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.
Expected Beneficial Outcomes (Rated)
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 overall (Dube 2010*, Addison 2009*, Wolfson 2003a, Card 1994*). Other studies indicate that minimum wage increases can result in reduced employment, especially among younger, less educated, or unskilled workers (Addison 2013*, Sabia 2012, Neumark 2008*). Yet other studies find that minimum wage increases primarily benefit non-poor households (Sabia 2010*, Burkhauser 2007) and have no impact on poverty rates overall (Sabia 2010*, Burkhauser 2007, Neumark 2008*).
Increases in the minimum wage have been associated with increased crime rates, particularly among teenagers; researchers attribute this increase largely to reduced employment among teens (Beauchamp 2013, Hashimoto 1987*) and individuals whose hours are reduced or positions are eliminated following the increase (Beauchamp 2013). Increased minimum wages have also been associated with increases in drunk driving (Hashimoto 1987*) and alcohol-related accidents involving teens, as increased wages may be spent on alcohol (Adams 2012*). Changes in the minimum wage may also indirectly affect obesity rates; some studies suggest a relationship (NBER-Meltzer 2011) while others do not (Cotti 2013*).
Some researchers recommend indexing the minimum wage to inflation, so that it increases in step with the cost of living (CBPP-McNichol 2004). 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 2015 federal poverty guideline ($16,020 for a family of two) (US DHHS-Poverty).
A recent report projects 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). Modeling suggests that an estimated 11.4 million families would increase earnings, while approximately 89,000 individuals would lose their jobs following this change. This change would generate tax revenue and decrease governmental benefit expenditures by a total of approximately $15.2 billion (CDF 2015).
Impact on Disparities
As of March 2016, the federal minimum wage remains $7.25 per hour and five states (Alabama, Louisiana, Mississippi, South Carolina, and Tennessee) do not have a state minimum wage law and the federal law applies (LawAtlas-Wage). As of January, 2016, the District of Columbia has the highest minimum wages at $10.50 per hour, followed by California and Massachusetts with $10.00 per hour; 31 additional states have minimum wages that are higher than the federal minimum (NCSL-Minimum wage). In 2014, Seattle WA passed legislation to gradually increase its minimum wage to $15 per hour, the highest local minimum wage in the nation (Krisberg 2015).
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 calculations (NCCP).
Citations - Evidence
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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.
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.
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).
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.
Addison 2013* - Addison JT, Blackburn ML, Cotti CD. Minimum wage increases in a recessionary environment. Labour Economics. 2013;23:30–9.
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.
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.
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.
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.
Beauchamp 2013 - Beauchamp A, Chan S. The minimum wage and crime. B.E. Journal of Economic Analysis & Policy. 2013.
Hashimoto 1987* - Hashimoto M. The minimum wage law and youth crimes: Time-series evidence. Journal of Law and Economics. 1987;30(2):443–64.
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.
NBER-Meltzer 2011 - Meltzer DO, Chen Z. The impact of minimum wage rates on body weight in the United States. (Grossman M, Mocan NH, eds.). University of Chicago Press; 2011:17–34.
Cotti 2013* - Cotti C, Tefft N. Fast food prices, obesity, and the minimum wage. Economics and Human Biology. 2013;11(2):134–47.
CBPP-McNichol 2004 - McNichol L, Springer J. State policies to assist working-poor families. Washington, DC: Center on Budget and Policy Priorities (CBPP); 2004.
US DHHS-Poverty - Office of the Assistant Secretary for Planning and Evaluation (ASPE). 2012 HHS poverty guidelines: One version of the [US] federal poverty measure. US Department of Health and Human Services (US DHHS).
CDF 2015 - Ending child poverty now. Washington, DC: Children's Defense Fund (CDF); 2015.
Citations - Implementation Examples
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LawAtlas-Wage - Law Atlas. Minimum wage laws map.
NCSL-Minimum wage - National Conference of State Legislatures (NCSL). State Minimum Wages. 2013.
Krisberg 2015 - Krisberg, K. Raising minimum wage good for public health, not just wallets: Advocates call for federal increase. The Nation's Health. American Public Health Association (APHA). 2015;45(2):1-12.
NCCP - National Center for Children in Poverty (NCCP). Putting research to work for children and families.
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