Estimated Effects of Minneapolis Minimum Wage Increase to $15 by 2022
| Simulated increases: | Nominal increase | Real increase (2016$) | Total Estimated Workers1 | Directly affected2 | Indirectly affected3 | Total Affected | Total Affected as % of Workers | Increase in wages for directly & indirectly affected4 (2016$) |
|---|---|---|---|---|---|---|---|---|
| January 1, 2018-$10.00 | $0.50 | $0.48 | 303,000 | 28,000 | 8,000 | 37,000 | 12.2% | $23,730,000 |
| July 1, 2018 – $11.25 | $1.25 | $1.20 | 304,000 | 37,000 | 7,000 | 44,000 | 14.5% | $80,761,000 |
| July 1, 2019 – $12.25 | $1.00 | $0.93 | 306,000 | 38,000 | 13,000 | 51,000 | 16.7% | $128,275,000 |
| July 1, 2020 – $13.25 | $1.00 | $0.91 | 308,000 | 42,000 | 14,000 | 56,000 | 18.2% | $191,483,000 |
| July 1, 2021 – $14.25 | $1.00 | $0.89 | 310,000 | 47,000 | 15,000 | 62,000 | 20.0% | $249,429,000 |
| July 1, 2022 – $15.25 | $0.75 | $0.65 | 312,000 | 48,000 | 19,000 | 67,000 | 21.5% | $300,203,000 |
| Total: | $5.50 | $4.79 | 312,000 | 48,000 | 19,000 | 67,000 | 21.5% | $300,203,000 |
Notes: Some workers indirectly affected in earlier steps will be directly-affected in later steps thus the step three demographics describe all workers affected as a result of the increases. Wage increase totals are the sums of all steps, as indicated.
Population growth assumptions: Annual population growth based on annualized growth rate labor force projections from 2010 to 2020, by race: White: -0.37 percent; Black: 2.24 percent; Hispanic: 3.23 percent; Asian/Other: 3.70 percent.
Wage growth assumptions: Assumed annual nominal wage growth of 1.99% from 2014 to 2018 (MN average annual wage growth of bottom 20% of wage earners from 2013-2015, according to CPS ORG). In subsequent steps, wages are assumed to grow at the projected pace of national consumer price inflation, per the Congressional Budget Office Economic Projections: 2.39%, 2.42%, 2.42%, and 2.42% in the years 2019, 2020, 2021, and 2022 respectively.
Geography identification: In the years 2010 and 2011, workers in Minneapolis City are uniquely identified by PWPUMA00 code 1300. For years 2012–2014, Minneapolis City is incorporated in a larger PWPUMA00 code, 1400. To isolate Minneapolis workers in the years 2012 on, we use a regression model on 5-year ACS data (2007–2011)--where Minneapolis is distinguished from the rest of Hennepin County with a separate PWPUMA00 code--to predict whether someone works in Minneapolis or in the rest of Hennepin County. The model includes controls for a variety of worker demographic information, nature of work (industry, occupation), and commute/transportation indicators. We then use the parameters from this model to score the likelihood that workers in the 2012 onward data work in Minneapolis, assigning a Minneapolis PWPUMA00 code to those that are likely to work in the city. Testing this scoring method on the 2007–2011 data itself (when we know whether someone works in the city), we accurately predict Minneapolis status for 69 percent of the workers in Hennepin County.
These increases only reflect the result of the proposed change in the minimum wage of Minneapolis City. Wage changes resulting from the scheduled changes to the Minnesota state minimum wage law are accounted for in the simulation.
1Total estimated workers is estimated from the ACS respondents who were 16 years old or older, employed, but not self-employed, and for whom a valid hourly wage can be imputed from annual wage earning, usual hours worked per week, and weeks worked in the previous year. All government workers are excluded except those that work for "local government".
2Directly Affected workers will see their wages rise as the new minimum wage rate will exceed their current hourly pay.
3Indirectly affected workers have a wage rate just above the new minimum wage (between the new minimum wage and 115 percent of the new minimum). They will receive a raise as employer pay scales are adjusted upward to reflect the new minimum wage.
4 Total amount of increased annual wages for directly and indirectly affected workers. Values in each step are cumulative of preceding steps.
Source: EPI analysis of 5-year pooled American Community Survey microdata, 2010–2014
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