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|
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.
3 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