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The Regional Impact of an $11/Hour Minimum Wage

June 23, 2014

Updated December 18, 2014

Increasing the minimum wage to $11 per hour will give hundreds of thousands of Massachusetts workers a raise and provide them and their families with additional resources to pay for basic necessities. A full-time minimum wage worker in Massachusetts makes $16,000 in 2014, over $5,500 less (when adjusted for inflation) than he or she will earn if the minimum wage had maintained its value since 1968 (which was equal to about $10.86 per hour, or $21,720 a year, in today’s dollars). Increasing the minimum wage to $11 by 2017 would raise the wages of approximately 605,000 workers.  For demographic information on the workers who will be helped by a minimum wage increase see MassBudget’s Factsheet, Rewarding Work: The Data on an $11 Minimum Wage.

While these 605,000 workers live throughout Massachusetts, some cities and towns have particularly high concentrations of the labor force employed in low-wage work. Raising the minimum wage will tend to have a greater impact in these areas, especially because workers who receive wage increases are likely to spend a portion of those increases locally, thereby supporting local businesses and boosting the local economy. This fact sheet builds on the previous MassBudget statewide analysis by providing estimates of the number of workers in specific cities and regions of the state who can expect to see their wages increase if the state minimum wage is raised in three steps to $11 per hour on January 1, 2017.

Calculating the Regional Impact of a Minimum Wage Increase

Like our earlier estimates of the statewide effect of a minimum wage increase, the projections contained in this fact sheet come from a model developed by the Economic Policy Institute, a national, non-partisan research organization. This model uses data from two separate Census surveys, the American Community Survey and the Current Population Survey and looks at specific geographic areas called Public Use Microdata Areas (PUMAs)—areas that are large enough so that the sample size used in the survey is sufficient to produce reliable estimates. The analysis assumes that an increase in the minimum wage to $11 per hour will have two types of effects. Workers who currently earn less than $11 per hour will be directly affected by the change because they will receive an automatic pay increase when the new minimum wage goes into effect.  Other workers, who currently earn slightly above $11 per hour, will be indirectly affected because their wages can be expected to increase somewhat as overall pay scales rise in response to the minimum wage increase. (See note at the end of this fact sheet for more details on the methodology used.)

Low-wage workers in all parts of the state will be affected by an increase in the minimum wage. As the table on the next page shows, however, there is significant variation in the portion of wage earners who will be affected—directly or indirectly—by an increase in the minimum wage to $11 per hour.  In cities such as Springfield and Lowell, and in the greater New Bedford and Pittsfield areas, about one in four workers is estimated to see his or her wages rise if the minimum wage is increased to $11 per hour—more than double the proportion in higher-income suburbs.  

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The minimum wage increase to $11 per hour will occur in three, annual steps of one dollar each, with each increase occurring on January 1st. The first increase, to $9 per hour, will occur on January 1st, 2015 and will affect some 280,000 Massachusetts workers and their families. The regional impacts of this first wage increase are shown in the table, below.

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Note on Methodology

Regional Calculations
The EPI model which produced the estimates in this paper uses data from the Current Population Survey (CPS) Outgoing Rotation Group (ORG) survey for 2013 on the total number of workers at different hourly wage levels in Massachusetts and the number of hours they work in order to estimate the total number of workers affected by a specific minimum wage increase and the average pay increase. While the CPS ORG data provide the best information on wage levels for different demographic groups on the state level, the survey is based on sample sizes that are generally too small to produce meaningful information on specific cities or regions within the state. 

In order to look at areas within the state, researchers generally use the data from the Census Bureau's American Community Survey (ACS). The ACS data allow analysis of geographic areas, called Public Use Microdata Areas (PUMAs), each of which has at least 100,000 people. Some PUMAs correspond to a single city, and others contain multiple cities and towns and can represent metropolitan areas, clusters of towns, or broader regions. However, the ACS provides less wage-related information than the CPS ORG survey and appears to undercount low-wage workers, making it difficult to accurately estimate the number of potentially affected workers. Thus, for the purpose of producing the local estimates contained in this fact sheet, the EPI model uses 2010/2011 ACS data to estimate the distribution of affected workers across the state (i.e., the percentage of all affected workers living in a particular area), and then applies the percentage to the statewide total generated from the CPS. Estimates of the percentage of the local workforce that will receive a wage increase in each area are based on this number, divided by the total labor force estimated for each area by the ACS.  

Directly affected workers
Directly affected workers are those who earn an estimated hourly amount that is lower than a given minimum wage amount. For instance, someone who reports an hourly wage of $9.50 or a weekly salary of $380 and works 40 hours per week (corresponding to an hourly wage of $9.50) would be directly affected if the minimum wage were increased to $10 per hour.

Indirectly affected workers
Workers who earn just above a given minimum wage amount would also see their wages increase in the period following a minimum wage increase. The EPI model estimates indirectly affected workers as those with reported wages between the new minimum wage and the sum of the new minimum plus the size of the minimum wage increase. For example, using this model, someone who reports an hourly wage of $11.50 (or a weekly salary of $460 and works 40 hours per week) would be indirectly affected if the minimum wage were increased from $10 per hour to $11 per hour (the third step of the three-step process being modeled), as pay scales are adjusted in response to the increase.