum wage earnings Projected annual full-time earnings under RTWA
1964 $16,317 $19,055 $24,008 $11,900  $  17,348
1965 $16,317 $19,055 $24,008 $11,900  $  17,073
1966 $16,317 $19,055 $24,008 $11,900  $  16,599
1967 $16,317 $19,055 $24,008 $11,900  $  18,034
1968 $16,317 $19,055 $24,008 $11,900  $  19,845 
1969 $16,317 $19,055 $24,008 $11,900  $  18,989
1970 $16,317 $19,055 $24,008 $11,900  $  18,115
1971 $16,317 $19,055 $24,008 $11,900  $  17,359
1972 $16,317 $19,055 $24,008 $11,900  $  16,850
1973 $16,317 $19,055 $24,008 $11,900  $  15,851
1974 $16,317 $19,055 $24,008 $11,900  $  18,019
1975 $16,317 $19,055 $24,008 $11,900  $  17,472
1976 $16,317 $19,055 $24,008 $11,900  $  18,106
1977 $16,317 $19,055 $24,008 $11,900  $  17,017
1978 $16,317 $19,055 $24,008 $11,900  $  18,357
1979 $16,317 $19,055 $24,008 $11,900  $  18,333
1980 $16,317 $19,055 $24,008 $11,900  $  17,639
1981 $16,317 $19,055 $24,008 $11,900  $  17,405
1982 $16,317 $19,055 $24,008 $11,900  $  16,414
1983 $16,317 $19,055 $24,008 $11,900  $  15,743
1984 $16,317 $19,055 $24,008 $11,900  $  15,123
1985 $16,317 $19,055 $24,008 $11,900  $  14,621
1986 $16,317 $19,055 $24,008 $11,900  $  14,361
1987 $16,317 $19,055 $24,008 $11,900  $  13,892
1988 $16,317 $19,055 $24,008 $11,900  $  13,400
1989 $16,317 $19,055 $24,008 $11,900  $  12,846
1990 $16,317 $19,055 $24,008 $11,900  $  13,880
1991 $16,317 $19,055 $24,008 $11,900  $  14,986
1992 $16,317 $19,055 $24,008 $11,900  $  14,616
1993 $16,317 $19,055 $24,008 $11,900  $  14,263
1994 $16,317 $19,055 $24,008 $11,900  $  13,965
1995 $16,317 $19,055 $24,008 $11,900   $13,637
1996 $16,317 $19,055 $24,008 $11,900  $  14,846
1997 $16,317 $19,055 $24,008 $11,900  $  15,755
1998 $16,317 $19,055 $24,008 $11,900  $  15,538
1999 $16,317 $19,055 $24,008 $11,900  $  15,221
2000 $16,317 $19,055 $24,008 $11,900  $  14,727
2001 $16,317 $19,055 $24,008 $11,900  $  14,325
2002 $16,317 $19,055 $24,008 $11,900  $  14,098
2003 $16,317 $19,055 $24,008 $11,900  $  13,790
2004 $16,317 $19,055 $24,008 $11,900  $  13,427
2005 $16,317 $19,055 $24,008 $11,900  $  12,991
2006 $16,317 $19,055 $24,008 $11,900  $  12,579
2007 $16,317 $19,055 $24,008 $11,900  $  13,894
2008 $16,317 $19,055 $24,008 $11,900  $  14,981
2009 $16,317 $19,055 $24,008 $11,900  $  16,645
2010 $16,317 $19,055 $24,008 $11,900  $  16,375
2011 $16,317 $19,055 $24,008 $11,900  $  15,874
2012 $16,317 $19,055 $24,008 $11,900  $  15,550
2013 $16,317 $19,055 $24,008 $11,900  $  15,327
2014 $16,317 $19,055 $24,008 $11,900  $15,080 
2015 $16,317 $19,055 $24,008 $11,900  $  14,917  $  14,917
2016 $16,317 $19,055 $24,008 $11,900  $  16,113
2017 $16,317 $19,055 $24,008 $11,900  $  17,715
2018 $16,317 $19,055 $24,008 $11,900  $  19,232
2019 $16,317 $19,055 $24,008 $11,900  $  20,667
2020 $16,317 $19,055 $24,008 $11,900  $22,012 
Annual wage income for a full-time minimum-wage worker, compared with various poverty thresholds, 1964–2014 and 2015–2020 (projected under Raise the Wage Act)
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Note: All dollar values are expressed in 2014 dollars.

Source: EPI analysis of Raise the Wage Act using Current Population Survey Outgoing Rotation Group microdata

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Demographic characteristics of affected workers

Raising the federal minimum wage to $12 by 2020 would lift pay for tens of millions of American workers. As the subsequent sections show, the vast majority of these workers do not fit the common portrayal of low-wage workers being primarily teenagers from middle-class families who are working part time after school, or stay-at-home mothers whose “secondary earnings” are inconsequential to their family’s financial health.

Figure D shows the number of workers who are likely to receive a raise as the minimum wage is gradually increased. In the first step, when the minimum is increased from $7.25 to $8.00 per hour, 5.4 million workers are likely to benefit. This includes 2.5 million workers who will directly benefit—meaning their current pay rate is between $7.25 and $8.00—as well as 2.9 million who will indirectly benefit, meaning they will likely receive a raise through spillover or “ripple” effects because their current pay rate is just above $8.00.5 Raising the minimum wage typically results in wage increases for workers further up the wage ladder because employers want to maintain some progression in their internal pay scales (Wicks-Lim 2006).

Figure D

Number of workers (in millions) affected by increasing the federal minimum wage to $12 by 2020

Directly affected Indirectly affected Total
2016 2.5 2.9                            5.4
2017 8.1 5.8                         13.9 
2018 13.5 8.7                         22.2 
2019 24.6  6.5                         31.1 
2020 28.4 6.7                         35.1 
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Source: EPI analysis of Raise the Wage Act using Current Population Survey Outgoing Rotation Group microdata

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With each successive increase, the cumulative number of workers who would benefit grows. In the second year, as the minimum is lifted to $9.00 per hour, 8.1 million workers would directly receive a raise, and another 5.8 million would indirectly receive a raise. When the minimum increases to $10 in year three, 13.5 million would be directly affected, along with 8.7 million who would be indirectly affected. In the fourth year, the increase to $11 per hour would raise wages directly for 24.6 million workers, and indirectly for another 6.5 million workers. The final increase to $12 per hour would directly lift the pay of 28.4 million workers, and indirectly spur wage increases for another 6.7 million workers. In total, the increase to $12 would lift wages for 35.1 million workers—more than one in four U.S. workers.

The resulting pay increases for affected workers are significant. Over the full phase-in period of the increases, workers would receive nearly $80 billion in additional annual wages. Once the increase is fully phased-in, the average affected worker would earn roughly $2,300 more each year than she does today (assuming no change in the number of work hours).

The following sections highlight the demographic characteristics—in terms of age, sex, race and ethnicity, family composition, hours of work, education, family income, and geography—of the workers who would be affected, either directly or indirectly. Tables containing all the underlying demographic information, including discrete numbers of affected workers by demographic category, are also presented in Appendix A. Detailed state-level data are available at http://go.epi.org/6jY.

Age

The low-wage workers likely to benefit from increasing the minimum wage are frequently characterized as being primarily teenagers, and almost entirely young. Although this would not justify paying them wages significantly lower than those paid to their counterparts a generation ago, this stereotype is also false. While some low-wage workers are indeed young, the vast majority of workers who would benefit from increasing the federal minimum wage to $12 are prime-working-age adults, and only a small fraction are teenagers. As shown in the top graph in Figure E, teens comprise a mere 10.7 percent of the workers who would benefit; nearly 90 percent of affected workers are 20 years old or older.

Figure E

Age of workers affected by increasing the federal minimum wage to $12 by 2020

Share of affected workers who are teenagers versus age 20 or older

Share of affected workers
Teenagers 10.7%
Age 20 or older 89.3%

 

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Detailed age breakdown of affected workers

Share of affected workers
Less than age 25 33.4%
Age 25 to 39 29.9%
Age 40 to 54 21.4%
Age 55+ 15.3%
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Source: EPI analysis of Raise the Wage Act using Current Population Survey Outgoing Rotation Group microdata

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The second graph in Figure E breaks down the age distribution of affected workers even further, showing that two-thirds of affected workers are at least 25 years old. In fact, a larger share of affected workers are age 55 and older (15.3 percent) than are teens (10.7 percent). Likewise, a larger portion of affected workers are age 40 and older (36.7 percent) than are under age 25 (33.4 percent). Among affected workers, the average age is 36 years old.6

Sex

While raising the minimum wage would benefit both women and men, it would disproportionately raise pay for women. As shown in the pie chart in Figure F, women make up 55.9 percent of affected workers. In comparison, women make up only 49.2 percent of the total U.S. workforce.

Figure F

Share of each group that would get a raise if the federal minimum wage to $12 by 2020

Share of total employment
Men 44.1%
Women 55.9%
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Shares of demographic groups that would benefit, by gender

Women Men
All workers 29.6% 21.7%
Working parents 27.3% 14.2%
Working single parents 39.6% 28.0%
Workers of color 37.1% 30.5%
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Source: EPI analysis of Raise the Wage Act using Current Population Survey Outgoing Rotation Group microdata

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This disproportionate impact is shown in the bar chart in Figure F. Among all wage-earning women in the United States, 29.6 percent would receive a raise under a federal minimum-wage increase to $12 by 2020. In comparison, 21.7 percent of all wage-earning men would benefit—not as large a share as for women, but still more than one-fifth of all male workers.

The bar chart in Figure F also shows the shares, by gender, of other selected groups who would benefit from a minimum-wage increase. Among working parents, 27.3 percent of working mothers would receive a raise, as would 14.2 percent of working fathers. Among single parents, the effects are more dramatic: Nearly 40 percent of all single working mothers would receive a raise if the federal minimum wage were increased to $12 by 2020, as would more than a quarter (28.0 percent) of single working dads. Large shares of minority workers would also benefit: 37.1 percent of women of color who work would receive a raise, along with 30.5 percent of men of color who work.

Race/ethnicity

As shown in the pie chart in Figure G, the majority of workers who would benefit from increasing the minimum wage are white, non-Hispanic workers, comprising just over half (53.2 percent) of all those who would receive a raise. Hispanic workers of any race make up the next largest share, at just under a quarter (24.3 percent) of the total affected population. Black or African American workers are 15.4 percent of the total, and Asians and workers of other races/ethnicities make up 7.1 percent of the total.

Figure G

Race/ethnicity of workers affected by increasing the federal minimum wage to $12 by 2020

Race Share of total affected
White, non-Hispanic 53.2%
Black or African American 15.4%
Hispanic of any race 24.3%
Asian or other race/ethnicity 7.1%
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Share of each worker race/ethnic group that would benefit

Race Share of each category
White, non-Hispanic 21.0%
Black or African American 34.7%
Hispanic of any race 37.8%
Asian or other race/ethnicity 23.2%
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Source: EPI analysis of Raise the Wage Act using Current Population Survey Outgoing Rotation Group microdata

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Although workers of color are a slim minority of those who would benefit, they do benefit at significantly higher rates. The bar chart in Figure G shows the share of each race or ethnic group that would receive a raise if the federal minimum wage were increased to $12 by 2020. As the figure shows, more than one-third (34.7 percent) of all black or African American workers would receive higher pay, as would nearly four in 10 (37.8 percent) Hispanic workers. Just less than a quarter of Asian workers and those of other races/ethnicities would receive a raise—a slightly higher share than that of white, non-Hispanic workers, of whom 21.0 percent would receive higher pay.

Education

As with misperceptions of the age of low-wage workers, many of the workers who would benefit from increasing the minimum wage have more education than is commonly acknowledged. As shown in Figure H, nearly half (45.1 percent) of the affected workers have at least some college experience, and nearly 20 percent have an associate degree or higher.

Figure H

Educational attainment of workers affected by increasing the federal minimum wage to $12 by 2020

Share
Less than high school 19.6%
High school 35.3%
Some college, no degree 25.2%
Associate degree 9.0%
Bachelor’s degree or higher 10.9%
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Share of each worker educational attainment group that would benefit

Share of category
Less than high school 57.4%
High school 33.3%
Some college, no degree 33.9%
Associate degree 21.6%
Bachelor’s degree or higher 8.0%
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Source: EPI analysis of Raise the Wage Act using Current Population Survey Outgoing Rotation Group microdata

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The bar graph in Figure H shows the share of workers at each educational level who would receive a raise from increasing the federal minimum wage to $12 by 2020. Not surprisingly, workers with lower levels of education are far more likely to be affected: More than half (57.4 percent) of workers with less than a high school education would receive a pay increase. Still, large shares of those who have completed high school and sought further education would also benefit. Just over a third (33.9 percent) of workers with some college experience, yet no degree, would receive a raise, as would more than one-fifth (21.6 percent) of workers with an associate degree.

Hours of work

Many workers who would benefit from a minimum-wage increase also work longer hours than commonly thought; they are not simply working part time or in after-school jobs. As shown in the pie chart in Figure I, more than half (57.4 percent) of affected workers work full time (at least 35 hours per week). Another 30.0 percent work between 20 and 34 hours per week, and only 12.6 percent work fewer than 20 hours per week.

Figure I

Work hours of workers affected by increasing the federal minimum wage to $12 by 2020

Share of affected workers
Part time (less than 20 hours) 12.6%
Mid time (20-34 hours) 30.0%
Full time (35+ hours) 57.4%
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Share of each work hour group that would benefit

Share of category
Part time (< 20 hours) 59.1%
Mid time (20-34 hours) 54.1%
Full time (35+ hours) 18.2%
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Source: EPI analysis of Raise the Wage Act using Current Population Survey Outgoing Rotation Group microdata

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Still, those workers who are not full time do benefit at disproportionate rates. The bar chart in Figure I shows the share of each group of workers by work hour category who would receive a raise from a minimum-wage increase to $12. Nearly 60 percent of workers who work fewer than 20 hours per week would receive a raise, as would 54.1 percent of those working between 20 and 34 hours per week. Among full-time workers, 18.2 percent would receive a raise.

Many individuals who work less than full time are not opting for fewer hours by choice—many are limited by a lack of available work, or because circumstances prevent them from seeking full-time employment, such as the need to care for a family member, or a lack of adequate work supports (access to child care, paid leave, or flexible work schedules) that might facilitate a full-time schedule. For these workers, an increase in their hourly rate of pay is arguably even more important, as it could provide resources that would enable them to seek more hours of work.

Family income

Again contrary to some portrayals, the majority of workers who would benefit from increasing the minimum wage come from families of modest means. As shown in Figure J, 67.3 percent of the workers who would receive a raise if the minimum wage were increased to $12 by 2020 have total family incomes of less than $60,000 per year. Exactly half of affected workers have total family incomes below $40,000 per year.

Figure J

Family income of workers affected by increasing the federal minimum wage to $12 by 2020

Family income level Share Share
Less than $20,000 21.5%
$20,000 – $39,999 28.5%
$40,000 – $59,999 17.3%
$60,000 – $74,999 9.7%
$75,000 – $99,999 9.7%
$100,000 – $149,999 8.4%
$150,000 or more 5.0%
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Source: EPI analysis of Raise the Wage Act using Current Population Survey Outgoing Rotation Group microdata

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Some opponents of raising the minimum wage contend that as a policy for reducing economic hardship, the minimum wage is ineffective because many poor people do not work. This is false. As explained in Gould, Davis, and Kimball (2015), the majority of poor people age 18 to 64 who can work (i.e., they are not in school, retired, or disabled) do work, and over 40 percent work full time. Moreover, increasing the minimum wage is an effective tool for reducing poverty. In a comprehensive review of the literature on the minimum wage’s poverty-reducing effects, Dube (2013) finds that nearly all studies of this relationship show that raising the minimum wage significantly reduces poverty rates. In his own analysis of minimum-wage increases in the 1990s and 2000s, he finds that for every 10 percent increase in the minimum wage, the poverty rate is expected to decline by 2.4 percentage points.

A variation of this criticism is that the minimum wage is “poorly targeted” because some of the workers who would benefit from a minimum-wage increase come from middle-class families. The fact that the minimum wage provides protection to workers at all levels of family income is a feature, not a bug, of the law. As a labor standard, the minimum wage prevents exploitation of workers, regardless of their family income level. No worker, no matter how wealthy his or her family, should have to work for unacceptably low wages. Moreover, the fact that some low-wage workers do come from middle-class families underscores that the erosion in the minimum wage’s value over the past 45 years has hurt both low- and middle-income families.

Family status and children

Many of the workers who would benefit from increasing the minimum wage are supporting families and children. As shown in the pie chart in Figure K, more than one-third (35.4 percent) of the affected workers are married, and more than one-quarter (27.7 percent) of affected workers have children. In total, over 9.7 million parents would receive higher pay under a minimum-wage increase to $12 by 2020. Of these, 3.9 million are single parents, accounting for 11.0 percent of those who would be affected by raising the minimum wage (discrete numbers of affected workers by family status are shown in Appendix Table 2a). While this is a relatively small portion of the total beneficiaries, it is larger than their 7.7 percent share of the overall labor force. In other words, single parents would disproportionately benefit from raising the minimum wage.

Figure K

Family status of workers affected by increasing the federal minimum wage to $12 by 2020

Family status Share of total affected
Married, no kids 18.7%
Married parent 16.7%
Single parent 11.0%
Unmarried, no kids 53.6%
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Share of each worker family type that would benefit

Family status Share of each category
Married, no kids 17.5%
Married parent 16.1%
Single parent 36.5%
Unmarried, no kids 35.4%
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Source: EPI analysis of Raise the Wage Act using Current Population Survey Outgoing Rotation Group microdata

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The bar chart in Figure K shows the shares of workers by family type who would be affected. Among married parents who work, 16.1 percent would receive a raise from increasing the minimum wage to $12 by 2020. Single parents who work would benefit at more than double that rate—more than one in three working single parents (36.5 percent) would receive higher pay if the minimum wage were raised.

The parents receiving higher pay provide for 17.5 million children across the United States. As shown in Figure L, this is nearly one-quarter (22.6 percent) of all U.S. children. The figure also shows that the share of children with at least one parent who would benefit from increasing the minimum wage varies considerably across the states. In Vermont, only 12.6 percent of children have a parent who would receive a raise, while in North Carolina, nearly one-third of children (31.6 percent) would see their family’s resources increase if the minimum wage were lifted to $12 by 2020.

Figure L

Share of children with at least one parent who would be affected by increasing the federal minimum wage to $12 by 2020, U.S. and by state

State Share of state children affected
Vermont 12.6%
Massachusetts 12.6%
Alaska 14.6%
New Hampshire 15.5%
Minnesota 15.8%
Connecticut 16.0%
New Jersey 16.3%
North Dakota 16.5%
Maryland 17.1%
Washington 17.1%
Wyoming 17.6%
Colorado 18.1%
Utah 18.6%
Virginia 19.0%
New York 20.2%
Wisconsin 20.2%
Maine 20.2%
Montana 20.3%
Pennsylvania 20.6%
Ohio 20.9%
Rhode Island 21.0%
California 21.2%
Hawaii 21.3%
Oregon 21.7%
South Dakota 22.0%
Kentucky 22.1%
Nebraska 22.2%
Michigan 22.3%
United States 22.6%
Delaware 22.7%
Florida 23.3%
Illinois 23.6%
Missouri 23.7%
Louisiana 24.2%
Alabama 25.1%
Georgia 25.6%
New Mexico 25.6%
Tennessee 25.7%
Oklahoma 25.7%
Indiana 25.8%
Mississippi 25.8%
Iowa 25.8%
Kansas 26.3%
Nevada 26.7%
South Carolina 27.6%
Texas 27.8%
Arizona 27.8%
Idaho 27.8%
West Virginia 28.0%
Arkansas 29.1%
North Carolina 31.6%
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Geography

Not surprisingly, the share of workers in each state who would be affected by a federal minimum-wage increase varies considerably. Figure M shows the share of each state’s workforce that would be affected if the federal minimum wage were raised to $12 by 2020. The smallest impact would be in Alaska, where only 15.7 percent of the workforce is likely to be affected. The largest impact is in Arkansas, where nearly a third of all workers (33.1 percent) are likely to receive a raise.

Figure M

Share of workforce affected by increasing the federal minimum wage to $12 by 2020, U.S. and by state

State Share of workforce affected
Alaska 15.7%
Massachusetts 16.6%
Washington 18.2%
Vermont 18.4%
Colorado 20.1%
Connecticut 20.2%
Maryland 20.3%
New Jersey 20.5%
Minnesota 20.8%
New Hampshire 21.5%
North Dakota 21.9%
Oregon 22.0%
New York 22.3%
Wyoming 22.5%
Rhode Island 22.8%
Virginia 22.8%
Wisconsin 23.8%
California 24.0%
Pennsylvania 24.3%
Hawaii 24.4%
Delaware 24.8%
Illinois 25.3%
United States 25.5%
Ohio 25.9%
Nebraska 26.0%
Maine 26.2%
Michigan 26.6%
Utah 26.6%
Missouri 26.6%
South Dakota 26.7%
Florida 26.8%
Oklahoma 27.0%
Iowa 27.0%
Kansas 27.8%
Arizona 28.8%
Indiana 29.2%
Louisiana 29.3%
New Mexico 29.3%
Texas 29.4%
Georgia 29.5%
Nevada 29.5%
Kentucky 29.8%
Alabama 29.9%
South Carolina 30.2%
Montana 30.2%
West Virginia 30.6%
Idaho 30.9%
Tennessee 30.9%
Mississippi 31.7%
North Carolina 32.5%
Arkansas 33.1%
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Many of the states with relatively small affected populations have recently enacted increases in their state minimums, or have automatic annual adjustments based on inflation, such as Vermont, Massachusetts, Washington, and Alaska. These states will already have wage floors near the proposed $12 by 2020.7 As the increases in those states’ minimum wages “ripple” up through the wage distribution in the preceding years, the number of workers who would be affected by the enactment of a higher federal minimum by 2020 is reduced.

In contrast, the share of the workforce that would be impacted by a federal increase is significantly larger in states with low minimum wages—or in some cases, no minimum wage—such as in Arkansas, North Carolina, Mississippi, Tennessee, and Idaho.8 Workers in the Southeast, in particular, are most likely to see a pay increase if the federal minimum wage were raised.

The importance of affected workers’ pay to their family’s total incomes

Low-wage workers are sometimes characterized as “secondary earners,” suggesting that their work earnings are discretionary or inconsequential to their family’s financial health. The data show that this is not at all the case; the average worker who would benefit from increasing the minimum wage to $12 by 2020 is, in fact, the primary breadwinner for her family. As shown in Figure N, the workers who would benefit from increasing the minimum wage earn, on average, 54.3 percent of their family’s total income. In several Southern states, affected workers earn more than 60 percent of their family’s total income.

Figure N

Average share of family income provided by worker affected by increasing the federal minimum wage to $12 by 2020, U.S. and by state

State Average share of total family income earned by affected worker
Connecticut 38.5%
New Hampshire 41.2%
Maryland 41.7%
Vermont 43.0%
New Jersey 43.5%
Massachusetts 44.2%
Minnesota 46.0%
Pennsylvania 46.2%
Wisconsin 46.6%
Hawaii 47.3%
Alaska 47.6%
Rhode Island 47.9%
Delaware 48.1%
Utah 48.4%
Virginia 48.5%
South Dakota 50.5%
Illinois 50.6%
New York 50.9%
Colorado 51.1%
Michigan 51.5%
North Dakota 52.4%
Ohio 52.5%
Missouri 52.9%
Maine 53.1%
Washington 53.1%
Wyoming 53.6%
Kansas 53.7%
Indiana 54.1%
United States 54.3%
Nebraska 54.3%
Iowa 54.7%
California 54.7%
Idaho 56.5%
Arizona 57.2%
Tennessee 57.5%
Florida 57.8%
Nevada 58.2%
West Virginia 58.9%
Oklahoma 58.9%
Georgia 59.0%
Oregon 59.3%
New Mexico 59.6%
Montana 59.7%
Alabama 59.8%
Texas 60.1%
Louisiana 60.3%
Mississippi 60.6%
South Carolina 60.6%
Kentucky 61.2%
North Carolina 62.4%
Arkansas 64.2%
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Other aspects of the proposal

The Raise the Wage Act would also “index” the minimum wage to median wages, and would gradually phase out the subminimum wage for tipped workers. This section explains why both aspects would benefit workers.

Indexing to median wages

After reaching $12 in 2020, the Raise the Wage Act would index the minimum wage to median wages so that in subsequent years, as wages throughout the workforce rise, the minimum wage would automatically be lifted to maintain its value relative to the median wage. This is different from how most minimum-wage indexing has been done in the past. There are currently a dozen states that index their state minimum wages to changes in prices, typically as measured by changes in the Consumer Price Index (CPI). Indexing to prices prevents any erosion in the minimum’s real (inflation-adjusted) value, thereby ensuring that low-wage workers can still afford the same amount of goods and services year after year. This is certainly advantageous to having no indexing; however, indexing to prices effectively legislates that America’s lowest-paid workers never see any material improvement in their quality of life. The real value of the minimum wage remains frozen, regardless of increases in overall labor productivity that provide the opportunity to broadly improve living standards.

In contrast, linking the minimum wage to median wages ensures that low-wage workers do not lose ground relative to typical workers. As Zipperer (2015b) explains, indexing to the median wage “links the minimum wage to overall conditions in the labor market.” To the extent that productivity improvements and technological progress result in higher wages for the typical U.S. worker, so too will minimum-wage workers see their hourly pay rise. It is of course true that both low- and middle-wage workers have seen their hourly pay lag relative to productivity growth in recent decades. A stronger minimum wage ensures that the vast majority of U.S. workers share a common trajectory of wage growth. It will need to be complemented with other policies to ensure wage growth for this entire vast majority rises in step with overall productivity growth.

In addition, wages are less volatile than prices. Price indices, such as the CPI, are subject to unpredictable changes in the price of food and energy that may be driven by temporary events, such as political instability or natural disasters. Wages, on the other hand, tend to be more stable, rising as fast—or faster—than prices over the long term, yet with greater predictability for employers and employees alike. (See Zipperer 2015b or Shierholz 2009.)

Eliminating the subminimum wage for tipped workers

Under current federal law, employers of workers who customarily receive tips are only required to pay their tipped staff a base wage of $2.13 per hour, provided employees’ weekly income from tips plus their base wage equates to an hourly rate of at least the minimum wage. As explained in Allegretto and Cooper (2014), this separate wage standard results in a host of problems for tipped workers, including dramatically higher poverty rates and greater reliance on public assistance. Contrary to common perceptions of waitstaff and bartenders making lavish incomes from tips, the vast majority of tipped work is low-paying. The median wage for tipped workers in 2013, including earnings from tips, was $10.22 per hour—38 percent less than the overall U.S. median wage for that year. Because the majority of tipped workers’ pay is from tips—as opposed to a regular paycheck—weekly income can be highly erratic and subject to a greater incidence of wage theft9 (Allegretto and Cooper 2014). Moreover, the fact that most tipped workers are women means that the inequities produced by this separate wage system exacerbate existing gender-based wage inequality. (See Gallagher Robbins, Vogtman, and Entmacher 2015.)

The Raise the Wage Act would raise the subminimum wage for tipped workers over 10 years until it reaches parity with the full minimum wage, as is currently the case in seven states.10 These seven states have significantly lower poverty rates among tipped workers than the states where tipped workers are paid a lower base wage. At the same time, growth in the restaurant industry has been as strong, if not stronger, in the states where tipped and nontipped employees are treated equally. This suggests that requiring employers to pay regular wages to tipped workers has had no significant negative effect on growth of the restaurant industry (Allegretto 2013).

Conclusion

Since its inception in the Great Depression, a strong minimum wage has been recognized as a key labor market institution that, if effectively maintained, can provide the foundation for equitable and adequate pay for American workers. However, the failure to regularly and adequately raise the federal minimum wage over the past five decades is one of several policy failures that have denied a generation of American workers more significant improvement in their quality of life. In fact, the erosion of the minimum wage has left low-wage workers today earning significantly less than their counterparts 50 years ago.

Raising the federal minimum wage to $12 by 2020 would restore its value to a level that ensures full-time work is a means to escape poverty, and would provide tens of millions of America’s lowest-paid workers with a small yet long-overdue improvement in their standard of living. Automating future increases by indexing to growth in the median wage would ensure workers at the bottom of the wage scale are never again left behind as productivity improvements lead to broader improvements in wages. In addition, gradually raising and eliminating the separate lower wage for tipped workers would eliminate the disparities in labor protections and living standards that currently exist between tipped and non-tipped workers. These actions would significantly improve the well-being of millions of American workers and their families, and help to reduce long-standing race- and gender-based wage inequities.

The Economic Policy Institute gratefully acknowledges the Surdna Foundation’s support of this research.

About the author

David Cooper is an economic analyst with the Economic Policy Institute. He conducts national and state-level research on a variety of issues, including the minimum wage, employment and unemployment, poverty, and wage and income trends. He also provides support to the Economic Analysis and Research Network (EARN) on data-related inquiries and quantitative analyses. David has been interviewed and cited by numerous local and national media for his research on the minimum wage, poverty, and U.S. economic trends. He holds a Master of Public Policy degree from Georgetown University.

Appendix A: Data tables

Appendix Table 1

Estimated effects of a federal minimum-wage increase to $12 in 2020, by step

Size of increase Total estimated workers1 Directly affected2 Indirectly affected3 Total affected Total affected as % of workers Increased wages for directly and indirectly affected4
6/1/2016: $8.00 $0.75  133,198,000 2,546,000  2,870,000 5,416,000 4.1%  $2,088,646,000
6/1/2017: $9.00 $1.00  134,228,000 8,141,000  5,764,000  13,905,000 10.4%  $8,477,746,000
6/1/2018: $10.00 $1.00  135,266,000  13,515,000  8,691,000  22,206,000 16.4%  $14,813,563,000
6/1/2019: $11.00 $1.00  136,313,000  24,640,000  6,472,000  31,112,000 22.8%  $23,154,338,000
6/1/2020: $12.00 $1.00  137,367,000  28,365,000  6,676,000  35,041,000 25.5%  $31,159,044,000
5-year totals: $4.75  137,367,000  28,365,000  6,676,000  35,041,000 25.5%  $79,693,337,000

1 Total estimated workers is estimated from the CPS respondents who were 16 years old or older, employed, but not self-employed, and for whom either a valid hourly wage is reported or one can be imputed from weekly earnings and average weekly hours.  Consequently, this estimate represents the identifiable wage-earning workforce and tends to understate the size of the full workforce.

2 Directly affected workers will see their wages rise, as the new minimum-wage rate will exceed their current hourly pay.

Indirectly affected workers  have a wage rate just above the new minimum wage (between the new minimum wage and the new minimum wage plus the dollar amount of the increase in the previous year's minimum wage).  They will receive a raise as employer pay scales are adjusted upward to reflect the new minimum wage.

4 Total annual amount of increased wages for directly and indirectly affected workers.

Note: Assumed annual population growth is 0.77% (U.S. projected average annual growth rate from 2015 to 2020, according to U.S. Census Bureau (2014)). Assumed annual wage growth is 1.24% leading up to the first increase (U.S. annual average of the bottom 20% of wage earners from 2010 to 2014).  In subsequent steps, we assume the CBO's projections for inflation plus 0.2% real wage growth. For example, in year 3, CBO projects growth in the CPI-U of 2.2%, so we assume wage growth of 2.4%.

Source: EPI analysis of Raise the Wage Act using Current Population Survey Outgoing Rotation Group microdata, 2014

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Appendix Table 2a

Characteristics of U.S. workers who would be affected by increasing the federal minimum wage to $12 per hour by July 2020, total

Category Estimated workforce Directly affected Indirectly affected Total affected Percentage of the total affected Share of this category that is affected
Total 137,367,000  28,365,000  6,676,000 35,041,000 100.0% 25.5%
Sex
Female 66,234,000  15,855,000  3,719,000 19,574,000 55.9% 29.6%
Male 71,133,000  12,511,000  2,957,000 15,468,000 44.1% 21.7%
Age
Under 20 4,650,000 3,481,000 272,000 3,753,000 10.7% 80.7%
20 or older 132,718,000  24,885,000  6,404,000 31,289,000 89.3% 23.6%
Less than 25 18,827,000  10,201,000  1,498,000 11,699,000 33.4% 62.1%
25 to 39 46,012,000 8,213,000  2,272,000 10,485,000 29.9% 22.8%
40 to 54 44,583,000 5,854,000  1,654,000 7,508,000 21.4% 16.8%
55+ 27,945,000 4,096,000  1,252,000 5,348,000 15.3% 19.1%
Race or ethnicity
White, non-Hispanic 88,590,000  14,938,000  3,689,000 18,627,000 53.2% 21.0%
Black or African American 15,543,000 4,522,000 879,000 5,401,000 15.4% 34.7%
Hispanic of any race 22,534,000 6,959,000  1,568,000 8,527,000 24.3% 37.8%
Asian or other race/ethnicity 10,700,000 1,946,000 540,000 2,486,000 7.1% 23.2%
Family status
Married parent 36,334,000 4,546,000  1,311,000 5,857,000 16.7% 16.1%
Single parent 10,548,000 3,113,000 737,000 3,850,000 11.0% 36.5%
Married, no kids 37,457,000 5,016,000  1,542,000 6,558,000 18.7% 17.5%
Unmarried, no kids 53,028,000  15,690,000  3,086,000 18,776,000 53.6% 35.4%
Working moms 23,222,000 5,098,000  1,250,000 6,348,000 18.1% 27.3%
Single moms 7,705,000 2,481,000 573,000 3,054,000 8.7% 39.6%
Working dads 23,660,000 2,561,000 798,000 3,359,000 9.6% 14.2%
Single dads 2,843,000 632,000 164,000 796,000 2.3% 28.0%
Family annual income level
Less than $20,000 13,708,000 6,420,000  1,097,000 7,517,000 21.5% 54.8%
$20,000–$39,999 26,523,000 7,953,000  2,034,000 9,987,000 28.5% 37.7%
$40,000–$59,999 24,076,000 4,814,000  1,244,000 6,058,000 17.3% 25.2%
$60,000–$74,999 16,411,000 2,702,000 680,000 3,382,000 9.7% 20.6%
$75,000–$99,999 19,852,000 2,711,000 688,000 3,399,000 9.7% 17.1%
$100,000–$149,999 21,162,000 2,353,000 582,000 2,935,000 8.4% 13.9%
$150,000 or more 15,636,000 1,412,000 352,000 1,764,000 5.0% 11.3%
Work hours
Part time (< 19 hours per week) 7,463,000 3,921,000 490,000 4,411,000 12.6% 59.1%
Mid time (20–34 hours per week) 19,436,000 9,120,000  1,390,000 10,510,000 30.0% 54.1%
Full time (35+ hours per week) 110,469,000  15,325,000  4,796,000 20,121,000 57.4% 18.2%
Education level
Less than high school 11,954,000 5,956,000 906,000 6,862,000 19.6% 57.4%
High school 37,167,000 9,993,000  2,366,000 12,359,000 35.3% 33.3%
Some college, no degree 26,069,000 7,172,000  1,673,000 8,845,000 25.2% 33.9%
Associate degree 14,622,000 2,451,000 701,000 3,152,000 9.0% 21.6%
Bachelor’s degree or higher 47,555,000 2,792,000  1,029,000 3,821,000 10.9% 8.0%
 Total est. # of children  Child has directly affected parent Child has indirectly affected parent  Total children with affected parents  % of all children
Children with at least one affected parent 77,411,000  14,054,000  3,463,000 17,517,000 22.6%
Average share of family income
earned by affected worker
Share of affected workers who are sole providers of their family’s income
All affected 54.3% 23.7%
Parents affected 63.1% 31.4%

Source: EPI analysis of Raise the Wage Act using Current Population Survey Outgoing Rotation Group microdata, 2014

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Appendix Table 2b

Characteristics of U.S. workers who would be affected by increasing the federal minimum wage to $12 per hour by July 2020, white non-Hispanic only

Category Estimated workforce Total affected Percentage of the total affected Share of this category that is affected
Total     88,590,000      18,627,000 100.0% 21.0%
Sex
Female     42,954,000      10,940,000 58.7% 25.5%
Male     45,636,000        7,687,000 41.3% 16.8%
Age
Under 20       3,047,000        2,443,000 13.1% 80.2%
20 or older     85,543,000      16,184,000 86.9% 18.9%
Less than 25     11,407,000        6,743,000 36.2% 59.1%
25 to 39     27,260,000        4,713,000 25.3% 17.3%
40 to 54     29,055,000        3,726,000 20.0% 12.8%
55+     20,869,000        3,445,000 18.5% 16.5%
Family status
Married parent     23,198,000        2,761,000 14.8% 11.9%
Single parent       4,995,000        1,456,000 7.8% 29.1%
Married, no kids     27,370,000        3,954,000 21.2% 14.4%
Unmarried, no kids     33,026,000      10,456,000 56.1% 31.7%
Working moms     13,794,000        2,939,000 15.8% 21.3%
Single moms       3,504,000        1,166,000 6.3% 33.3%
Working dads     14,399,000        1,278,000 6.9% 8.9%
Single dads       1,492,000           289,000 1.6% 19.4%
Family annual income level
Less than $20,000       6,196,000        3,018,000 16.2% 48.7%
$20,000–$39,999     13,702,000        4,556,000 24.5% 33.3%
$40,000–$59,999     15,261,000        3,387,000 18.2% 22.2%
$60,000–$74,999     11,106,000        2,011,000 10.8% 18.1%
$75,000–$99,999     14,418,000        2,309,000 12.4% 16.0%
$100,000–$149,999     15,959,000        2,040,000 11.0% 12.8%
$150,000 or more     11,948,000        1,306,000 7.0% 10.9%
Work hours
Part time (< 19 hours per week)       5,261,000        2,937,000 15.8% 55.8%
Mid time (20–34 hours per week)     12,211,000        5,963,000 32.0% 48.8%
Full time (35+ hours per week)     71,118,000        9,727,000 52.2% 13.7%
Education level
Less than high school       4,301,000        2,491,000 13.4% 57.9%
High school     23,012,000        6,616,000 35.5% 28.8%
Some college, no degree     16,530,000        5,071,000 27.2% 30.7%
Associate degree     10,280,000        1,938,000 10.4% 18.9%
Bachelor’s degree or higher     34,466,000        2,510,000 13.5% 7.3%
Average share of family income earned by affected worker Share of affected workers who are sole providers of their family’s income
All affected 47.1% 17.5%
Parents affected 53.7% 21.7%

Source: EPI analysis of Raise the Wage Act using Current Population Survey Outgoing Rotation Group microdata, 2014

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Appendix Table 2c

Characteristics of U.S. workers who would be affected by increasing the federal minimum wage to $12 per hour by July 2020, black only

Category Estimated workforce Total affected Percentage of the total affected Share of this category that is affected
Total      15,543,000   5,401,000 100.0% 34.7%
Sex
Female        8,471,000   3,114,000 57.7% 36.8%
Male        7,072,000   2,287,000 42.3% 32.3%
Age
Under 20           442,000     366,000 6.8% 82.8%
20 or older      15,101,000   5,035,000 93.2% 33.3%
Less than 25        2,192,000   1,565,000 29.0% 71.4%
25 to 39        5,413,000   1,926,000 35.7% 35.6%
40 to 54        5,214,000   1,226,000 22.7% 23.5%
55+        2,724,000     684,000 12.7% 25.1%
Family status
Married parent        2,863,000     635,000 11.8% 22.2%
Single parent        2,301,000   1,000,000 18.5% 43.5%
Married, no kids        2,900,000     689,000 12.8% 23.8%
Unmarried, no kids        7,479,000   3,076,000 57.0% 41.1%
Working moms        3,148,000   1,170,000 21.7% 37.2%
Single moms        1,911,000     852,000 15.8% 44.6%
Working dads        2,016,000     466,000 8.6% 23.1%
Single dads           390,000     149,000 2.8% 38.2%
Family annual income level
Less than $20,000        2,710,000   1,669,000 30.9% 61.6%
$20,000–$39,999        4,162,000   1,702,000 31.5% 40.9%
$40,000–$59,999        2,861,000     822,000 15.2% 28.7%
$60,000–$74,999        1,742,000     452,000 8.4% 25.9%
$75,000–$99,999        1,575,000     306,000 5.7% 19.4%
$100,000–$149,999        1,561,000     313,000 5.8% 20.1%
$150,000 or more           932,000     136,000 2.5% 14.6%
Work hours
Part time (< 19 hours per week)           670,000     476,000 8.8% 71.0%
Mid time (20–34 hours per week)        2,322,000   1,566,000 29.0% 67.4%
Full time (35+ hours per week)      12,551,000   3,359,000 62.2% 26.8%
Education level
Less than high school        1,146,000     735,000 13.6% 64.1%
High school        4,938,000   2,144,000 39.7% 43.4%
Some college, no degree        3,784,000   1,562,000 28.9% 41.3%
Associate degree        1,683,000     515,000 9.5% 30.6%
Bachelor’s degree or higher        3,992,000     445,000 8.2% 11.1%
Average share of family income earned by affected worker Share of affected workers who are sole providers of their family’s income
All affected 64.4% 33.7%
Parents affected 71.9% 42.5%

Source: EPI analysis of Raise the Wage Act using Current Population Survey Outgoing Rotation Group microdata, 2014

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Appendix Table 2d

Characteristics of U.S. workers who would be affected by increasing the federal minimum wage to $12 per hour by July 2020, Hispanic of any race only

Category Estimated workforce Total affected Percentage of the total affected Share of this category that is affected
Total       22,534,000   8,527,000 100.0% 37.8%
Sex
Female         9,647,000   4,179,000 49.0% 43.3%
Male       12,887,000   4,348,000 51.0% 33.7%
Age
Under 20            832,000     675,000 7.9% 81.1%
20 or older       21,703,000   7,853,000 92.1% 36.2%
Less than 25         3,862,000   2,556,000 30.0% 66.2%
25 to 39         9,193,000   3,122,000 36.6% 34.0%
40 to 54         6,880,000   2,026,000 23.8% 29.4%
55+         2,599,000     823,000 9.7% 31.7%
Family status
Married parent         6,806,000   2,005,000 23.5% 29.5%
Single parent         2,660,000   1,207,000 14.2% 45.4%
Married, no kids         4,428,000   1,383,000 16.2% 31.2%
Unmarried, no kids         8,641,000   3,933,000 46.1% 45.5%
Working moms         4,332,000   1,822,000 21.4% 42.1%
Single moms         1,860,000     891,000 10.4% 47.9%
Working dads         5,134,000   1,389,000 16.3% 27.1%
Single dads            800,000     316,000 3.7% 39.5%
Family annual income level
Less than $20,000         3,867,000   2,368,000 27.8% 61.2%
$20,000–$39,999         6,684,000   3,011,000 35.3% 45.0%
$40,000–$59,999         4,320,000   1,420,000 16.7% 32.9%
$60,000–$74,999         2,325,000     643,000 7.5% 27.7%
$75,000–$99,999         2,364,000     512,000 6.0% 21.7%
$100,000–$149,999         1,930,000     394,000 4.6% 20.4%
$150,000 or more         1,043,000     180,000 2.1% 17.3%
Work hours
Part time (< 19 hours per week)            989,000     660,000 7.7% 66.7%
Mid time (20–34 hours per week)         3,471,000   2,227,000 26.1% 64.2%
Full time (35+ hours per week)       18,074,000   5,640,000 66.1% 31.2%
Education level
Less than high school         5,792,000   3,230,000 37.9% 55.8%
High school         7,066,000   2,800,000 32.8% 39.6%
Some college, no degree         4,096,000   1,569,000 18.4% 38.3%
Associate degree         1,805,000     512,000 6.0% 28.4%
Bachelor’s degree or higher         3,775,000     416,000 4.9% 11.0%
Average share of family income earned by affected worker Share of affected workers who are sole providers of their family’s income
All affected 64.2% 32.0%
Parents affected 71.5% 39.9%

Source: EPI analysis of Raise the Wage Act using Current Population Survey Outgoing Rotation Group microdata, 2014

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Appendix Table 2e

Characteristics of U.S. workers who would be affected by increasing the federal minimum wage to $12 per hour by July 2020, Asian or other race only

Category Estimated workforce Total affected Percentage of the total affected Share of this category that is affected
Total      10,700,000   2,486,000 100.0% 23.2%
Sex
Female        5,162,000   1,341,000 53.9% 26.0%
Male        5,538,000   1,145,000 46.1% 20.7%
Age
Under 20          329,000      269,000 10.8% 81.8%
20 or older      10,371,000   2,217,000 89.2% 21.4%
Less than 25        1,366,000      836,000 33.6% 61.2%
25 to 39        4,146,000      724,000 29.1% 17.5%
40 to 54        3,434,000      530,000 21.3% 15.4%
55+        1,753,000      396,000 15.9% 22.6%
Family status
Married parent        3,467,000      456,000 18.3% 13.2%
Single parent          592,000      187,000 7.5% 31.6%
Married, no kids        2,759,000      532,000 21.4% 19.3%
Unmarried, no kids        3,882,000   1,311,000 52.7% 33.8%
Working moms        1,949,000      416,000 16.7% 21.3%
Single moms          430,000      146,000 5.9% 34.0%
Working dads        2,110,000      227,000 9.1% 10.8%
Single dads          162,000        42,000 1.7% 25.9%
Family annual income level
Less than $20,000          935,000      462,000 18.6% 49.4%
$20,000–$39,999        1,976,000      718,000 28.9% 36.3%
$40,000–$59,999        1,634,000      429,000 17.3% 26.3%
$60,000–$74,999        1,237,000      275,000 11.1% 22.2%
$75,000–$99,999        1,495,000      273,000 11.0% 18.3%
$100,000–$149,999        1,711,000      187,000 7.5% 10.9%
$150,000 or more        1,713,000      142,000 5.7% 8.3%
Work hours
Part time (< 19 hours per week)          543,000      337,000 13.6% 62.1%
Mid time (20–34 hours per week)        1,432,000      754,000 30.3% 52.7%
Full time (35+ hours per week)        8,725,000   1,395,000 56.1% 16.0%
Education level
Less than high school          715,000      405,000 16.3% 56.6%
High school        2,151,000      799,000 32.1% 37.1%
Some college, no degree        1,660,000      644,000 25.9% 38.8%
Associate degree          854,000      187,000 7.5% 21.9%
Bachelor’s degree or higher        5,321,000      450,000 18.1% 8.5%
Average share of family income earned by affected worker Share of affected workers who are sole providers of their family’s income
All affected 52.3% 19.7%
Parents affected 60.1% 25.4%

Source: EPI analysis of Raise the Wage Act using Current Population Survey Outgoing Rotation Group microdata, 2014

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Appendix Table 2f

Characteristics of U.S. workers who would be affected by increasing the federal minimum wage to $12 per hour by July 2020, women of color only

Category Estimated workforce Total affected Percentage of the total affected Share of this category that is affected
Total     23,280,000   8,634,000 100.0% 37.1%
Age
Under 20         818,000     677,000 7.8% 82.8%
20 or older     22,462,000   7,957,000 92.2% 35.4%
Less than 25       3,598,000   2,478,000 28.7% 68.9%
25 to 39       8,546,000   2,859,000 33.1% 33.5%
40 to 54       7,574,000   2,183,000 25.3% 28.8%
55+       3,563,000   1,114,000 12.9% 31.3%
Family status
Married parent       5,227,000   1,520,000 17.6% 29.1%
Single parent       4,201,000   1,888,000 21.9% 44.9%
Married, no kids       4,652,000   1,362,000 15.8% 29.3%
Unmarried, no kids       9,200,000   3,863,000 44.7% 42.0%
Working moms       9,428,000   3,408,000 39.5% 36.1%
Single moms       4,201,000   1,888,000 21.9% 44.9%
Family annual income level
Less than $20,000       3,915,000   2,493,000 28.9% 63.7%
$20,000–$39,999       6,058,000   2,749,000 31.8% 45.4%
$40,000–$59,999       4,067,000   1,377,000 15.9% 33.9%
$60,000–$74,999       2,464,000     730,000 8.5% 29.6%
$75,000–$99,999       2,523,000     601,000 7.0% 23.8%
$100,000–$149,999       2,479,000     443,000 5.1% 17.9%
$150,000 or more       1,775,000     241,000 2.8% 13.6%
Work hours
Part time (< 19 hours per week)       1,411,000     937,000 10.9% 66.4%
Mid time (20–34 hours per week)       4,394,000   2,754,000 31.9% 62.7%
Full time (35+ hours per week)     17,476,000   4,944,000 57.3% 28.3%
Education level
Less than high school       2,809,000   1,955,000 22.6% 69.6%
High school       6,306,000   3,007,000 34.8% 47.7%
Some college, no degree       4,878,000   2,131,000 24.7% 43.7%
Associate degree       2,428,000     781,000 9.0% 32.2%
Bachelor’s degree or higher       6,859,000     760,000 8.8% 11.1%
Average share of family income earned by affected worker Share of affected workers who are sole providers of their family’s income
All affected 61.2% 30.1%
Parents affected 68.5% 38.3%

Source: EPI analysis of Raise the Wage Act using Current Population Survey Outgoing Rotation Group microdata, 2014

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Appendix Table 3

Estimated effects of a federal minimum-wage increase to $12 by July 2020, fully phased-in, by state

State  Estimated wage-earning population  Directly affected  Indirectly affected  Total affected  Share of state workforce Total wage increase for directly and indirectly affected workers  Average total increase in annual income for affected workers
United States 137,367,000  28,365,000  6,676,000  35,041,000 25.5% $79,693,337,000 $2,300
Alabama 1,972,000 492,000 97,000 589,000 29.9% $1,626,600,000 $2,800
Alaska 321,000 26,000 24,000 50,000 15.6% $42,661,000 $800
Arizona 2,710,000 636,000 143,000 779,000 28.7% $1,760,314,000 $2,300
Arkansas 1,157,000 325,000 58,000 383,000 33.1% $999,562,000 $2,600
California 15,808,000 2,716,000  1,075,000 3,791,000 24.0% $4,123,717,000 $1,100
Colorado 2,429,000 394,000 94,000 488,000 20.1% $1,010,738,000 $2,100
Connecticut 1,632,000 271,000 59,000 330,000 20.2% $363,609,000 $1,100
Delaware 403,000 80,000 20,000 100,000 24.8% $211,521,000 $2,100
District of Columbia 340,000 n/a n/a n/a
Florida 8,406,000 1,902,000 353,000 2,255,000 26.8% $5,734,670,000 $2,500
Georgia 4,104,000 1,043,000 168,000 1,210,000 29.5% $3,659,438,000 $3,000
Hawaii 596,000 124,000 21,000 145,000 24.3% $177,188,000 $1,200
Idaho 671,000 177,000 30,000 207,000 30.8% $577,820,000 $2,800
Illinois 5,740,000 1,231,000 223,000 1,454,000 25.3% $3,504,000,000 $2,400
Indiana 2,927,000 733,000 123,000 855,000 29.2% $2,400,665,000 $2,800
Iowa 1,525,000 336,000 77,000 412,000 27.0% $1,050,892,000 $2,500
Kansas 1,344,000 305,000 68,000 373,000 27.8% $999,302,000 $2,700
Kentucky 1,794,000 436,000 99,000 535,000 29.8% $1,528,313,000 $2,900
Louisiana 1,916,000 468,000 93,000 561,000 29.3% $1,650,552,000 $2,900
Maine 591,000 130,000 25,000 155,000 26.2% $367,929,000 $2,400
Maryland 2,733,000 462,000 92,000 554,000 20.3% $659,495,000 $1,200
Massachusetts 3,172,000 68,000 459,000 527,000 16.6% $122,439,000 $200
Michigan 4,210,000 931,000 189,000 1,120,000 26.6% $2,212,337,000 $2,000
Minnesota 2,659,000 440,000 113,000 553,000 20.8% $737,488,000 $1,300
Mississippi 1,075,000 287,000 53,000 340,000 31.6% $1,108,815,000 $3,300
Missouri 2,676,000 605,000 108,000 713,000 26.6% $1,917,625,000 $2,700
Montana 433,000 107,000 24,000 131,000 30.3% $280,153,000 $2,100
Nebraska 917,000 186,000 52,000 238,000 26.0% $357,534,000 $1,500
Nevada 1,228,000 298,000 64,000 362,000 29.5% $983,415,000 $2,700
New Hampshire 655,000 115,000 26,000 141,000 21.5% $327,545,000 $2,300
New Jersey 4,033,000 690,000 137,000 827,000 20.5% $1,744,157,000 $2,100
New Mexico 797,000 198,000 36,000 234,000 29.4% $666,459,000 $2,900
New York 8,422,000 1,547,000 328,000 1,875,000 22.3% $3,563,101,000 $1,900
North Carolina 4,114,000 1,141,000 194,000 1,335,000 32.5% $3,993,754,000 $3,000
North Dakota 368,000 63,000 18,000 81,000 22.0% $196,271,000 $2,400
Ohio 5,188,000 1,095,000 249,000 1,343,000 25.9% $2,980,908,000 $2,200
Oklahoma 1,533,000 339,000 75,000 414,000 27.0% $1,202,714,000 $2,900
Oregon 1,624,000 273,000 83,000 357,000 22.0% $516,006,000 $1,400
Pennsylvania 5,769,000 1,162,000 240,000 1,402,000 24.3% $3,496,215,000 $2,500
Rhode Island 474,000 92,000 16,000 108,000 22.8% $208,215,000 $1,900
South Carolina 1,971,000 506,000 89,000 595,000 30.2% $1,737,731,000 $2,900
South Dakota 380,000 81,000 20,000 102,000 26.8% $163,666,000 $1,600
Tennessee 2,624,000 689,000 122,000 812,000 30.9% $2,389,551,000 $2,900
Texas 11,724,000 2,919,000 526,000 3,445,000 29.4% $10,239,937,000 $3,000
Utah 1,292,000 275,000 69,000 344,000 26.6% $834,767,000 $2,400
Vermont 299,000 43,000 12,000 55,000 18.4% $51,511,000 $900
Virginia 3,833,000 725,000 150,000 875,000 22.8% $2,351,019,000 $2,700
Washington 3,045,000 417,000 136,000 554,000 18.2% $654,366,000 $1,200
West Virginia 719,000 190,000 30,000 220,000 30.6% $436,777,000 $2,000
Wisconsin 2,748,000 548,000 106,000 654,000 23.8% $1,622,497,000 $2,500
Wyoming 267,000 49,000 11,000 60,000 22.5% $147,377,000 $2,400

Note: Total estimated workers is estimated from the CPS respondents who were 16 years old or older, employed, but not self-employed, and for whom either a valid hourly wage is reported or one can be imputed from weekly earnings and average weekly hours.  Consequently, this estimate represents the identifiable wage-earning workforce and tends to understate the size of the full workforce. Directly affected workers will see their wages rise because the new minimum wage rate will exceed their current hourly pay. Indirectly affected workers  have a wage rate just above the new minimum wage (modeled as workers with wages between the new minimum wage and the new minimum wage plus the dollar amount of the increase in the previous year's minimum wage).  They will receive a raise as employer pay scales are adjusted upward to reflect the new minimum wage.

Source: EPI analysis of Raise the Wage Act using Current Population Survey Outgoing Rotation Group microdata, 2014

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Appendix B: Technical appendix and methodology

EPI’s minimum-wage simulation model relies on four quarters of data from the Outgoing Rotation Group of the Current Population Survey (CPS-ORG). The ORG data are first cleaned and imputations made, where necessary, as described in Mishel et al. (2012, Appendix B). EPI’s simulation model also pulls data from a compiled dataset of all applicable minimum-wage rates for all states, by month and year, from January 1984 onward. Minimum-wage rates for states with scheduled state minimum-wage increases and/or annual indexing for inflation are projected using CBO projections for inflation, published in the CBO annual Budget and Economic Outlook. See CBO (2015).

We restrict the ORG data to individuals age 16 and older, who are currently employed and for whom valid wage information is either reported or can be calculated from the data, as explained in Mishel et al. (2012, Appendix B).

Sorting the data by state, we first adjust wage values for individuals in states where a state minimum-wage increase occurs between the data period and the first proposed increase in the minimum-wage proposal being analyzed. (For example, if using 2013 data, the minimum wage in New Jersey rose to $8.25 on January 1, 2014; thus, some individuals in New Jersey with wages below $8.25 will already have higher wages before any proposed federal increase could take place.) In these states, wage values below the state minimum wage expected in the month prior to the proposed new minimum wage are increased in direct proportion to the expected minimum. For example, if someone in New Jersey in August 2013 was earning 105 percent of the August 2013 state minimum, his wage is adjusted to 105 percent of the expected state minimum for June 2014, if the proposed federal increase is modeled to occur in July 2014.

For workers in all states, we assume annual nominal wage growth equal to inflation, as projected in CBO (2015), plus 0.2 percent—a prediction based upon U.S. average annual wage growth since 2010.

We also assume population growth between the data period and the proposed first increase. We adjust the ORG weights by the Census Bureau’s projected annual growth rate from 2014 to 2020 of 0.77 percent. This annual growth rate is adjusted by the number of months that occur between the midpoint of the data and the month that the first proposed minimum-wage increase would occur.

Having made these adjustments, we identify “directly affected” workers as those workers in states where the prevailing minimum wage is less than the proposed federal minimum, whose wages are greater than or equal to 95 percent of the prevailing minimum wage and less than the proposed federal minimum wage. We identify “indirectly affected” workers as those workers in states where the prevailing minimum wage is less than the proposed federal minimum, whose wages are greater than or equal to the proposed federal minimum wage, but less than the proposed minimum plus the dollar value of the proposed increase—hereafter referred to as the “indirectly affected cutoff.” For example, for an increase from $7.25 to $8.20, directly affected workers have a wage between $7.25 and $8.20. The size of the increase is $0.95; thus, the indirectly affected workers would be those workers with wages between $8.20, inclusive, and $9.15, exclusive. The indirectly affected cutoff in this case would be $9.15.

Having counted these directly and indirectly affected workers, the program iterates to the next proposed increase.

After each step, if an individual is predicted to be either directly or indirectly affected, her wage is adjusted to reflect her implied raise. For directly affected workers, their raise is equal to the difference between the new minimum wage and their existing wage. For indirectly affected workers, their raise is modeled as one-fourth of the difference between their existing wage and the indirectly affected cutoff. For example, an indirectly affected worker previously earning $8.50 would receive a raise of 0.25 x ($9.15-$8.50), or $0.16.

Again, weights are adjusted to reflect the predicted population growth between the first and second increments in the proposed minimum-wage increase. Wage values are again adjusted in states with scheduled minimum-wage increases and are adjusted to reflect natural nominal wage growth.

The same method for identifying directly and indirectly affected workers is applied, and the counts are recorded. The model iterates in this fashion for all remaining steps.

The data used for this report are the CPS ORG data for calendar year 2014.

Endnotes

1. We use the Research Series of the Consumer Price Index for All Urban Consumers (CPI-U) to deflate the value of the minimum wage because the CPI-U tracks changes in the prices of goods bought by typical U.S. consumers. It is the standard deflator used by researchers and government agencies when adjusting wages and incomes for changes in prices. For example, the Census Bureau uses the CPI-U when it measures trends in family and household incomes, and the Internal Revenue Service adjusts tax brackets annually using the CPI-U. The Census Bureau has made various methodological improvements to the CPI-U over the years. The Research Series applies current CPI-U methodology retrospectively to calculate the most accurate measure of historical inflation for typical U.S. consumers. We use the implicit price deflator for gross domestic product—or “GDP deflator”—when calculating changes in total economy net productivity. This is also standard practice, as it captures changes in the value of the overall output of the economy—i.e., the value of what workers are able to produce.

Sherk (2015) criticizes these choices, saying that it is inappropriate to use different deflators to adjust the two series. He contends that using the same deflator for both series, or a different mix of deflators, would show less inflation and thus less erosion in the purchasing power of the minimum wage. Bivens (2015, forthcoming) explains the rationale for using these two separate series in great detail, noting how the series differ and why we believe our choices are appropriate. Yet without going into this detail, Sherk’s criticism is irrelevant. It is true that some alternative measures of inflation, such as the price index for personal consumption expenditures (PCE), do show lower levels of inflation than the CPI-U-RS, and thus deflating the minimum wage using the PCE will show less erosion in the minimum wage’s buying power. But this does not change the conclusion that minimum-wage workers today make significantly less than their counterparts a generation ago.

In fact, even if one were to indulge Sherk’s incorrect suggestion that there has been no decline in the real value of the minimum wage if inflation is measured using the GDP deflator—something no serious analysis of wage values would do—it would still mean that the country’s minimum-wage workers are paid no more than they were paid nearly 50 years ago. Given the tremendous growth in per-capita income, wealth, and average labor productivity in the United States over the past five decades, there is no reason why this need be the case; policymakers could have raised the minimum wage more regularly such that a minimum-wage worker in 2015 would be significantly better off than a minimum-wage worker in 1968. Lawmakers simply chose a different outcome.

2. Overall productivity is measured as total economy productivity net depreciation. From 1968 to 2014, net productivity grew by 93 percent. Based upon projections for productivity growth in CBO (2015), growth from 1968 to 2020 is expected to be 117 percent.

3. If median wages grow at CBO’s projected rate of inflation plus 0.5 percent between 2014 and 2020, a $12 minimum wage in 2020 would equal 49.9 percent of the median wage.

4. A single earner with an annual income of $22,012 in 2014 (the equivalent of earning $12 per hour full time, year round in 2020) and three qualifying dependent children would receive an EITC benefit of roughly $5,000. This would bring her total annual income to just over $27,000. The poverty line for a family of four in 2014 was $24,008.

5. The range of indirectly affected workers is modeled as those workers reporting hourly wages between the new minimum wage, and the sum of the new minimum wage and the size of the increase to the minimum in each step. For example, when the minimum wage is raised from $7.25 to $8.00, the band of indirectly affected workers is modeled as those workers earning between $8.00 and $8.75. See the methodological appendix for further detail.

6. The median age of affected workers is 31.

7. Vermont’s minimum wage will be raised to $10.50 in 2018 and linked to inflation thereafter. It is projected to be $11 in 2020. Massachusetts’s minimum will be raised to $11 by 2017. Washington’s minimum wage has been indexed to inflation since 1998. It is expected to be around $10.55 by 2020. Alaska’s minimum will be raised to $9.75 in 2016, with inflation adjustment thereafter. It is expected to be roughly $10.65 by 2020. The minimum wage in the District of Columbia will be raised to $11.50 in 2016, with automatic inflation adjustment every year thereafter. Based on projections for inflation, it will likely reach $12.60 by 2020.

8. Idaho and North Carolina have minimum wages equal to the federal $7.25. Arkansas recently passed a minimum-wage increase to $8.50 by 2017, but without any further adjustment thereafter. Tennessee and Mississippi have no minimum-wage laws. In these states and others without a minimum wage or with minimum wages below the federal minimum wage, workers must be paid at least the federal minimum wage.

9. “Wage theft” is the practice of employees not being paid the full wages to which they are entitled for the hours they work. See Meixell and Eisenbrey (2014) for greater detail.

10. Tipped workers receive the full minimum wage before tips in Alaska, California, Oregon, Washington, Minnesota, Montana, and Nevada. In Hawaii, tipped workers can be paid $0.50 less than the regular minimum wage if workers’ combined base wage plus hourly tips equals at least $7.00 more than the regular minimum wage.

References

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Congressional Budget Office. 2015. The Budget and Economic Outlook, 2015 to 2025. http://www.cbo.gov/sites/default/files/cbofiles/attachments/49892-Outlook2015.pdf

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