An analysis of the significance of increasing minimum wage in building prosperity from the bottom up

Some skeptics have argued that only a very small share of workers actually receive the minimum wage, and furthermore, that many of those workers are not struggling adults, but rather teenagers from affluent families. Our main goal of this empirical exercise is to dispel the notion that the minimum wage is not a relevant policy lever, which is based on the faulty premise that only a small number of workers would be affected.

The Baltimore bill would also gradually close the gap between the regular minimum wage and the subminimum wage paid to workers who regularly receive tips also known as the tipped minimum wage.

We hasten to note that a complete analysis of the net effects of a minimum wage increase would also have to account for potential negative employment effects.

This proposal would raise wages for 98, working people—about 27 percent of all Baltimore workers. Workers in lower-income households would disproportionately benefit from the minimum-wage increase.

In addition, the report examines the demographics of affected workers, including their age, gender, race and ethnicity, education levels, work hours, family status, household composition, and family income, as well as the industry in which they work.

The Productivity–Pay Gap

For decades following the enactment of the federal minimum wage inCongress regularly raised the minimum wage to account for increasing costs of living. The chart below shows how the jobs gap has evolved since the start of the Great Recession in Decemberand how long it will take to close under different assumptions of job growth.

The solid line shows the net number of jobs lost since the Great Recession began. On average, affected workers earn For the purpose of this analysis, we set aside the important issue of potential employment effects, which is another crucial element in the debate about an optimal minimum wage policy.

This holds true in the states that comply with the federal minimum wage, in addition to those states that have instituted their own higher minimum wage levels.

Using data from the Bureau of Labor Statistics, combined with information on the binding minimum wage in each state, we are able to calculate these shares. The broken lines track how long it will take to close the jobs gap under alternative assumptions about the rate of job creation going forward.

This approach misses a large number of low-wage workers whose wages would likely be raised through a ripple effect resulting from an increase in the minimum wage. InMontana had the highest share of workers— The industries with the largest shares of affected workers are hospitality and retail.

This effect of the statutory minimum wage on wages paid at the low end of the wage distribution more generally is well recognized in the academic literature.

Understanding the magnitude of the impact of a federal or state-level minimum wage increase on workers is an important first step in informing the policy debate.

This has become an important policy prescription in movements to combat poverty. Indeed, every state in the country has a substantial share of workers who would be impacted by an increase in the minimum wage in that state, as seen in figure 1 below.

Women would comprise If the economy adds aboutjobs per month, which was the average monthly rate for the best year of job creation in the s, then it will take until September to close the jobs gap.

Table 1 shows this schedule versus that proposed by the Baltimore bill, both for the overall minimum wage and the tipped minimum wage.

'Boosting the economy from the bottom up': Why minimum wage hikes are a good thing

In the high-population state of California, 4. Over 60 percent of Baltimore workers in these industries would benefit from the increase.

The minimum wage is intended to ensure that work provides the means to a decent standard of living. Even in Alaska, which boasts higher wages compared to the rest of the country, In these states, 3.

In lieu of federal action on the minimum wage, many states and localities have elevated their own minimum wages above the federal minimum. Far from the stereotype of low-wage workers being teenagers working to earn spending money, those who would benefit are overwhelmingly adult workers, most of whom come from families of modest means, and many of whom are supporting families of their own.

While low- and middle-income Americans are treading water, an enormous and rising share of income growth goes to corporate profits and the top 1 percent.Broad-based wage growth is the key to reversing the rise of income inequality, enhancing social mobility, reducing poverty, boosting middle-class incomes, and aiding asset-building and retirement security.

How to Raise Wages: Policies That Work and Policies That Don’t | March 19, Wage stagnation is not inevitable. 7 nternational Journal of Labour Research ol. 4 Issue This issue of the International Journal of Labour Research is wholly dedi- cated to the question of the minimum wage, a matter that has gained in importance and profile in recent years.

The minimum wage debate currently underway tends to narrowly focus on those workers making exactly the minimum wage. This approach misses a large number of low-wage workers whose wages would likely be raised through a ripple effect resulting from an increase in the minimum wage.

According to our analysis, a sustained percentage point drop in the unemployment rate translates to a percent increase in the wages of a worker at the 20 th percentile of the wage distribution.

It would lead to a wage gain for a worker in the middle of the wage distribution of percent. In the article, "Building Prosperity from the Bottom Up", author Thomas Palley argues that increasing minimum wage would not only improve the standard of living for the lower class, but it would also help the middle class as.

Thomas Palley provides an excellent defense of “the new economics of the minimum wage” in “Building Prosperity from the Bottom Up,” in the September/October issue of Challenge magazine.

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An analysis of the significance of increasing minimum wage in building prosperity from the bottom up
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