A minimum wage is the lowest hourly, daily, or monthly compensation that employers may legally pay to workers. The federal government and many states have established minimum wage laws. Where federal and state law have different rates, the higher minimum wage standard applies. Some local governments cannot enact such measures due to state preemption legislation1.
Expected Beneficial Outcomes (Rated)
Other Potential Beneficial Outcomes
Improved birth outcomes
Evidence of Effectiveness
There is mixed evidence about the effects of increasing the minimum wage on income, employment, and poverty.
A number of studies find that increasing the minimum wage increases workers’ incomes with little or no evidence of job loss overall2, 3, 4, 5, 6, 7. A recent review of US studies finds minimum wage increases do not reduce employment overall and suggests small negative effects are primarily among teenagers8. Other studies indicate that minimum wage increases can result in reduced employment, especially among younger, less educated, or unskilled workers9, 10, 11, reduced employment may be in sectors such as manufacturing rather than restaurants or retail, which employ the majority of minimum wage workers12. Recent research also suggests that increases to the minimum wage may lead teens to increase their focus on education; teens who are not employed are more likely to be in school, rather than not in school and not employed13.
Yet other studies find that minimum wage increases primarily benefit non-poor households14, 15 and have no impact on poverty rates overall11, 14, 15. Still others find more complex effects, such as a Seattle-based study that suggests increases in the minimum wage may contribute to reduced entries into the workforce, and reduced employee hours, though wages may increase overall for workers with more experience and employee turnover is reduced16.
Higher minimum wages may reduce absence due to illness among covered workers17, and may, in some cases, improve self-reported access to care and diet quality, though effects vary18. Some studies suggest changes in the minimum wage may also indirectly affect obesity rates19 while others do not20. Increasing the minimum wage may decrease rates of suicide among adults with a high school education or less21, particularly during times of high unemployment22.
Increasing the minimum wage may increase use of prenatal care, reduce smoking during pregnancy23, and may increase birthweight23, 24, and decrease rates of infant mortality24. Increases in the minimum wage are also significantly associated with a decline in child maltreatment reports, particularly neglect25.
Increased minimum wages have also been associated with increases in alcohol-related accidents involving teens, as increased wages may be spent on alcohol26. Other research finds that minimum wage increases do not increase wages for teens overall, and are not associated with increased alcohol consumption, binge drinking, or drunk driving among teens, and may be associated with reductions in alcohol consumption for older teens27. Other studies suggest increases in the minimum wage reduce recidivism rates for non-violent crime28.
Some researchers recommend indexing the minimum wage to inflation, so that it increases in step with the cost of living29. Full-time earnings at the federal minimum wage of $7.25 an hour (set in 2009) do not bring a family of two over the 2020 federal poverty guideline ($17,240 for a family of two)30. Some experts also recommend increasing the minimum wage alongside increases in the amount of the Earned Income Tax Credit (EITC)31, 32, 33, 34.
A recent Congressional Budget Office (CBO) report suggests increasing the minimum wage to $15 per hour would increase income by 5.3% on average, for families below the poverty threshold; incomes for those above the poverty line would be reduced by 0.1%35. A 2015 report projected that increasing the minimum wage from $7.25 to $10.10 ($7.07 for tipped workers) would reduce child poverty by 4% (400,000 children)36.
Impact on Disparities
As of January 2020, the federal minimum wage remains $7.25 per hour; five states (Alabama, Louisiana, Mississippi, South Carolina, and Tennessee) do not have a state minimum wage law and two have a minimum wage lower than the federal minimum wage (Wyoming and Georgia) so the federal law applies37. Washington, DC has the highest minimum wages at $14.00 per hour, followed by Washington State ($13.50), California ($13.00), and Massachusetts with $12.75 per hour; 29 states and the District of Columbia have minimum wages that are higher than the federal minimum38. Recent legislation will gradually increase the minimum wage to $15 per hour in California, Connecticut, Illinois, Maryland, Massachusetts, New Jersey, New York, and Washington, DC38. As of 2020, 25 states have pre-emption laws in place which prohibit setting local minimum wage levels higher than the state or federal minimum wage1; Colorado repealed its pre-emption law in 201939.
In 2018, 1.7 million workers earned wages at or below the federal minimum wage, or 2.1% of all hourly paid workers40. As of January 2020, individuals earning at or below the federal minimum wage are more likely to be 25 years old or older, and slightly more women than men are paid at or below the federal minimum wage41. The National Center for Children in Poverty’s Basic Needs Budget suggests that parents generally need earnings of one-and-a-half to three-and-a-half times the federal poverty level to cover their family’s living expenses. This tool includes basic living expenses such as housing, child care, and health care in its calculations42.
EPI-Minimum Wage Tracker - Economic Policy Institute (EPI). Minimum Wage Tracker.
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1 EPI 2018 - Economic Policy Institute (EPI). Worker rights preemption in the US.
2 Godoy 2019 - Godøy A, Reich M. Minimum wage effects in low-wage areas. Institute for Research on Labor and Employment (IRLE). 2019: Working Paper 106-19.
3 Allegretto 2011* - Allegretto SA, Dube A, Reich M. Do minimum wages really reduce teen employment? Accounting for heterogeneity and selectivity in state panel data. Industrial Relations. 2011;50(2):205-240.
4 Dube 2010* - Dube A, Lester TW, Reich M. Minimum wage effects across state borders: Estimates using contiguous counties. Review of Economics and Statistics. 2010;92(4):945–64.
5 Addison 2009* - Addison JT, Blackburn ML, Cotti CD. Do minimum wages raise employment? Evidence from the US retail-trade sector. Labour Economics. 2009;16(4):397-408.
6 Wolfson 2003a - Wolfson P, Belman D. The minimum wage: Consequences for prices and quantities in low-wage labor markets. Journal of Business & Economic Statistics. 2003;22(3).
7 Card 1994* - Card D, Krueger AB. Wages and employment: A case study of the fast-food industry in New Jersey and Pennsylvania. American Economic Review. 1994;84(4):772–93.
8 Wolfson 2019* - Wolfson P, Belman D. 15 years of research on US employment and the minimum wage. Labour. 2019;33(4):488-506.
9 Addison 2013* - Addison JT, Blackburn ML, Cotti CD. Minimum wage increases in a recessionary environment. Labour Economics. 2013;23:30–9.
10 Sabia 2012* - Sabia JJ, Burkhauser R V, Hansen B. Are the effects of minimum wage increases always small? New evidence from a case study of New York state. Industrial and Labor Relations Review. 2012;65(2):350-76.
11 Neumark 2008* - Neumark D, Wascher W. Minimum wages and low-wage workers: How well does reality match the rhetoric? Minnesota Law Review. 2008;92(5):1296-1317.
12 NBER-Cengiz 2019* - Cengiz D, Dube A, Lindner A, Zipperer B. The effect of minimum wages on low-wage jobs: Evidence from the United States using a bunching estimator. National Bureau of Economic Research (NBER). 2019: Working Paper 25434.
13 Neumark 2019* - Neumark D, Shupe C. Declining teen employment: Minimum wages, returns to schooling, and immigration. Labour Economics. 2019;59:49-68.
14 Sabia 2010* - Sabia JJ, Burkhauser RV. Minimum wages and poverty: Will a $9.50 federal minimum wage really help the working poor? Southern Economic Journal. 2010;76(3):592-623.
15 Burkhauser 2007 - Burkhauser RV, Sabia JJ. The effectiveness of minimum-wage increases in reducing poverty: Past, present, and future. Contemporary Economic Policy. 2007;25(2):262-81.
16 NBER-Jardim 2018* - Jardim E, Long MC, Plotnick R, et al. Minimum wage increases and individual employment trajectories. National Bureau of Economic Research (NBER). 2018: Working Paper 25182.
17 Du 2018* - Effects of minimum wages on absence from work due to illness. The BE Journal of Economic Analysis & Policy. 2018.
18 Narain 2019 - Narain KDC, Zimmerman FJ. Examining the association of changes in minimum wage with health across race/ethnicity and gender in the United States. BMC Public Health. 2019;19(1):1-20.
19 NBER-Meltzer 2011 - Meltzer DO, Chen Z. The impact of minimum wage rates on body weight in the United States. In: Grossman M, Mocan NH, eds. Economic Aspects of Obesity. University of Chicago Press; 2011:17–34.
20 Cotti 2013* - Cotti C, Tefft N. Fast food prices, obesity, and the minimum wage. Economics and Human Biology. 2013;11(2):134–47.
21 NBER-Dow 2019* - Dow W, Godøy A, Lowenstein C, Reich M. Can economic policies reduce deaths of despair? National Bureau of Economic Research (NBER). 2019: Working Paper 25787.
22 Kaufman 2020 - Kaufman JA, Salas-Hernández LK, Komro KA, Livingston MD. Effects of increased minimum wages by unemployment rate on suicide in the USA. Journal of Epidemiology and Community Health. 2020;74(3):219-224.
23 NBER-Wehby 2018* - Webhy G, Dave D, Kaestner R. Effects of the minimum wage of infant health. National Bureau of Economic Research (NBER). 2018: Working Paper 22373.
24 Komro 2016 - Komro KA, Livingston MD, Markowitz S, Wagenaar AC. The effect of an increased minimum wage on infant mortality and birth weight. American Journal of Public Health. 2016;106(8):1514-1516.
25 Raissian 2017* - Raissian KM, Bullinger LR. Money matters: Does the minimum wage affect child maltreatment rates? Children and Youth Services Review. 2017;72:60-70.
26 Adams 2012* - Adams S, Blackburn ML, Cotti CD. Minimum wages and alcohol-related traffic fatalities among teens. Review of Economics and Statistics. 2012;94(3):828–40.
27 Sabia 2014* - Sabia JJ, Pitts M, Argys L. Do minimum wages really increase youth drinking and drunk driving? Federal Reserve Bank of Atlanta. 2014: Working Paper 2014-20.
28 NBER-Agan 2018a* - Agan AY, Makowsky MD, Clemens J, et al. The minimum wage, EITC, and criminal recidivism. National Bureau of Economic Research (NBER). 2018: Working Paper 25116.
29 CBPP-McNichol 2004 - McNichol L, Springer J. State policies to assist working-poor families. Washington, DC: Center on Budget and Policy Priorities (CBPP); 2004.
30 US DHHS-Poverty - Office of the Assistant Secretary for Planning and Evaluation (ASPE). 2020 HHS poverty guidelines: One version of the [US] federal poverty measure. US Department of Health and Human Services (US DHHS).
31 Grimes 2019* - Grimes DR, Prime PB, Walker MB. Geographical variation in wages of workers in low-wage service occupations: A US metropolitan area analysis. Economic Development Quarterly. 2019; 33(3).
32 CBPP-Williams 2019 - Williams E, Waxman S. State Earned Income Tax Credits and minimum wages work best together. Center on Budget and Policy Priorities (CBPP). 2019.
33 NASEM 2019 - National Academies of Sciences, Engineering and Medicine. A roadmap to reducing child poverty. Washington DC: The National Academies Press; 2019.
34 Leigh 2018 - Leigh JP, Du J. Effects of minimum wages on population health. Health Affairs Health Policy Brief. 2018.
35 CBO-Wage 2019 - Congressional Budget Office (CBO). The effects on employment and family income of increasing the federal minimum wage. 2019.
36 CDF 2015 - Ending child poverty now. Washington, DC: Children's Defense Fund (CDF); 2015.
37 US DOL-Minimum wage - US Department of Labor (US DOL). State minimum wage laws.
38 NCSL-Minimum wage - National Conference of State Legislatures (NCSL). State minimum wages. 2020.
39 NELP-Lathrop 2019 - Lathrop, Y. Raises from coast to coast in 2020: Minimum wage will increase in record-high 47 states, cities, and counties this January. New York, NY: National Employment Law Project (NELP); 2019.
40 US BLS-Wage 2018 - US Bureau of Labor Statistics (BLS). Characteristics of minimum wage workers, 2018.
41 US BLS-CPS 2020 - US Bureau of Labor Statistics (BLS). Labor force statistics from the Current Population Survey (CPS).
42 NCCP - National Center for Children in Poverty (NCCP). Putting research to work for children and families.
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