Guess Where Low Wages Went Up? (Hint: Look where minimum wages went up.)

September 2nd, 2014 at 3:36 pm

EPI’s Elise Gould has a nifty bit of analysis that deserves attention. When looking at the most recent real wage trends by decile, she finds real losses in every decile except one: the first decile, aka the tenth percentile, which was essentially unchanged (up 0.3%).

Why might low-wage workers, of all people, buck the trend of real wage declines between the first half of last year and this year? Elise says: “Simple—several states raised their minimum wage over that period.”

In fact, 13 states raised their minimum wages in 2014 (see the list below). Elise compares the 10th percentile wage growth among these thirteen states that increased their minimums with the rest that did not. The results are the first two bars in the figure below.

Real wages for low-wage workers rose by just about 1% over the past year in the states that raised their minimum wages, and were flat (down 0.1%) in the other states.

OK, but did those increases bite into employment growth, as opponents typically insist must be the case? Not according to the other two sets of bars. They show that payroll employment growth was slightly faster in states that raised, and the decline in unemployment, slightly greater.

Now, these are all small changes and I wouldn’t make a federal case out of any of them. But I would forcefully assert that they clearly do not comport with the doomsday scenarios touted by the opponents of minimum wage increases.

The conclusion is one that’s especially relevant this week as the inadequacy of low-wage workers’ earnings and their actions to improve them are about to be back in the news. Contrary to the forces opposing a higher wage floor, the low-wage workers at greatest risk are not the ones who live in states that are raising their minimum wages; it’s the rest of ‘em.

EG_minwg

Source: Elise Gould, EPI; BLS (employment growth is percent change in payrolls; unemployment decline is percentage point changes in the rates).

Note: States that raised their min wg in 2014: AZ, CA, CT, FL, MO, MT, NJ, NY, OH, OR, RI, VT, WA. (H/t: BDaS)

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3 comments in reply to "Guess Where Low Wages Went Up? (Hint: Look where minimum wages went up.)"

  1. Allan says:

    The important question in the States where minimum wages were raised is what would have happened to job growth if minimum wages were not raised? It is only the answer to that question that can determine the efficacy of raising minimum wages compared with not raising.


  2. Tom in MN says:

    Your blue and (almost) red color coding is appropriate as the blue states, which raised min-wages, are generally doing better than red states. Our min-wage increase is also phasing in as of August 1. But we were already way better than the national average due to other good blue state stuff like more spending and tax increases on the wealthy. But the min-wage increase, even if it does not improve overall conditions, is just the fair thing to do and directly addresses inequality. Actually it should not be called a min-wage increase, but instead a reversal of min-wage cuts that have occurred since 60’s due to inflation.


  3. Fred Donaldson says:

    The hidden opposition to raising the minimum wage (especially in poor states) comes from those making a little more than the $7.25 an hour. The propaganda is that the hike will reward “burger-flippers” and other menial workers with $15 an hour, or the WH’s measly $10.10. Why should the “flippers” make as much as you, is the argument, ignoring the fact that you are being paid xyz dollars above the minimum wage, and that spread will most likely continue in full when the minimum goes up? Their $3 to $7.75 raise will probably lead to something like a $3 to $7.75 raise for you, as it also leads to an immensely stronger consumer base and reduced public welfare payments.

    The argument that the poor don’t deserve a raise – because they will make nearly as much as you – is both false and contrived. Unfortunately, both the Democrats and the unions have failed to make this overall impact on lower wages a focus in their support for change.


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