Commentary

Top economic lesson of 2019: Raise the minimum wage

The Economic Policy Institute recently published its “Top 13 Charts of 2019” a series of brief takes on the state of the U.S. economy and how average workers are faring. One of the charts — number six — make clear that it’s past time for North Carolina to raise its minimum wage.

While federal policymakers have neglected to increase the federal minimum wage above $7.25 per hour, many states and cities have raised their own minimum wages above the federal level. As of July 2019, 29 states and the District of Columbia have wage floors higher than the federal minimum. The lowest-paid workers in these states are clearly better off than their counterparts in the states with a minimum wage still stuck at $7.25 per hour.

But the most meaningful boost to living standards appears in the states whose minimum wage increases have outpaced inflation. If we subtract the eight states whose increases have been too infrequent and small to stay ahead of the rising cost of living, it leaves 21 states (and the District of Columbia) where the inflation-adjusted minimum wage actually rose in value between 2010 and 2018.

The wages of low-wage workers in those states rose much faster than in states without real minimum wage increases. The figure shows the gains in the 10th percentile hourly wage (i.e., the wage for the worker who earns more than only 10% of all workers) between 2010 and 2018 for each set of states, overall and by gender. Between 2010 and 2018, the 10th percentile hourly wage increased 9.9% in states with real minimum wage increases, compared with growth of only 5.7% in states without an inflation-adjusted increase in their minimum wage. The figure also shows that real minimum wage increases were particularly beneficial to women. And if we convert the overall growth rate in the two sets of states to an annual rate, we see that  the 10th percentile wage grew 0.5 percentage points faster in states with real minimum wage increases than in states without real minimum wage increases. That’s a sizable benefit considering that labor markets were already tightening (i.e., employers were increasingly competing to fill jobs) in all states during this period).

Click here to explore the other 12 charts.

 

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