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The $10.10 Minimum Wage Proposal: An Evaluation across States

Abstract

This paper offers state-level estimates of job loss from increasing the federal minimum wage to $10.10 per hour in 2016. Given the vast differences in nominal wages across geography, a federal increase in minimum wage that is not indexed to local wage levels will have a differential impacts across states. The proposed minimum wage would be binding for between 17 and 18 % of workers nationally. We estimate coverage rates ranging from just 4 % in Washington D.C. to as high as 51 % in Puerto Rico, with 13 states having at least 20 % of the employed population covered by the proposal. Using labor demand elasticities from previous empirical work, these coverage rates imply national employment losses between 550,000 and 1.5 million workers. The range of state estimates shows that states are differentially impacted, with high-end loss estimates ranging between 2.8 % of covered employees in Arkansas to over 41 % in Puerto Rico. Sensitivity analysis highlights that using even a simple methodology with relatively few assumptions for estimating employment loss from minimum wage changes is subject to a high degree of uncertainty.

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Fig. 1

Notes

  1. The Fair Labor Standards Act, which established the minimum wage, currently applies to about two-thirds of workers (CBO 2014).

  2. See http://www.bls.gov/oes/current/oessrcst.htm to download the state-level files detailing the wage and salary distribution.

  3. See http://www.bls.gov/news.release/cpi.nr0.htm for the most current CPI data.

  4. The CBO report inflates the wage and employment distribution by a 2.9 % annual rate up to 2016 to match the $10.10 proposal.

  5. For a thorough review of this literature see Brown et al. (1982).

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Correspondence to Andrew Hanson.

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Hanson, A., Hawley, Z. The $10.10 Minimum Wage Proposal: An Evaluation across States. J Labor Res 35, 323–345 (2014). https://doi.org/10.1007/s12122-014-9190-8

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  • DOI: https://doi.org/10.1007/s12122-014-9190-8

Keywords

  • Minimum wage
  • Fiscal federalism
  • Employment

JEL

  • J18
  • J38