The Demographic Impacts of a Minimum Wage Increase [1]
Wrapped into his 2019 budget proposal, Governor Wolf has proposed to raise the minimum wage in July 2019 to $12/hour, with yearly 50-cent increases until it reaches $15/hour in 2025. After 2025, the minimum wage would be adjusted for inflation. Also included in this plan is to eliminate the separate tipped minimum wage of $2.83/hour—tipped workers would earn $12 in July 2019 and would follow the same scheduled changes each year.
This increase is needed to make up for the declining value of the minimum wage over time. Figure 1 shows the minimum wage relative to the median wage for full-time, full-year workers in Pennsylvania over time. In 1968, the minimum wage was 51% of the median wage in Pennsylvania; the minimum was $1.60 compared to the median of $3.15. As you can see by the dark blue line, this value has decreased steadily over time. Today, the minimum wage is only 30% of the median wage in Pennsylvania. Doing nothing and maintaining a $7.25 minimum wage will result in this falling to 26.3% by 2025. Alternatively, Governor Wolf’s plan to raise the minimum wage to $15/hour by 2025 will bring the minimum back to about half of the median wage, where it was in the late 1960s.
FIGURE 1
This proposal to raise the minimum wage would have far-reaching impacts on workers across the state (see Figure 2 and Table 1). An increase to $12/hour on July 1, 2019, would impact a total of 1.7 million Pennsylvania workers. More than 1.13 million would see a direct increase, meaning they earn less than $12/hour on July 1, 2019, and would see an increase specifically due to the legislated increase. There are also 540,000 people who make slightly more than $12/hour as of July 2019, but would see their wages increase as scales are adjusted upwards. Typically, raising the minimum wage results in increases for workers who are higher paid because employers want to maintain progression within their pay scales.[2] With each minimum wage increase from 2020 to 2025, additional workers will benefit. By July 1, 2025, when the minimum wage reaches $15/hour, a total of 2.01 million workers will see benefits: 1.05 million directly and 970,000 indirectly. By 2025, one-third (34%) of Pennsylvania’s workforce would see a raise.
[1] This report is based on an Economic Policy Institute report by David Cooper (source below) who provided us with state-level data and his report which served as a template for this state-level report. His analysis uses the EPI’s revised Minimum Wage Simulation Model, estimating the workforce affected by changes in the minimum wage nationally. This report focuses on the impacts of such a wage increase in Pennsylvania. David Cooper. 2019. “Raising the federal minimum wage to $15 by 2024 would lift pay for nearly 40 million workers.” Economic Policy Institute. February 5, 2019.
[2] Wicks-Lim, Jeannette. 2006. “Mandated Wage Floors and the Wage Structure: New Estimates of the Ripple Effects of Minimum Wage Laws.” Political Economy Research Institute at the University of Massachusetts Amherst, Working Paper no. 116.; David Cooper. 2019. “Raising the federal minimum wage to $15 by 2024 would lift pay for nearly 40 million workers.” Economic Policy Institute. February 5, 2019.