Effects of proposed federal minimum-wage increase, 2012–2015
|Size of increase||Total estimated workers1||Directly affected2||Indirectly affected3||Total affected||Total affected as % of workers||Increased wages for directly and indirectly affected4||Average individual increase in annual income||GDP impact5||Jobs impact: full-time employment6||Three-year total: job years|
|Three-stage increase to $9.80/hour, modeled for July 2012, July 2013, July 2014|
1. Total estimated workers is estimated from the CPS respondents for whom either a valid hourly wage is reported or one can be imputed from weekly earnings and average weekly hours. Consequently, this estimate 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.
3. Indirectly affected workers currently 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 2012 minimum wage). They will receive a raise as employer pay scales are adjusted upward to reflect the new minimum wage.
4. Increased wages: annual amount of increased wages for directly and indirectly affected workers, assuming they work 52 weeks a year
5. GDP and job impact figures estimate the GDP impact of workers' increased earnings after controlling for the reduction in corporate profits.
6. The 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 takes that into account by essentially 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. Jobs numbers assume full-time employment requires $115,000 in additional GDP. Jobs impact total is in job years.
Notes: Annual population growth: 0.79% (U.S. projected average annual rate from 2000 to 2020, according to Census). Wage growth: 1.19% in year one (2011 average of bottom 20th-percentile wage in the United States), 2.80% in years two and three (five-year average from 2002 to 2006, using CPS-ORG). Job impact estimation methods can be found in Hall and Gable (2012) and Bivens (2011).
Source: Authors' analysis of Harkin/Miller proposal using Current Population Survey Outgoing Rotation Group microdata