Effects of proposed federal minimum-wage increase to $10.10 by 2016, 2014–2016
|Size of increase||Estimated workforce1||Directly affected2||Indirectly affected3||Total affected||Share of workforce affected||Increased wages for all affected workers4||GDP impact5||Jobs impact: Full-time employment6||Three-year total: Job years|
|Three-stage increase to $10.10/hour, modeled for July 2014, July 2015, and July 2016|
1The estimated workforce includes CPS respondents who were 16 years old or older, employed but not self-employed, and for whom a valid hourly wage is reported or 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.
2Directly affected workers are those whose wages would rise because the new minimum wage rate would exceed their current hourly pay.
3Indirectly affected workers have an hourly wage just above the new minimum wage (between the new minimum wage and the new minimum wage plus the dollar amount of the increase over the preceding minimum wage). They would receive a raise as employers adjusted pay scales upward to reflect the new minimum wage.
4 The total annual amount of increased wages of directly and indirectly affected workers assumes they work 52 weeks per year.
5A national model is used to estimate the GDP impact of workers' increased earnings. Estimations rely upon multipliers applicable to current economic conditions and periods of labor market slack.
6The increased economic activity from these additional wages adds not just jobs but also hours for people who already have jobs (work hours for people with jobs also dropped in the downturn). Full-time employment estimates take that into account, essentially by taking the number of total hours added (including both hours from new jobs and more hours for people who already have jobs) and dividing by 40, to get full-time-equivalent jobs added. The estimates reflect the jobs created or sustained in each year of the increases and assume full-time employment requires $133,000 in additional GDP.
Note: All estimates assume an annual population growth of 0.77 percent (U.S. projected average annual rate from 2014 to 2019, according to U.S. Census Bureau) and wage growth of 1.8 percent in the first year (U.S. average of the bottom 20 percent of wage earners in 2012) and 2.8 percent in the second and third years (U.S. annual average of the bottom 20 percent of wage earners from 2002 to 2006, according to CPS-ORG). Job-impact estimation methods can be found in Cooper and Hall (2013) and Bivens (2011).
Source: Author's analysis of Harkin-Miller proposal using Current Population Survey Outgoing Rotation Group public use microdata from 2012Q4 through 2013Q3
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