Giving Compass' Take:
- A new study by Michael Reich, Justin Wiltshire, and Carl McPherson reveals that increasing the minimum wage benefits workers, employers, and the economy.
- How can donor efforts help advocate for increases to the minimum wage?
- Learn how increasing the minimum wage leads to better health outcomes for workers.
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Increasing the minimum wage has repeatedly been shown to raise the pay of low-wage workers and improve the overall economy. While the federal minimum wage remains at its 2009 level of $7.25 per hour, 30 states and dozens of cities, as well as Washington, DC, have instituted much higher wage floors.
Our new working paper, “Minimum Wage Effects and Monopsony Explanations,” examines the effects of the boldest such policies: the near-doubling of minimum wages—to $15 per hour—in California and New York between 2013 and 2022. We find that these large minimum wage increases both raised pay for workers at the bottom of the earnings ladder and increased employment.
We focus on the lowest-wage workers—those employed in the fast-food industry and teen workers—who are often considered the most vulnerable to losing their jobs when minimum wages rise. Nonetheless, we find positive earnings and positive employment effects for both groups of workers in both states.
Our study uses data from the U.S. Bureau of Labor Statistics and the U.S. Census Bureau to study 47 large and mid-sized counties from these two states. Average wages in these counties span the distribution of average wages in counties across the United States. Our findings therefore contain lessons that are likely to apply to the entire country.
We compare each of these counties to a matched combination of counties that had similar wage and employment trajectories before 2013 and are in the 20 states where the minimum wage has remained at $7.25 since 2009.
We find substantial earnings increases and positive employment impacts. We also find that the employment effects are concentrated largely just below and above the new $15 minimum wage, with no significant effects for those higher up the earnings ladder. This result gives us confidence that our methods are not generating spurious positive employment effects.
Read the full article about minimum wage increases and society by Michael Reich, Justin Wiltshire and Carl McPherson at Washington Center for Equitable Growth.