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 to increase the federal minimum wage to ensure that even the lowest-paid workers benefited from broader improvements in wage and living standards.
Yet for decades, 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 undo the decline in value that has occurred since the 1960s. In 2016, the federal minimum wage of $7.25 was worth 10 percent less than when it was last raised in 2009, after adjusting for inflation, and 25 percent below its peak value in 1968.
This decline in purchasing power means low-wage workers have to work longer hours just to achieve the standard of living that was considered the bare minimum almost half a century ago. Over that time, 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 earning the minimum wage does not earn enough through full-time work to be above the federal poverty line.
Restoring the value of the minimum wage to at least the same level it had 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.
In April 2017, Sens. Bernie Sanders (I-Vt.) and Patty Murray (D-Wash.), and Reps. Bobby Scott (D-Va.) and Keith Ellison (D-Minn.) announced that they would introduce the Raise the Wage Act of 2017, a bill that would raise the federal minimum wage in eight 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. The report concludes with a discussion of the provisions of the Raise the Wage Act that would index the minimum wage to median wages, and gradually eliminate the subminimum wage for tipped workers.
This report finds that:
- A $15 minimum wage in 2024 would undo the erosion of the value of the real minimum wage that began primarily in the 1980s. In fact by 2019, 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 22.5 million workers. On average, these low-wage workers would receive a $3.10 increase in their hourly wage, in today’s dollars. For a directly affected worker who works all year, that translates into a $5,100 increase in annual wage income, a raise of 31.3 percent. Another 19.0 million workers would benefit from a spillover effect as employers raise wages of workers making more than $15 in order to attract and retain their workforces.
- All told, raising the minimum to $15 in 2024 would directly or indirectly lift wages for 41.5 million workers, 29.2 percent of the wage-earning workforce.
- Over the phase-in period of the increases, the rising wage floor would generate $144 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 36 years old. A larger share of workers age 55 and older would receive a raise (16.1 percent) than teens (9.8 percent). More than half of all affected workers are prime-age workers between the ages of 25 and 54.
- Although men are a larger share of the overall U.S. workforce, the majority of workers affected by raising the minimum wage (55.6 percent) are women.
- The minimum wage increase would disproportionately raise wages for people of color—for example, blacks make up 12.2 percent of the workforce but 16.7 percent of affected workers. This disproportionate impact means large shares of black and Hispanic workers would be affected: 40.1 percent of black workers and 33.5 percent of Hispanic workers would directly or indirectly get a raise.
- Of workers who would receive a raise, nearly two-thirds (63.0 percent) work full time, nearly half (46.6 percent) have some college experience, and more than a quarter (28.0 percent) have children.
- Four out of every 10 single parents who work (40.8 percent) would receive higher pay, including 44.6 percent of working single mothers. In all, 4.5 million single parents would benefit, accounting for 10.8 percent of those who would be affected by raising the minimum wage
- The workers with families—defined as a worker with a spouse or a child in the home—who would benefit are, on average, the primary breadwinners for their family, earning an average of 63.8 percent of their family’s total income.
- A federal minimum wage increase to $15 in 2024 would raise wages for the parents of 19 million children across the United States, nearly one-quarter (24.0 percent) of all U.S. children.
- Indexing the minimum wage to median wages 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.
Chosen excerpts by Job Market Monitor. Read the whole story at Raising the minimum wage to $15 by 2024 would lift wages for 41 million American workers | Economic Policy Institute