We write a lot and that makes it hard to find the time to catch up on our latest research. To make our work easier to digest in 2018 we are breaking reports up into smaller bite size pieces and posting them here. This post is the fifth in a series of six highlighting key findings from our latest report The Pennsylvania Minimum Wage in 2018. Netflix down? Can’t read another grim news story?
After determining the level of the minimum wage, the single most important issue policymakers will consider is whether the wage is adjusted annually to reflect changes in the demand for labor.
Currently, 18 states, including New York, New Jersey, Ohio, and the District of Columbia, adjust the minimum wage annually to reflect changes in consumer prices. If after raising the minimum wage to $7.15 in 2007 had Pennsylvania’s minimum wage been adjusted annually based on changes in the Consumer Price Index (CPI) it would be $8.40 per hour in 2018 (table below)
The Raise the Wage Act of 2017 introduced in the U.S. Senate last May proposes indexing the minimum wage using the median wage. The advantage of using the median wage is that it more directly reflects conditions in labor markets than consumer prices, where volatile components like food and energy prices tend to be driven by economic factors unrelated to labor market conditions. Adjusting the minimum wage set at $7.15 in 2007 for changes in the median wage for full-time full-year workers in Pennsylvania since then would lift the minimum wage in 2018 to $9.60 per hour.
We would recommend the Pennsylvania minimum wage be indexed to the median wage.