This week, Governor Tom Wolf announced that, through executive order, he would require Pennsylvania state workers under his jurisdiction and employees working on future state contracts to be paid at least $10.15 an hour.
Prior to his action, these workers making the minimum wage, many of whom who are heads of household, were often not making enough money to live above the poverty line. None of them were making enough money to have what economists call a living wage — the wage rate required to meet minimum standards of living in a given area. In many places across the state, a living wage for workers with a family is well more than even the $10.15 an hour that this executive order raises wages to. You can see MIT’s calculations for living wage by family by Pennsylvania county and metro area here.
We have a moral obligation to ensure those working in Pennsylvania are paid enough to make ends meet.
This week’s executive order is just the first step. The minimum wage needs to increase for all workers in Pennsylvania. And that’s true not only because it helps working people, but also because it relieves pressure on Pennsylvania’s budget. People who make the minimum wage spend almost all they earn. Thus raising the minimum wage generates new economic activity. Keystone Research Center estimates that a higher minimum wage will increase revenues from the Personal Income Tax by $45.6 million and the Sales Tax by $75.9 million. And it will also decrease state expenditures because many working people making the minimum wage will move from traditional Medicaid (which we call Medical Assistance in Pennsylvania) to the expanded Medicaid created by the Affordable Care Act. The federal government reimburses Pennsylvania for a bit less than half the cost of traditional Medicaid, but the reimbursement rate for expanded Medicaid is 90% or more. We estimate that raising the minimum wage for all Pennsylvanians will reduce state spending by $104 million.
At a time when we face a structural deficit of about $2 billion, we can’t afford to pass up this opportunity to reduce it by $225 million simply by raising the minimum wage to $10.10.
But beyond that, we can’t look past the moral obligation we have, as a Commonwealth, to make sure that working Pennsylvanians are able to support themselves and their families. Raising the minimum wage is the right thing to do. And the time is now.