On July 18, 2019, the U.S. House of Representatives passed an amended version of the Raise the Wage Act of 2019, which would raise the federal minimum wage to $15 by 2025. EPI published a fact sheet analyzing the impact of raising the federal minimum wage to $15 by 2025.

Introduction and executive summary

The federal minimum wage was established in 1938, as part of the Fair Labor Standards Act (FLSA), to help ensure that all work would be fairly rewarded and that regular employment would provide a decent quality of life. In theory, Congress makes periodic amendments to the FLSA, increasing the federal minimum wage so that even the lowest-paid jobs in the economy still pay enough for workers to meet their needs, and helping ensure that low-wage workers benefit from economywide improvements in productivity, wages, and living standards.

Yet since the late 1960s, lawmakers have let the value of the minimum wage erode, allowing inflation to gradually reduce the buying power of a minimum wage income. When the minimum wage has been raised, the increases have been too small to counter the decline in value that has occurred since 1968, when the minimum wage hit its peak in inflation-adjusted terms. In 2018, the federal minimum wage of $7.25 was worth 14.8 percent less than when it was last raised in 2009, after adjusting for inflation, and 28.6 percent below its peak value in 1968, when the minimum wage was the equivalent of $10.15 in 2018 dollars.

This decline in purchasing power means low-wage workers have to work longer hours now just to achieve the standard of living that was considered the bare minimum half a century ago. Since the 1960s, the United States has achieved tremendous improvements in labor productivity that could have allowed workers at all pay levels to enjoy a significantly improved quality of life (Bivens et al. 2014). Instead, because of policymakers’ failure to preserve this basic labor standard, a parent who is the sole breadwinner for her family and who is earning the minimum wage today does not earn enough through full-time work to bring her family above the federal poverty line.

Restoring the value of the minimum wage to at least the same level it was at a generation ago should be uncontroversial. But such a raise would be insufficient. The technological progress and productivity improvements that the country has achieved over the last 50 years have not benefited all of America’s workers. This means lawmakers must strive to enact minimum wage increases that are bolder than the typical legislated increases in recent decades.

On January 16, 2019, Sen. Bernie Sanders (I-Vt.) and Rep. Bobby Scott (D-Va.) announced that they would introduce the Raise the Wage Act of 2019, a bill that would raise the federal minimum wage in six steps to $15 per hour by 2024. Beginning in 2025, the minimum wage would be “indexed” to median wages so that each year, the minimum wage would automatically be adjusted based on growth in the median wage. The bill would also gradually increase the subminimum wage for tipped workers (or “tipped minimum wage”), which has been fixed at $2.13 per hour since 1991, until it reaches parity with the regular minimum wage.1

This report begins by providing historical context for the current value of the federal minimum wage and the proposed increase to $15 by 2024. It then describes the population of workers likely to receive higher pay under an increase to $15 by 2024, with detailed demographic data that refute a number of common misconceptions about low-wage workers. Next, it describes the provisions of the Raise the Wage Act that would index the minimum wage to the median wage, and gradually eliminate the subminimum wage for tipped workers. The report concludes with a discussion of the research on the likely effects such a raise would have on businesses, employment, and low-wage workers’ welfare.

This report finds that:

• Raising the minimum wage to $15 by 2024 would undo the erosion of the value of the real minimum wage that began primarily in the 1980s. In fact, by 2021, for the first time in over 50 years, the federal minimum wage would exceed its historical inflation-adjusted high point, set in 1968.
• Gradually raising the minimum wage to $15 by 2024 would directly lift the wages of 28.1 million workers. The average directly affected worker who works all year would receive a $3,900 increase in annual wage income—equal to a raise of 20.9 percent. Another 11.6 million workers would benefit from a spillover effect as employers raise wages of workers making more than $15 in order to attract and retain employees.
• All told, raising the minimum wage to $15 by 2024 would directly or indirectly lift wages for 39.7 million workers, 26.6 percent of the wage-earning workforce.
• Over the phase-in period of the increases, the rising wage floor would generate $118 billion in additional wages, which would ripple out to the families of these workers and their communities. Because lower-paid workers spend much of their extra earnings, this injection of wages would help stimulate the economy and spur greater business activity and job growth.
• The workers who would receive a pay increase are overwhelmingly adult workers, most of whom work full time in regular jobs, often to support a family.
  • The average age of affected workers is 35 years old. A larger share of workers ages 55 and older would receive a raise (14.6 percent) than teens (9.3 percent). More than half of all affected workers are prime-age workers between the ages of 25 and 54.
  • Although men make up a larger share of the overall U.S. workforce, the majority of workers who would be affected by a raise to the minimum wage (57.9 percent) are women.
  • The minimum wage increase would disproportionately raise wages for people of color—for example, black workers make up 11.8 percent of the workforce but 16.9 percent of affected workers. This disproportionate impact means large shares of black and Hispanic workers would be affected: 38.1 percent of black workers and 33.4 percent of Hispanic workers would get a raise.
  • Of workers who would receive a raise, 60.0 percent work full time, 44.0 percent have some college experience, and more than a quarter (28.3 percent) have children.
  • Nearly four out of every 10 single parents who work (38.9 percent) would receive higher pay, including 43.0 percent of working single mothers. In all, 5.4 million single parents would benefit, accounting for 13.5 percent of those who would be affected by raising the minimum wage to $15 by 2024.
• The workers with families who would benefit are typically the primary breadwinner for their family, earning an average of 51.9 percent of their family’s total income.
• The Raise the Wage Act would disproportionately help those in poverty or close to it. Two-thirds (67.3 percent) of the working poor in America would receive a pay increase if the minimum wage were raised to $15 by 2024.
• A federal minimum wage increase to $15 in 2024 would raise wages for the parents of 14.4 million children across the United States, nearly one-fifth (19.6) percent of all U.S. children.
• Indexing the minimum wage to the median wage would ensure that low-wage workers share in broad improvements in U.S. living standards and would prevent future growth in inequality between low- and middle-wage workers.

The minimum wage in context

Since its inception in 1938, the federal minimum wage has been adjusted through legislated increases nine times—from a nominal (non-inflation-adjusted) value of 25 cents per hour in 1938 to the current $7.25, where it has remained since 2009. These increases have been fairly irregular, varying in size and with differing lengths of time between increases. Yet aside from a few very brief deflationary periods in the post–World War II era, prices have consistently risen year after year. Each year that the minimum wage remains unchanged, its purchasing power slowly erodes until policymakers enact an increase. This haphazard maintenance of the wage floor has meant that low-wage workers of different generations or in different decades have been protected by significantly different wage standards.

Figure A shows the nominal and inflation-adjusted (real) value of the minimum wage since 1938, as well as the value of the minimum wage had it increased at the rate of productivity (specifically, it shows U.S. total economy net productivity indexed to the 1968 inflation-adjusted value of the minimum wage). As the figure shows, in 1950—the first year the minimum wage was increased after the end of World War II—the minimum wage rose rather dramatically in real terms, nearly doubling overnight. The 1950 increase was followed by regular increases that roughly kept pace with rising labor productivity until the late 1960s. The minimum wage peaked in inflation-adjusted value in 1968, when it was equal to $10.15 in 2018 dollars. Increases in the 1970s essentially held the real value of the minimum wage in place as high levels of inflation—driven by oil and food price shocks—effectively negated the nominal increases that were enacted at that time. In the 1980s, as inflation remained elevated, the minimum wage was left to deteriorate to 1950s levels. Subsequent increases in the 1990s and late 2000s were not large enough to undo the erosion that had taken place in the 1980s. As of 2018, the federal minimum wage was worth 28.6 percent less than in 1968.2

The dashed lines in the figure—representing projected values for the years 2019–2024—show that the Raise the Wage Act would reverse this unfortunate trend for low-wage workers. A series of six increases over six years—beginning with an increase to $8.55 in 2019 and ending at $15 in 2024—would for the first time ever lift the purchasing power of the federal minimum wage above its 1968 peak. In real terms (that is, in 2018 dollars), the minimum wage would reach an estimated value of $10.37 in 2020 and $12.98 in 2024. The full increase to $15 by 2024 represents a 79.0 percent real increase in the minimum wage over its current value, and a 27.9 percent increase in purchasing power from the 1968 peak.3

Such an increase would be the largest raise in the federal minimum wage since 1950, when it was lifted by an inflation-adjusted 85 percent in one year. As such, this increase would be larger than what has been typical in recent decades; however, policymakers will have to enact bolder increases than in the recent past if they intend for low-wage workers to ever fully share in the growth of productivity and the economy that has occurred over the past five decades. As explained by Cooper, Schmitt, and Mishel (2015), increases in average labor productivity represent the potential for higher living standards for workers. In simple terms, if workers, on average, are producing more from each hour worked, there is room in the economy for all workers to get a commensurate raise in wages. This would represent all workers getting a share of economic growth. However, this potential is realized only if productivity gains translate into higher wages. The top line in the figure, which represents the inflation-adjusted value of the minimum wage had it aligned with productivity growth, shows that average labor productivity has more than doubled since the late 1960s. Despite this growth in the country’s ability to produce income, pay for workers generally and for low-wage workers in particular has either stagnated or fallen since the 1970s (Bivens et al. 2014). In the case of low-wage workers, hourly pay has declined in real terms since 1979 as a direct result of the erosion of the minimum wage (Bivens et al. 2014).

A higher minimum wage would direct a portion of overall labor productivity gains into higher living standards for low-wage workers. It is not known precisely how much productivity in low-wage work has grown since the 1960s relative to overall productivity. However, low-wage workers today tend to be older (and are therefore likelier to have greater work experience) and are significantly more educated than their counterparts in 1968 (Mishel 2014a). To the extent that workers with more experience and greater education typically earn more than their younger and less-educated counterparts, we would expect low-wage workers today to earn more, not less, than what they earned in the previous generation. In this context, a pay increase for America’s lowest-paid workers of 28 percent over the 56-year span from 1968 to 2024 is indeed modest when compared with projected overall productivity growth of 119 percent over the same period.4

The minimum wage is also a mechanism for combating inequality and helping to keep a middle-class lifestyle within reach for all workers. As increased productivity has translated into higher wages for high-wage workers, a rising minimum wage ensures that the lowest-paid jobs also benefit from these improvements. This is the essence of the “fairness” implied in the name of the Fair Labor Standards Act, the act that established the minimum wage.

Figure B shows how the federal minimum wage has compared with the wages of typical U.S. workers over time. The top line shows the median wage of full-time, full-year workers since 1968, adjusted for inflation to constant 2018 dollars. (The dashed line shows projections for 2019–2024.) The bottom line shows the inflation-adjusted value of the federal minimum wage. (The dashed line shows projections for 2019–2024 under the Raise the Wage Act.) In 1968, the median worker in the United States earned $19.23 per hour—roughly $9 more per hour than a minimum wage worker at that time. Since then, the gap between the typical U.S. worker and the lowest-paid worker has grown substantially—to more than $15 per hour as of 2018. The median wage has grown only modestly over the past 50 years—roughly 16 percent—yet the large decline in the value of the minimum wage has left workers at the bottom of the wage scale farther from the middle class than they have been in half a century. Indeed, the declining value of the federal minimum wage is the key driver of the growth in inequality between low-wage workers and middle-wage workers since the late 1970s (see Zipperer 2015a and Mishel 2014b).

The vertical dotted lines in the graph illustrate the gap between the median and minimum wages at different points in time—and show how the Raise the Wage Act would shrink this gap, reducing it to about $1 dollar more than the difference that existed in 1968. Assuming modest annual real wage growth of 0.5 percent for workers at the median over the next six years, a minimum wage of $15 in 2024 (which corresponds to $12.98 in 2018 dollars) would lift the wage floor to just over $10 less than the wages of a typical U.S. worker—far closer to the gap that existed in the late 1960s.

Figure C presents these same data in a different way. The solid line shows the value of the federal minimum wage as a percentage of the median wage of all full-time, full-year workers. Once again, the gradual decline of the line illustrates how inadequate increases in the federal minimum wage have gradually increased the gap between the lowest-paid workers and those in the middle of the wage distribution. In 1968, the federal minimum wage was equal to just over half the wage of the typical U.S. worker: 52.8 percent of the median wage of all full-time workers. In 2018, the minimum wage is projected to be less than one-third of the wage of the typical worker: 32.4 percent of the median wage of all full-time, full-year workers.

The dashed lines in Figure C project the ratios for 2019–2024 under the Raise the Wage Act. These projections show that the Raise the Wage Act would reverse this growth in inequality and place the minimum wage as a share of the the median wage above its historical high point. Projections are shown for 2019–2024 under two scenarios: one in which nominal median wages rise at the rate of projected inflation, so that there is no real wage growth, and one in which median wages grow 0.5 percent per year faster than projected inflation from 2018 to 2024, as was assumed in Figure B.5 The Raise the Wage Act would lift the minimum wage’s share of the full-time, full-year median wage to 58.0 percent if there is no real wage growth or to 56.4 percent if there is modest real wage growth. Of course, if wages for middle-wage workers grow faster than 0.5 percent above inflation, this percentage will be smaller.

When set at an adequate level, the minimum wage also helps ensure that work is a means to a decent quality of life. In fact, the explicit purpose of the FLSA is to correct “labor conditions detrimental to the maintenance of the minimum standard of living necessary for health, efficiency, and general well-being of workers.”6 The federal poverty line is often cited as a proxy for the level of income needed for the general well-being of families. Researchers and policymakers have long acknowledged that, in reality, the poverty line is woefully inadequate as a measure of what is truly needed for a family to afford the basic necessities.7 Yet even against this low bar, the federal minimum wage has rarely produced enough income for regular full-time workers, particularly those with children, to meet their needs.

As shown in Figure D, a parent working full time while earning the minimum wage today earns too little to bring his family—even if it is just a family of two—above the federal poverty line. In contrast, at its high point in 1968, the minimum wage was sufficient to keep a family of three out of poverty, but not a family of four. As the ascending dashed line in the figure shows, the Raise the Wage Act would, for the first time ever, bring full-time minimum wage earnings above the poverty line for a family of four.

Demographic characteristics of affected workers

Raising the federal minimum wage to $15 by 2024 would lift pay for more than one-fourth of American workers. The vast majority of workers who typically benefit from minimum wage increases do not fit the common portrayal of low-wage workers primarily as teenagers from middle-class families, who are working part time after school, or as “stay-at-home” parents—parents whose primary job is caring for their own children—who are picking up some work on the side and whose “secondary earnings” are inconsequential to their family’s financial health.8 As the subsequent sections show, increasing the minimum wage to $15 by 2024 would raise wages for millions of prime-age, full-time workers, many of whom are the primary breadwinners for their families. Detailed demographic information on the affected workforce—including statistics on women, black, Hispanic, Asian, white, and Native American workers—can be found in Appendix Tables 6–12.

Figure E shows the number of workers who are likely to receive a raise as the minimum wage is gradually increased.

In the first step, when the minimum is increased from $7.25 to $8.55 per hour, 7.6 million workers are likely to benefit. This includes 2.9 million workers who will directly benefit—meaning their current pay rate is between $7.25 and $8.55—as well as 4.7 million who will indirectly benefit, meaning they will likely receive a raise through spillover or “ripple” effects because their current pay rate is just above $8.55.9 Raising the minimum wage typically results in wage increases for workers further up the wage ladder because employers want to maintain some progression in their internal pay scales (Wicks-Lim 2006).

With each successive increase, the number of workers who would benefit grows: At each step, all those workers whose wages were raised in the previous step receive another raise, and additional workers whose wages were “too high” to benefit from previous step increases now benefit as well. In the second year, as the minimum wage is lifted to $9.85 per hour, the number of workers who would directly receive a raise grows to 7.3 million; another 8.3 million would indirectly receive a raise. When the minimum wage increases to $11.15 in year three, 14.0 million would be directly affected, along with 7.5 million who would be indirectly affected. In the fourth year, 2022, the increase to $12.45 per hour would raise wages directly for 18.4 million workers and indirectly for another 8.6 million workers. The increase to $13.75 per hour in year five would directly lift the pay of 22.1 million workers and indirectly spur wage increases for another 11.8 million workers. In the final year, when the minimum wage is raised to $15 per hour, 28.1 million workers would directly benefit and an additional 11.6 million would likely receive a raise indirectly as employers adjust overall pay ladders. In total, the increase to $15 would lift wages for 39.7 million workers—26.6 percent of all U.S. workers. Detailed figures on the workers affected and resulting wage increases in each step can be found in Appendix Tables 1 and 2.

This minimum wage increase would be larger than any other increase that has been enacted in the United States. In addition to the larger breadth of affected workers, the potential increase in wages for those workers would be larger than any previous increase. Over the full six-year phase-in period, affected workers would receive approximately $118 billion in additional annual wages, assuming no change in the number of work hours for these workers.10 Once the increase is fully phased in, the average affected worker who works year-round would earn roughly $3,000 more each year than she does today. Among only those workers who directly benefit, the average year-round worker would get a boost to his or her annual earnings of about $3,900.

The following sections highlight the demographic characteristics—age, sex, race/ethnicity, family composition, hours of work, education, family income, poverty status, and geography—of the workers who would be affected. We count as “affected” both those directly and indirectly affected. The calculations are estimates for 2024. Tables containing all the underlying demographic information, including discrete numbers of affected workers by demographic category, are presented in Appendix A.

Age

The low-wage workers likely to benefit from an increase to the minimum wage are frequently characterized as being primarily teenagers and almost entirely young. Although this would not justify paying them wages significantly lower than those paid to their counterparts a generation ago, this stereotype is also false—and particularly so for beneficiaries of a minimum wage increase to $15. While some low-wage workers are indeed young, the vast majority of workers who would benefit from increasing the federal minimum wage to $15 are adults age 20 or older; only a small fraction are teenagers. As shown in the top graph in Figure F, teens account for a mere 9.3 percent of the workers who would benefit; over 90 percent of affected workers are 20 years old or older.

The second graph in Figure F breaks down the age distribution of affected workers even further, showing that more than two-thirds of affected workers are at least 25 years old. In fact, workers ages 55 and older make up a larger share of workers who would receive a raise (14.6 percent) than do teens (9.3 percent), and workers ages 40 and older make up a larger share of those who would receive an increase (33.9 percent) than do workers under age 25 (32.5 percent). Among affected workers, the average age is 35 years old.11

Gender

While raising the minimum wage would benefit both women and men, it would disproportionately raise pay for women. As shown in the pie chart in Figure G, women make up 57.9 percent of affected workers. In comparison, women make up only 48.5 percent of the total U.S. workforce.12

The magnitude of the impact on women is shown in the bar chart in Figure G. Among all wage-earning women in the United States, 31.7 percent—nearly one in three working women—would receive a raise under a federal minimum wage increase to $15 by 2024. In comparison, 21.7 percent of all wage-earning men would benefit—not as large a share as for women, but still more than one-fifth of all working men.

The bar chart in Figure G also shows, by gender, the shares of workers who would benefit from a minimum wage increase by family status and for workers of color. Among working parents with children in their home, 30.2 percent of working mothers would receive a raise, as would 13.4 percent of working fathers. Among single parents, the effects are more dramatic: 43.0 percent of all single mothers would receive a raise if the federal minimum wage were increased to $15 by 2024, as would nearly a third (29.4 percent) of single fathers. Large shares of minority workers would also benefit: 35.6 percent of women of color would receive a raise, along with 27.9 percent of men of color.

Race/ethnicity

As shown in the upper section of Figure H, the majority—52.2 percent—of workers who would benefit from increasing the minimum wage are white, non-Hispanic workers. Hispanic workers of any race make up the next largest share, at just under a quarter (24.2 percent) of the total affected population. Black workers make up 16.9 percent of the total, and Asian workers and workers of other races/ethnicities make up 6.8 percent of the total.

Although workers of color are a minority of those who would benefit, they do benefit at significantly higher rates. The lower section of Figure H shows the share of each racial/ethnic group that would receive a raise if the federal minimum wage were increased to $15 by 2024. As the figure shows, 38.1 percent of all black workers would receive higher pay, as would a third (33.4 percent) of Hispanic workers. Nearly one in four (23.2 percent of) white, non-Hispanic workers would get a raise—a slightly higher share than that of Asian workers and those of other races/ethnicities, among whom 19.6 percent would receive higher pay.

Education

Just as there is a common misperception that low-wage workers are mostly young, there is also a common misperception that low-wage workers have low education levels. The reality is that, as shown in Figure I, close to half (44.0 percent) of workers who would be affected by an increase to the minimum wage have at least some college experience, and about one in seven (13.8 percent) have an associate degree or higher.

The lower bar graph in Figure I shows the share of workers at each educational level who would receive a raise if the federal minimum wage were increased to $15 by 2024. Not surprisingly, workers with lower levels of education are far more likely to be affected: More than half (51.1 percent) of workers with less than a high school education would receive a pay increase. Still, large shares of those who have completed high school and sought further education would also benefit. More than a third (34.4 percent) of workers with some college experience, yet no degree, would receive a raise, as would more than one-fifth (21.5 percent) of workers with an associate degree.

Hours of work

Many workers who would benefit from a minimum wage increase also work longer hours than commonly thought; they are not simply working part-time or after-school jobs. As shown in the upper section of Figure J, 60.0 percent of affected workers work full time (at least 35 hours per week). Another 29.5 percent work between 20 and 34 hours per week, and only 10.5 percent work fewer than 20 hours per week.

Still, those workers who are not full time are more likely to benefit. The lower bar chart in Figure J shows the share of each group of workers by work-hour category who would receive a raise if the minimum wage were increased to $15. Roughly half (48.4 percent) of workers who work fewer than 20 hours per week would receive a raise, as would 52.8 percent of those working between 20 and 34 hours per week. Among full-time workers, one in five (20.1 percent) would receive a raise.

Many individuals who work less than full time are not opting for fewer hours by choice, but are limited by a lack of available work, or because circumstances—such as the need to care for a family member, or a lack of adequate work supports (access to child care, paid leave, or flexible work schedules)—prevent them from seeking full-time employment (Golden 2016). For these workers, an increase in their hourly rate of pay is arguably even more important, not only because of the increased earnings but also because those increased earnings could provide the resources needed (e.g., money for child care) to allow them to seek more hours of work.

Family income

Again contrary to some portrayals, the majority of workers who would benefit from increasing the minimum wage come from families of modest means. That being the case, these workers’ wages are likely to constitute an essential contribution to their household’s welfare—rather than simply being “extra” income supplementing a much higher paycheck from a spouse or parents. As shown in Figure K, 76.0 percent of the workers who would receive a raise if the minimum wage were increased to $15 by 2024 have total family incomes of less than $75,000 per year. More than half of affected workers (59.5 percent) have total family incomes below $50,000 per year.

Some argue that the minimum wage is “poorly targeted” as a tool for alleviating poverty or improving low-income households’ welfare because some of the workers who would benefit from a minimum wage increase come from middle-class families. It is false that raising the minimum wage does not reduce poverty—as is explained in the next section—but assessing only the minimum wage’s poverty-reducing effects also disregards an important aspect of the policy. The minimum wage provides protection to workers at all levels of family income—this is a feature, not a bug, of the law. As a labor standard, the minimum wage prevents exploitation of workers, regardless of their family income level. No worker, no matter how wealthy his or her family, should have to work for unacceptably low wages. Moreover, the fact that some low-wage workers do come from middle-class families underscores the point that the erosion in the minimum wage’s value over the past 45 years has hurt both low- and middle-income families.

Poverty status

Some opponents of raising the minimum wage contend that as a policy for reducing economic hardship, the minimum wage is ineffective because many poor people do not work. This is false. As explained in Gould, Davis, and Kimball 2015, the majority of poor people ages 18 to 64 who can work (i.e., they are not in school, retired, or disabled) do work, and over 40 percent work full time. Moreover, increasing the minimum wage is an effective tool for reducing poverty. In a comprehensive review of the literature on the minimum wage’s poverty-reducing effects, Dube (2018) finds that nearly all studies of this relationship show that raising the minimum wage significantly reduces poverty rates. Dube’s study also finds that for every 10 percent increase in the minimum wage, over the long run, the poverty rate is expected to decline by 5.3 percent.

Our findings show that the Raise the Wage Act would disproportionately help workers in poverty or near the poverty line. As shown in the top portion of Figure L, nearly half (46.7 percent) of all workers who would be affected by raising the minimum wage to $15 by 2024 have total family incomes within 200 percent of the poverty line. Another 33.1 percent have family incomes between 201 and 400 percent of the poverty line.

Indeed, workers living below or near the poverty line are far more likely than higher-income workers to get a pay increase if the minimum wage is raised. The bar chart in the bottom section of Figure L shows that two-thirds (67.3 percent) of all the working poor would receive higher wages as a result of the Raise the Wage Act. More than half (53.6 percent) of those who are “near poor,” with incomes between 101 and 200 percent of the poverty line, would also receive a raise.

Family status and children

Many of the workers who would benefit from increasing the minimum wage are supporting families and children. As shown in the upper section of Figure M, nearly one-third (30.8 percent) of the affected workers are married, and more than one-quarter (28.3 percent) of affected workers have children. In total, over 11.2 million parents would receive higher pay under a minimum wage increase to $15 by 2024. Of these, 5.4 million are single parents, accounting for 13.5 percent of those who would be affected by raising the minimum wage. While this is a relatively small portion of the total beneficiaries, it is larger than their 9.2 percent share of the overall labor force. In other words, single parents would disproportionately benefit from raising the minimum wage.

The lower bar chart in Figure M shows the shares of workers by family type who would be affected. Among married parents who work, 15.6 percent would receive a raise from increasing the minimum wage to $15 by 2024. Single parents who work would benefit at more than double that rate—38.9 percent would receive higher pay if the minimum wage were raised.

The parents receiving higher pay provide for 14.4 million children across the United States, nearly one-fifth (19.6 percent) of all U.S. children (see Appendix Table 4). It is also worth noting that many children are raised by an adult who is not their biological or adoptive parent; these households are not accounted for in these numbers. Thus, the full benefit to children of a $15 minimum wage is arguably better captured by looking at the impacts for all children with at least one adult in their household who receives a raise—regardless of whether that person is their biological or adoptive parent. There are a total of 17.0 million children (23.2 percent of all U.S. children) with at least one adult in their household—e.g., a parent, grandparent, caretaker, or adult sibling—who will benefit from raising the federal minimum wage to $15 by 2024.

The importance of affected workers’ pay to their family’s total incomes

Low-wage workers are sometimes characterized as “secondary earners,” suggesting that their work earnings are discretionary or inconsequential to their family’s financial health. The data show that this is not at all the case. Roughly half of all workers who would be affected by raising the minimum wage to $15 by 2024 are either married or have children, and these workers earn, on average, 51.9 percent of their family’s total income. Of these workers with families, 32.2 percent are the sole providers of their family’s income.13

Geography

Not surprisingly, the share of workers in each state who would be affected by a federal minimum wage increase varies considerably, largely due to the fact that many states, and a growing number of cities and counties, have already enacted minimum wage increases that will have lifted a sizeable share of their state or local workforces out of the affected range.14 As the increases in those states’ and localities’ minimum wages “ripple up” through the wage distribution, the number of workers who would be affected by the enactment of a higher federal minimum by 2024 is reduced.

Figure N shows the share of each state’s resident workforce that would be affected if the federal minimum wage were raised to $15 by 2024. Because California and Massachusetts will already have state minimum wages of $15 in 2023, very few California or Massachusetts workers would be affected by the change in the federal minimum wage—although a small number who commute to out-of-state jobs would be impacted. The District of Columbia is raising its minimum wage to $15 in 2020 and so few workers in the district would benefit from the new federal minimum. However, a relatively small number of workers in both D.C. and Massachusetts—those who customarily receives tips as a portion of their wages—will benefit from the Raise the Wage Act’s increase in the minimum wage for tipped workers. Tipped workers in California are already paid the full minimum wage before tips, so they will not be affected by the federal policy change. New York is raising the minimum wage in New York City, Long Island, and Westchester County to $15 before 2024, but not in the upstate region of the state; upstate workers would therefore still be affected by the federal change (as would tipped workers throughout the state). In total, 12.5 percent of New York workers would receive a raise as a result of the rising federal minimum wage and tipped minimum wage.

Among states that will not already have a $15 minimum wage by 2024, the smallest impacts would be in Washington and Minnesota, where just over 15 percent of the workforce would receive a raise. Washington’s state minimum wage is scheduled to go to $13.50 in 2020 with automatic adjustments for inflation thereafter, and the city of Seattle raised its minimum wage to $15 for all businesses as of January 2019. In Minnesota, the state minimum wage is $9.86 as of January 2019, and it will be adjusted for inflation in subsequent years; however, both Minneapolis and St. Paul will have local $15 minimum wages by 2022. Because the Twin Cities make up the majority of the state labor market, the changing federal minimum has less of an impact on the state as a whole.

In contrast, the share of the workforce that would be impacted by a federal increase is significantly larger in states with low minimum wages—or, in some cases, no minimum wage—such as in Arkansas, North Carolina, Mississippi, Louisiana, and Idaho.15 Workers in the Southeast, in particular, are most likely to see a pay increase if the federal minimum wage is raised. The largest impact would be in Mississippi, where more than four in 10 workers (41.6 percent) are likely to be affected by the bill, and the average affected worker would receive a 20 percent raise—the largest average raise of any state’s workforce.

Other aspects of the proposal

In addition to the six phased-in increases from 2019 to 2024, the Raise the Wage Act would also “index” the minimum wage to the median wage and (as mentioned in the previous section) would gradually phase out the subminimum wage for tipped workers. This section explains how these two provisions would benefit workers.

Indexing to the median wage

After the minimum wage reaches $15 in 2024, the Raise the Wage Act would index the minimum wage to the median wage so that in subsequent years, as wages throughout the workforce rise, the minimum wage would automatically be lifted to maintain its value relative to the median wage. This is different from how most minimum wage indexing has been done in the past. Currently 17 states and the District of Columbia have enacted indexing of their state minimum wages to changes in prices, typically as measured by changes in the Consumer Price Index (CPI). (The automatic annual adjustments this indexing mandates have not yet taken effect in all of these states.) Indexing to prices prevents any erosion in the minimum’s real (inflation-adjusted) value, thereby ensuring that low-wage workers can still afford the same amount of goods and services year after year. This is certainly advantageous relative to having no indexing; however, indexing to prices effectively legislates that the lowest-paid workers never see any material improvement in their quality of life. The real value of the minimum wage remains frozen, regardless of increases in overall labor productivity or technological advances that improve the country’s ability to improve living standards.

In contrast, linking the minimum wage to the median wage ensures that low-wage workers do not lose ground relative to typical workers. As Zipperer (2015b) explains, indexing to the median wage “links the minimum wage to overall conditions in the labor market.” To the extent that productivity improvements and technological progress result in higher wages for the typical U.S. worker, so too will minimum wage workers see their hourly pay rise. It is of course true that both low- and middle-wage workers have seen their hourly pay lag relative to productivity growth in recent decades. A stronger minimum wage ensures that the vast majority of U.S. workers share a common trajectory of wage growth. But the minimum wage needs to be complemented by other policies to ensure that wage growth for this entire vast majority rises in step with overall productivity growth.16

Another good reason for indexing to the median wage rather than to price indices is that wages are less volatile than prices. Price indices, such as the CPI, are subject to unpredictable changes in the price of food and energy that may be driven by temporary events, such as political instability or natural disasters. Wages, on the other hand, tend to be more stable, rising as fast—or faster—than prices over the long term, and with greater predictability for employers and employees alike (see Zipperer 2015b or Shierholz 2009).

Eliminating the subminimum wage for tipped workers

Under current federal law, employers of workers who customarily receive tips are only required to pay their tipped staff a base wage of $2.13 per hour, provided employees’ weekly income from tips plus their base wage equates to an hourly rate of at least the minimum wage. As explained by Allegretto and Cooper (2014), this separate wage standard results in a host of problems for tipped workers, including dramatically higher poverty rates and greater reliance on public assistance. Contrary to a common perception that waitstaff and bartenders make lavish incomes from tips, the vast majority of tipped work is low-paying. From 2014 to 2016, the median wage for tipped workers, including earnings from tips, was $11.00 per hour—37 percent less than the median wage of workers who do not rely on tips (Cooper 2017). Because the majority of tipped workers’ pay is from tips—as opposed to a regular paycheck—weekly income can be highly erratic and subject to a greater incidence of wage theft (Allegretto and Cooper 2014).17 Moreover, the fact that most tipped workers are women means that the inequities produced by this separate wage system exacerbate existing gender-based wage inequality (see National Women’s Law Center 2016).

The Raise the Wage Act would raise the subminimum wage for tipped workers over nine years until it reaches parity with the full minimum wage, as is currently the case in seven states.18 These seven states have significantly lower poverty rates among tipped workers than the states where tipped workers are paid a lower base wage. At the same time, growth in the restaurant industry has been as strong, if not stronger, in the states where tipped and nontipped employees are treated equally. This suggests that requiring employers to pay regular wages to tipped workers has had no significant negative effect on the growth of the restaurant industry (Allegretto 2013).

Effects on job growth and workers’ welfare

Whenever any minimum wage increase is proposed, concerns are always raised about the impact such a policy change might have on the employment of low-wage workers.19 Given this, it is not surprising that the effect of the minimum wage on employment has been one of the most heavily studied topics in economics, particularly since the 1990s. A full review of that literature is beyond the scope of this report; Schmitt (2013), Kuehn (2014), and Wolfson and Belman (2016), however, offer useful summaries.

The overwhelming conclusion of this literature has been that past increases in minimum wages have had little to no effect on employment. In their meta-analysis of 739 estimated effects from 37 published studies on the minimum wage and employment between 2000 and 2015, Wolfson and Belman (2016) find “no support for the proposition that the minimum wage has had an important effect on U.S. employment.” Moreover, Allegretto et al. (2017) find that studies that employ the most credible research designs (comparing similar jurisdictions that have raised their minimum wage with those that have not) also find little to no effect on employment. In other words, both the average study and the highest-quality studies find little to no impact of the minimum wage on employment.

In what has been hailed as the most important work on the minimum wage in 25 years, Cengiz et al. (2019) use a novel methodology to estimate the employment effect of minimum wages by examining 138 state minimum wage changes that occurred in the United States between 1979 and 2014.20 They find that even with minimum wages rising as high as 55 percent of the median wage, there was no evidence of any reduction in the total number of jobs for low-wage workers.21 Moreover, the researchers examined effects specifically for workers without a college degree, underrepresented minorities, and young workers—groups that might have greater difficulty in finding work—and still found no evidence of substantial job losses.

This large body of research is useful for understanding the appropriateness of the minimum wage level proposed by the Raise the Wage Act of 2019. Raising the federal minimum wage to $15 by 2024 would bring the U.S. wage floor above its historical high point, both in absolute terms and relative to the wages of middle-wage workers. As noted in Figure C in the first section of this report, a minimum wage of $15 would likely equal between 56 and 58 percent of the full-time median wage in 2024—just slightly beyond the range of minimum wages that have been studied. Given that research on the existing experience of the minimum wage in the United States has never led to evidence of meaningful negative effect on employment, Cooper, Mishel, and Zipperer (2018) explain that raising the minimum wage beyond historical experience is, in fact, the optimal policy choice. If existing research has shown that prior minimum wage increases have had no clear, detectable downside, then any increase that does not exceed past experience would leave money on the table that could otherwise have been earned by low-wage workers.

Furthermore, Cooper, Mishel, and Zipperer go on to explain that the narrow focus on potential employment effects of minimum wage increases is a deeply flawed way of evaluating the merits of the policy, since what matters most is not whether the minimum wage changes someone’s work status at any given time, but how the policy affects his or her total earnings. For example, even in the scenario where a minimum wage increase had a negative effect on job growth, there is no reason to assume that anyone would be worse off. Any reduction in job growth is implicitly a reduction in the total hours worked by low-wage workers. Because there is a high degree of churn in the low-wage labor market—i.e., low-wage workers cycle in and out of jobs frequently—it is likely that any reduction in hours would be spread across many low-wage workers, with some working fewer hours per week and others having longer spells between jobs throughout the year. However, because they will all be earning more per hour than they would have otherwise, it’s entirely possible that few, if any, workers will actually see a reduction in their total annual take-home pay.

Indeed, two recent studies show that regardless of any potential employment changes, minimum wage increases have had clear positive effects on the total annual incomes of low-wage workers and their families. Dube (2018) shows that minimum wage increases raised family incomes at the bottom of the income distribution. Using high-quality administrative data, Rinz and Voorheis (2018)—researchers at the U.S. Census Bureau—find that minimum wage increases raised individual incomes and that those income gains accelerated for up to five years after the policy change. In other words, any potential hours reductions or other decreases in employment that might have resulted from past minimum wage increase were apparently not large enough to reduce overall annual earnings for low-wage families.

Conclusion

Since its inception during the Great Depression, a strong minimum wage has been recognized as a key labor market institution that, if effectively maintained, can provide the foundation for equitable and adequate pay for American workers. However, the failure to regularly and adequately raise the federal minimum wage over the past five decades is one of several policy failures that have denied a generation of American workers more significant improvement in their quality of life. In fact, the erosion of the minimum wage has left low-wage workers today earning significantly less than their counterparts 50 years ago.

Raising the federal minimum wage to $15 by 2024 would take its value to a level that finally ensures full-time work is a means to escape poverty, and it would provide tens of millions of America’s lowest-paid workers with a substantial, long-overdue improvement in their standard of living. Past increases in the minimum wage have been inadequate to preserve low-wage workers’ standard of living, let alone allow them to share in the broader benefits of rising productivity and a growing economy. In contrast, the Raise the Wage Act of 2019 is a bold proposal that would achieve these goals.

Automating future increases by indexing to growth in the median wage would ensure workers at the bottom of the wage scale are never again left behind as productivity improvements lead to broader improvements in wages. In addition, gradually raising and eliminating the separate lower wage for tipped workers would eliminate the disparities in labor protections and living standards that currently exist between tipped and nontipped workers. These actions would significantly improve the well-being of millions of American workers and their families, and they would help to reduce long-standing race- and gender-based wage inequities.

Decades of research have shown that past minimum wage increases have had their intended effect—raising incomes for low-wage workers with little, if any, negative impact on their employment. As lawmakers propose lifting the U.S. wage floor to new heights, this research affirms their ambition. Anything less would be needlessly timid and would potentially deprive millions of low-wage workers of earnings they could have had with little cost.

About the author

David Cooper joined the Economic Policy Institute in 2011. As senior economic analyst, he conducts national and state-level research, with a focus on the minimum wage, employment and unemployment, poverty, and wage and income trends. Cooper is also the deputy director of the Economic Analysis and Research Network (EARN), a national network of over 60 state-level policy research and advocacy organizations.

Cooper has testified at numerous state and municipal hearings on the challenges facing low-wage workers and their families. His analyses on the impact of minimum wage laws have been used by policymakers and advocates in city halls and statehouses across the country as well as in Congress and the White House. He has been interviewed and cited by numerous local and national media, including The New York Times, The Washington Post, The Wall Street Journal, CNBC, and NPR.

He holds Master of Public Policy and Bachelor of Arts degrees from Georgetown University.

Appendix: Data tables

Methodology

The Economic Policy Institute Minimum Wage Simulation Model uses data from the Current Population Survey (CPS) and the American Community Survey (ACS) to estimate the size and demographic/workforce characteristics of the populations affected by proposed changes in federal, state, and local minimum wages, as well as the likely impact of those changes on the wages of affected workers. The model accounts for inflation, labor force growth, and all existing state and local minimum wage laws and the likely minimum wages resulting from those laws throughout the simulation period. The statistics in this report were generated using the 2017 ACS five-year microdata and the 2017 CPS Outgoing Rotation Group microdata. A full description of the methodology can be found in Cooper, Mokhiber, and Zipperer 2019.

Endnotes

1.  It would also phase out the youth minimum wage, which allows employers to pay workers under 20 a lower wage for the first 90 calendar days of work (U.S. Department of Labor Wage and Hour Division 2008a), and the subminimum wage for workers with disabilities, which allows employers, after receiving a certificate from the Wage and Hour Division of the Department of Labor, to pay workers with disabilities a lower wage (U.S. Department of Labor Wage and Hour Division 2008b).

2.  We use the Research Series of the Consumer Price Index for All Urban Consumers (CPI-U) to deflate the value of the minimum wage because the CPI-U tracks changes in the prices of goods bought by typical U.S. consumers. It is the standard deflator used by researchers and government agencies when adjusting wages and incomes for changes in prices. For example, the Census Bureau uses the CPI-U when it measures trends in family and household incomes, and the Internal Revenue Service adjusts tax brackets annually using the CPI-U. The Census Bureau has made various methodological improvements to the CPI-U over the years. The Research Series applies current CPI-U methodology retrospectively to calculate the most accurate measure of historical inflation for typical U.S. consumers. We use the implicit price deflator for gross domestic product—or “GDP deflator”—when calculating changes in total economy net productivity. This is also standard practice, as it captures changes in the value of the overall output of the economy—i.e., the value of what workers are able to produce.

3.  Inflation-adjusted values for future years are calculated using the projections for CPI-U in CBO 2018.

4.  Overall productivity is measured as total economy productivity net depreciation. From 1968 to 2016, net productivity grew by 100 percent. Based on projections for productivity growth in CBO 2018, growth from 1968 to 2024 is expected to be 119 percent.

5. In a well-functioning economy, growth in wages would consistently outpace inflation. Unfortunately, that has not been the norm for the last half century in the U.S. Median wage growth has barely outpaced inflation over the past 50 years (as shown by the mere 16 percent growth of the median wage in Figure B). Labor market conditions at the start of 2019 are strong enough that it is possible there could be some median wage growth above inflation in the near term. Thus, assuming growth of 0.5 percent above inflation is a plausible, albeit conservative, estimate relative to what wage growth should be in a healthy economy with rising productivity.

6.  Fair Labor Standards Act of 1938.

7.  Wething and Gould (2013) describe the various shortcomings of the federal poverty line and discuss alternative tools for measuring well-being. O’Brien and Pedulla (2010) also discuss the federal poverty line’s inadequacy and provide a useful history of the measure.

8.  See Cooper and Essrow 2015.

9.  Dube, Giuliano, and Leonard (2015) observe minimum wage spillover or “ripple” effects for workers earning up to 15 percent above newly implemented minimum wages. Thus, in this analysis, the range of indirectly affected workers is modeled as those workers reporting hourly wages between 100 and 115 percent of the new minimum wage. See Cooper, Mokhiber, and Zipperer 2019 for further detail.

10.  Because this increase is larger than past increases that have been rigorously studied, we cannot predict how the higher wage floor might affect the aggregate hours worked by low-wage workers. As explained in greater detail in Cooper, Mishel, and Zipperer (2018), it may be that the total hours worked by the low-wage workforce shrinks. However, the distribution of that shrinkage is not clear. Opponents of minimum wage increases often portray this potential shrinkage as low-wage workers being forced out of the labor market entirely, never to work again. This is a misleading suggestion. The low-wage labor market has very high churn—workers move in and out of jobs frequently, some work multiple jobs, and many will typically spend some portion of the year not working. If the higher minimum wage does lead to a reduction in the total hours of work for low-wage workers, this reduction could manifest as some workers working fewer weeks per year, fewer hours per week, or in fewer jobs if they previously held more than one. In all three scenarios, the workers’ total annual pay is still likely to be higher than it would have been otherwise because of the higher hourly rate they would receive from the minimum wage increase. The clearly harmful outcome would be instances in which workers are truly unable to find work at all, or in which their individual loss of hours outweighs the increased hourly rate of pay, leaving them worse off on net. We believe that such outcomes, if they occur, would affect only a very small fraction of workers in the low-wage labor market, and that the benefits of higher pay for millions more outweigh the risk of such negative outcomes. Moreover, policymakers have other tools (e.g., more generous unemployment benefits, work sharing programs, targeted hiring programs, and many other tools) that they can use to mitigate the impacts of any negative outcomes for workers.

11.  The median age of affected workers is 30.

12. There are an estimated 72.5 million women in the wage-earning workforce, out of a total of 149.3 million workers. See Appendix Table 3.

13. Author’s calculation using the EPI Minimum Wage Simulation Model. See Cooper, Mokhiber, and Zipperer 2019 for details.

14.  For a full list of all states that have enacted minimum wages above the federal minimum wage, and for any scheduled future increases, see EPI’s minimum wage tracker (EPI 2019a).

15.  Idaho and North Carolina have minimum wages equal to the federal minimum wage of $7.25. Arkansas voters recently passed a ballot measure increasing the state minimum wage to $11 by 2021, but without any further adjustment thereafter. Tennessee and Mississippi have no minimum wage laws. In these states and others without a minimum wage or with a minimum wage below the federal minimum wage, workers must be paid at least the federal minimum wage.

16.  EPI’s “Agenda to Raise America’s Pay” describes 11 policies to boost American’s wages by tilting bargaining power back toward low- and moderate-wage workers. See EPI 2016 for details.

17.  “Wage theft” occurs when employers fail to pay employees the full wages to which they are entitled for the hours they work. See Cooper and Kroeger 2017 or Meixell and Eisenbrey 2014 for greater detail.

18.  Tipped workers receive the full minimum wage before tips in Alaska, California, Oregon, Washington, Minnesota, Montana, and Nevada. In 2016, voters in Maine passed a ballot measure that will raise Maine’s tipped minimum wage over a 10-year period until it is equal to the state’s full minimum wage. In Hawaii, tipped workers generally receive the full minimum wage before tips, but employers may pay these workers $0.75 below the regular minimum wage if workers’ combined base wage plus hourly tips equals at least $7.00 more than the regular minimum wage.

19. See National Employment Law Project 2013.

20. See Marinescu 2018.

21. Cengiz et al. (2019) examine minimum wages as high as 59 percent of the median wage of all workers. This is a slightly different statistic from the median wage of full-time, year-round workers described in the first section of this report. The full-time, year-round workforce is a subset of all workers—some of whom work part time or only part of the year. Because part-time and part-year workers tend to have lower wages than full-time, full-year workers, including them in this calculation lowers the calculated median wage, therefore leading to the minimum wage being a higher percentage of the median wage than would result if calculated using the median wage of full-time, year-round workers. The full-time, year-round median is used in this report because it can be calculated for workers in 1968, allowing for comparisons to the high point of the federal minimum wage. Data allowing for calculations of the median wage of all workers are only available beginning in 1979.

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