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The Regional Impact of a Minimum Wage Increase

By Kurt Wise and Sarah Nolan, January 18, 2013 (updated: November 19, 2013)

Increasing the minimum wage would 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 2013, about $5,000 less (when adjusted for inflation) than he or she would earn if the minimum wage had maintained its value since 1968 (which was equal to about $10.72, or $21,440 a year, in today's dollars). Increasing the minimum wage to $10.50 by 2016 would raise the wages of approximately 568,000 workers. For demographic information on the workers who would be helped by a minimum wage increase see here.

While these 568,000 workers live throughout Massachusetts, some cities and towns have higher concentrations of the labor force employed in low-wage work than others. Raising the minimum wage would tend to have a greater impact in these areas, particularly since workers who receive wage increases are likely to spend a portion of those increases locally. 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 could expect to see their wages increase if the state minimum wage were to rise in two steps to $10.50 per hour on January 1, 2016.

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 $10.50 per hour will have two types of effects. Workers who currently earn less than $10.50 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 $10.50 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, there is a fair amount of variation in terms of the portion of wage earners who will be affected—directly or indirectly—by an increase in the minimum wage to $10.50 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 $10.50 per hour—more than double the proportion in higher-income suburbs.

Workers Affected by a Minimum Wage Increase to $10.50 by City/Region

City or Region*Directly AffectedIndirectly AffectedTotal% Workforce
     
MASSACHUSETTS443,700124,000567,70018%
     
NORTH Directly AffectedIndirectly AffectedTotal% Workforce
City of Lowell9,2002,70011,90024%
Greater Lawrence 9,5003,70013,20021%
Greater Lynn 8,2002,90011,10022%
Eastern Essex (Salem, Beverly, Marblehead)8,0002,50010,50017%
Northeastern Essex (Gloucester, Newburyport)5,4001,9007,30017%
Central Essex (Peabody, Danvers, Lynnfield)6,9002,1009,00016%
North Central Essex (Haverhill, N. Andover, Boxford)7,3002,1009,40016%
Northeastern Middlesex (Wakefield, Reading)5,6001,3006,90012%
Northern Middlesex (Billerica, Chelmsford)9,9002,80012,70013%
GREATER BOSTON Directly AffectedIndirectly AffectedTotal% Workforce
City of Boston**45,50011,20056,70018%
Chelsea, Revere & Winthrop7,0002,8009,80022%
Malden-Medford13,8001,50015,30021%
Somerville-Everett15,2001,80017,00022%
Cambridge5,2002,5007,70015%
Newton-Brookline4,2001,3005,5008%
Milton-Quincy7,2002,1009,30016%
Northern Suburban (Woburn , Melrose, Stoneham)7,4001,3008,70014%
Northwestern Suburban (Waltham, Arlington)9,7003,10012,80014%
Western Suburban (Needham, Wellesley)3,4009004,3009%
SOUTH/CAPEDirectly AffectedIndirectly AffectedTotal% Workforce
Greater Weymouth9,1002,50011,60016%
Greater Brockton9,4002,10011,50022%
Greater Taunton10,4002,20012,60021%
Greater Attleboro10,6002,50013,10021%
Greater Fall River6,8002,6009,40020%
Greater New Bedford15,5004,50020,00025%
Greater Plymouth10,8002,30013,10016%
Southwest (Franklin, Foxborough)8,6001,2009,80015%
Central Norfolk (Norwood, Walpole)4,5001,8006,30013%
Southeastern Norfolk (Braintree, Randolph)7,7002,80010,50018%
Western Plymouth (Bridgewater, Easton)11,1002,70013,80018%
Western & Eastern Cape; Islands3,7001,9005,60016%
Central Cape9,7003,40013,10022%
CENTRALDirectly AffectedIndirectly AffectedTotal% Workforce
City of Worcester12,8004,60017,40022%
Suburban Worcester6,1001,5007,60013%
Framingham-Natick Area6,7001,9008,60017%
Greater Milford5,0001,9006,90012%
Central Middlesex (Acton, Concord, Sudbury)4,5006005,1009%
Western Middlesex (Marlborough, Hudson)8,3002,40010,70019%
Central Worcester (Westborough, Northborough)5,9002,1008,00016%
North Central (Leominster, Fitchburg)9,4003,50012,90021%
South Central (Southbridge, Webster, Oxford)8,4002,50010,90017%
WESTDirectly AffectedIndirectly AffectedTotal% Workforce
City of Springfield14,6003,20017,80029%
Chicopee-Holyoke Area9,3002,60011,90024%
West Central Hampden (Westfield, Agawam)11,3003,90015,20027%
Greater Amherst Area7,0003,00010,00023%
Eastern Hampden and Hampshire (Ludlow, Long Meadow)8,2002,00010,20018%
Greater Pittsfield Area10,0002,40012,40024%
Western Massachusetts (Greenfield, Athol, Montague)9,7002,50012,20021%

* In most cases an area includes more than one city or town (for example, Greater Lawrence includes Methuen and Andover). For large areas, the two or three biggest cities or towns are noted.

**The number of workers affected in Boston varies greatly within areas of the city. The city is divided into five broad census areas, and the percentage of workers who would be affected by a minimum wage increases ranges from 15 percent to 25 percent, depending on area.

Source: Economic Policy Institute analysis of American Community Survey and Current Population Survey data for 2012 and 2013.

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 the last two quarters of 2012 and the first two quarters of 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 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 $10.50 per hour.

Indirectly affected

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 $9.25 per hour to $10.50 per hour (the second step of the two-step process being modeled), as pay scales are adjusted in response to the increase.