The Minimum Wage
The Work & Education section finds that a high-quality educational system which ensures broad access to pre-K through college and university training is an important tool for building an economy that offers high-wage jobs. Indeed, it is likely that our highly educated workforce helps attract high-wage employers to Massachusetts and allows businesses already here to grow. However, some jobs do not require a higher degree. In the past, federal and state requirements for a minimum wage have helped raise the salary floor for such jobs. In Massachusetts, some 500,000 workers would see an increase in the wages if the minimum wage were raised to $10.50 per hour by 2016.1
Over the past forty years the value of the minimum wage has been eroded by inflation. A minimum wage earner working full time in Massachusetts will earn about $16,000 this year, higher than the poverty threshold for an individual (a little over $11,700 in 2012), but lower than the threshold for a family of three (around $18,500). That same worker would have earned about $21,400 back in 1968or $5,400 more than today (adjusted for inflation).
In Massachusetts, employers may pay a lower minimum wage to certain workers who regularly earn tips (when the workers' tips bring their pay up to the regular minimum wage). Originally set as a percentage of the regular minimum wage, the tipped minimum wage was frozen at $2.63 per hour in 1999 and has not been increased for the last 14 years. Since 1968, the real value of the tipped minimum wage has fallen 58 percent, even further than the regular minimum wage. The decline in value particularly affects women, who constitute a disproportionate share of tipped workers (see the MassBudget factsheet, The Minimum Wage for Tipped Workers
Minimum wage standards tend to benefit other low-income workers who earn wages above the minimum wage. This is so because labor contracts may tie wages to the value of the minimum wage or the overall wage structure of an employer may shift upward when the minimum wage increases. Minimum wage increases in 2000-01 and 2007-08 were followed by a slight uptick in wages for the bottom 20 percent of earners generally. However, since 1979, the real value of the minimum wage has declined and wages for the bottom 20 percent have remained stagnant.
Close to half of workers earning hourly wages between the minimum wage and $11.00 dollars per hourthose who would benefit most directly from an increase in the minimum wage have not attended college. Over 40 percent of minimum wage and low-wage earners (those workers earning $11/hr. or less) work full time.2
Minimum wage and low-wage workers are concentrated in a few industriesin fact, nearly two-thirds of Massachusetts workers who earn between $8.00 and $11.00 per hour are concentrated in just three industriesRetail, Leisure & Hospitality, and Education & Health Care - all of which have seen healthy job growth in recent years (details here).3
Data on changes in the number of jobs in Massachusetts show that recent increases in the Massachusetts minimum wage have not resulted in job loss in industry sectors in which minimum wage earners typically work. Since 1996, Massachusetts has implemented three sets of increases to the state minimum wage (in 1996-1997, 2000-01, and 2007-08). Two of these sets of increases (2000-01 and 2007-08) were implemented right before or during the start of a recession that resulted in job loss for all sectors. However, job growth in low wage sectors has tended to recover more quickly and has been positive over the entire period, which is unlike sectors (such as manufacturing) with fewer minimum wage earners.
Increasing the minimum wage could help restore the value it has lost over time. In order to restore the value lost due to increases in the cost of living, the minimum wage would need to rise to about $10.72 in 2013. Assuming the cost of living continues to grow modestly, it would need to be about $11.00 per hour by 2015. And if the minimum wage had kept pace with gains in productivity since 1979, it would be $19.77or about $39,000 a year for a full-time worker. To look at these and other scenarios, see our interactive tool.
1Economic Policy Institute analysis of Current Population Survey, Outgoing Rotation Group, 2012Q3 - 2013Q2.
2Economic Policy Institute analysis of Current Population Survey, Out Going Rotation Group, 2012Q3 - 2013Q2
3 Economic Policy Institute analysis of U.S. Bureau of Labor Statistics data.