Social & Economic Factors Education Employment Income Family & Social Support Community Safety Search Policies & Programs

hints
Display All Policies & Programs

Minimum wage increases

Health Factors: Income
Decision Makers: Local Government State Government Federal Government
Evidence Rating: Mixed Evidence
Population Reach: 10-19% of WI's population
Impact on Disparities: Likely to decrease disparities

Is this program or policy in use in your community? Tell us about it.

Description

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

Increased income
Reduced poverty
Increased employment

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).

Implementation

United States

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).

Wisconsin

As of July 2009, Wisconsin’s minimum wage is $7.25 per hour, matching the federal rate (NCSL-Minimum wage).

Citations - Evidence

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. Accessed on December 15, 2015
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. Accessed on November 23, 2015
Addison 2013* - Addison JT, Blackburn ML, Cotti CD. Minimum wage increases in a recessionary environment. Labour Economics. 2013;23:30–9. Accessed on December 8, 2015
Beauchamp 2013 - Beauchamp A, Chan S. The minimum wage and crime. B.E. Journal of Economic Analysis & Policy. 2013. Accessed on December 14, 2015
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. Accessed on December 1, 2015
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. Accessed on March 14, 2016
CBPP-McNichol 2004 - McNichol L, Springer J. State policies to assist working-poor families. Washington, DC: Center on Budget and Policy Priorities (CBPP); 2004. Accessed on August 2, 2017
CDF 2015 - Ending child poverty now. Washington, DC: Children's Defense Fund (CDF); 2015. Accessed on July 27, 2017
Cotti 2013* - Cotti C, Tefft N. Fast food prices, obesity, and the minimum wage. Economics and Human Biology. 2013;11(2):134–47. Accessed on December 8, 2015
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. Accessed on December 22, 2015
Hashimoto 1987* - Hashimoto M. The minimum wage law and youth crimes: Time-series evidence. Journal of Law and Economics. 1987;30(2):443–64. Accessed on December 10, 2015
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. Accessed on December 10, 2015
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. Accessed on February 29, 2016
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. Accessed on November 9, 2015
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. Accessed on December 8, 2015
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). Accessed on September 13, 2017
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). Accessed on November 24, 2015

Citations - Implementation

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. Accessed on February 5, 2016
LawAtlas-Wage - Law Atlas. Minimum wage laws map. Accessed on March 14, 2016
NCCP - National Center for Children in Poverty (NCCP). Putting research to work for children and families. Accessed on March 14, 2016
NCSL-Minimum wage - National Conference of State Legislatures (NCSL). State Minimum Wages. 2013. Accessed on November 18, 2015

Page Last Updated

March 14, 2016

* Journal subscription may be required for access.