Minimum wage increases

Evidence Rating  
Mixed Evidence
Evidence rating: Mixed Evidence

Strategies with this rating have been tested more than once and results are inconsistent or trend negative; further research is needed to confirm effects.

Health Factors  
Decision Makers

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)

  • Increased income

  • Reduced poverty

  • Increased employment

Other Potential Beneficial Outcomes

  • Improved birth outcomes

  • Reduced suicide

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 less technically skilled workers9, 10, 11, though 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, revenue-generating 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%. The CBO report estimates that by 2025 a $15 per hour minimum wage would increase wages for 27.3 million workers35. 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.

Equity Analysis

Potential to decrease disparities: Supported by some evidence

There is some evidence that increasing the minimum wage has the potential to decrease disparities in socioeconomic status among working-age adults by increasing the incomes of workers earning low wages with minimal or no adverse employment effects2, 3, 4, 5, 6, 7. Evidence is mixed regarding the effects of minimum wage increases on employment, with at least one meta-analysis finding no reduction overall8 and other studies finding reduced employment among younger, less educated, or less technically skilled workers9, 10, 11. A recent Congressional Budget Office (CBO) report estimates that increasing the federal minimum wage to $15 per hour would result in a net poverty reduction35.

Some experts suggest that cash-transfer programs such as the Earned Income Tax Credit (EITC) could raise the incomes of individuals in households experiencing poverty more effectively than raising the minimum wage44. Other experts assert that increased income from a higher minimum wage benefits individuals and families regardless of whether the worker’s household is currently below, at, or above the poverty threshold45. State and federal minimum wage increases may also reduce recidivism among men and women who have been in prison, more than the EITC28 and Black and Hispanic individuals make up a disproportionately high share of individuals incarcerated in prison in the US46.

Research suggests minimum wage workers are more likely to be women than men, and that states in the southern US have the highest percentages of hourly employees paid at or below federal minimum wage40, 47. States in the southern US also contain the most counties where Black or Hispanic people are the majority or represent a larger population share than in the U.S. overall48. Black people make up 58% of the population in the southern US48. Florida is the only Gulf state that increased its minimum wage; Texas, Oklahoma, Louisiana, Mississippi, Alabama, and Georgia all match or follow the federal minimum wage of $7.25 per hour39. At least one study on the effect of raising the minimum wage in the lowest-wage states, such as Alabama and Mississippi, suggests minimum wage increases would raise wages the most in the lowest-wage areas, reduce rates of households and children living in poverty, and would not negatively affect employment2.

Historical Context

Advocates for a minimum wage in the late 19th and early 20th centuries described it as a living wage, arguing that a minimum wage should cover an individual’s basic needs49, 50. In response, the US federal minimum wage was established in 1938 via the Fair Labor Standards Act (FLSA), with related worker protections51. The aim was to set a minimum standard for conditions needed to support workers’ health, efficiency and well-being45. However, the minimum wage is not indexed to inflation and policymakers have not increased the federal minimum wage alongside increases in the cost of living29. As such, the value of the minimum wage has eroded over time while the median wage has increased. This contributes to growing inequality between low-wage and middle-wage workers52 and lowered living standards for workers earning minimum wage47.

Agricultural and domestic workers, despite being a large share of the workforce, were excluded from the FLSA53 and the national unemployment insurance (UI) program created in 193554. 65 percent of Black Americans (and up to 80 percent in some parts of the southern US) and 40 percent of whites were not initially covered by UI or by Social Security Insurance54. This exclusion reinforced state-sanctioned marginalization of Black workers and reproduced the U.S. racial power structure in the development of welfare programs—by making whites the primary recipients of generous social insurance programs54.

Living wage campaigns in the 1990s and later have drawn attention to workers living in poverty and asserted that the minimum wage does not qualify as a living wage as it fails to meet workers’ and their families’ basic needs without supplemental assistance55. Campaigns, such as in Baltimore, have been supported by coalitions which include workers and activists of color, women, and immigrants49. Such campaigns advocate for adoption of local wages above the federal minimum, basing estimates on the income a family of four would need to pay for childcare, food, health care, transportation, and other necessities49. Campaigns often advocate for related rights and protections for workers, such as paid vacation and protections for those doing union organizing, and often for raising minimum wages statewide49. Experts suggest that successful living wage campaigns include a coalition aligning trade unions and community-based social justice advocates49. Living wage laws in practice cover a smaller percentage of workers than the federal minimum wage. Some cities with living wage ordinances went on to pass a higher city minimum wage, covering more workers56.

Since 1997, 26 states have passed preemption laws which prevent localities from implementing a minimum wage or living wage higher than the state minimum (or federal minimum, in some states), regardless of local costs of living1. These include states in the southern US with the lowest wages2, the highest percentages of Black Americans48, and the most rural counties with high and persistent rates of poverty57.

Equity Considerations

  • What jobs in your area or state are likely to pay minimum wage, or near minimum wage? Who works in those jobs?
  • What efforts exist in your area or state to increase wages in job sectors with historically low wages, such as hospitality? How can you partner or align with those efforts?
  • What strategies can you consider to ensure that minimum wages keep up with inflation and cost of living increases?
  • How do preemption laws impact your ability to implement minimum wage increases?

Implementation Examples

As of January 2022, the federal minimum wage remains $7.25 per hour37.

30 states and the District of Columbia have minimum wages that are higher than the federal minimum38. Washington, DC has the highest minimum wage at $15.20 per hour39. 18 states and DC have minimum wages which increase automatically with the cost of living39. 40 localities have minimum wages higher than their state minimum wage39.

21 states increased their minimum wages on January 1, 2021 and 5 additional states increased their minimum wage throughout 202138. States with less than one percent of hourly paid workers earning at or below the federal minimum wage are Alaska, Arizona, Arkansas, California, Colorado, Connecticut, Montana, Nevada, New York, Oregon, South Dakota, and Washington40. Of these, only Oregon and Arkansas have preemption laws in place which prohibit setting local minimum wage levels higher than the state or federal minimum wage1, but both states have state minimums higher than the federal minimum wage39.

Southern states have the highest percentage of hourly paid workers earning at or below the federal minimum wage40. Five states (Alabama, Louisiana, Mississippi, South Carolina, and Tennessee) do not have a state minimum wage and two (Georgia and Wyoming) have a state minimum wage lower than the federal minimum wage so the federal law applies37. All of these states, except Wyoming, have preemption laws in place which prohibit setting local minimum wage levels higher than the state or federal minimum wage1. Birmingham, AL’s city council passed a city-wide minimum wage ordinance in 2015 to raise wages above $7.25 per hour but the AL state legislature passed a preemption law before the ordinance took effect1. A living wage in Shelby County, AL for a household with two working adults and two children is estimated to be $22.3241. As of 2020, 25 states have preemption laws in place which prohibit setting local minimum wage levels higher than the state or federal minimum wage1; Colorado repealed its preemption law in 201942.

The number of workers earning at or below the federal minimum wage fell due to state minimum wage increases and the impacts COVID-19 had on the labor market. In 2021, 1.1 million workers earned wages at or below the federal minimum wage, or 1.4% of all hourly paid workers40. As of 2021, individuals earning at or below the federal minimum wage are more likely to be 25 years old or older, and slightly more likely to be women than men40.

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 calculations43.

Implementation Resources

EPI-Minimum Wage Tracker - Economic Policy Institute (EPI). Minimum Wage Tracker.

Footnotes

* Journal subscription may be required for access.

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 FRB-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 EPI-Minimum Wage Tracker - Economic Policy Institute (EPI). Minimum Wage Tracker.

40 US BLS-Wage 2022 - US Bureau of Labor Statistics (BLS). Characteristics of minimum wage workers, 2021. 2022.

41 Living Wage Calculator - Living Wage Calculator. Introduction to the living wage calculator.

42 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.

43 NCCP - National Center for Children in Poverty (NCCP). Putting research to work for children and families.

44 Sabia 2014 - Sabia JJ. Minimum wages: An antiquated and ineffective antipoverty tool. Journal of Policy Analysis and Management. 2014;33(4),1028-1036.

45 Bernstein 2014* - Bernstein J, Shierholz H. The minimum wage: A crucial labor standard that is well-targeted to low- and moderate-income households. Point/Counterpoint. Journal of Policy Analysis and Management. 2014;33(4):1036-1043.

46 Pew-Gramlich 2020 - Gramlich J. Black imprisonment rate in the US has fallen by a third since 2006. Washington, DC: Pew Research Center; 2020.

47 CBPP-Minimum wage 2018 - Center on Budget and Policy Priorities (CBPP). Policy basics: The minimum wage. Washington, DC: Center on Budget and Policy Priorities (CBPP); 2018.

48 Brookings-Frey 2019 - Frey WH. Six maps that reveal America’s expanding racial diversity. Washington, DC: Brookings Institution; 2019.

49 Evans 2016 - Evans B, Fanelli C. A survey of the living wage movement in Canada: Prospects and challenges. Interface. 2016;8(1):77-96.

50 Luce 2005* - Luce S. The role of community involvement in implementing living wage ordinances. Industrial Relations. 2005;44(1):32-58.

51 US DOL-FLSA - US Department of Labor (US DOL). Wages and the Fair Labor Standards Act (FLSA).

52 Autor 2016 - Autor DH, Manning A, Smith CL. The contribution of the minimum wage to US wage inequality over three decades: A reassessment. American Economic Journal: Applied Economics. 2016;8(1):58-99.

53 NELP-Dixon 2021 - National Employment Law Project (NELP): Testimony of Rebecca Dixon. From excluded to essential: Tracing the racist exclusion of farmworkers, domestic workers, and tipped workers from the Fair Labor Standards Act. Hearing before the US House of Representatives Education and Labor Committee, Workforce Protections Subcommittee. 2021.

54 Rodems 2016 - Rodems R, Shaefer H. Left out: Policy diffusion and the exclusion of black workers from unemployment insurance. Social Science History. 2016;40(3):385-404.

55 Horton 2018* - Horton A, Wills J. Chapter 13: Impacts of the living wage on in-work poverty. In: Lohmann H, Marx I, eds. Handbook on In-Work Poverty. Cheltenham, UK: Edward Elgar Publishing; 2018:228-244.

56 Sosnaud 2016* - Sosnaud B. Living wage ordinances and wages, poverty, and unemployment in US cities. Social Service Review. 2016;90(1):3-34.

57 USDA-ERS 2019 - US Department of Agriculture (USDA), Economic Research Service (ERS). High and persistent poverty rates in US rural counties, 2019.

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