Counterproductive: The Employment and Income Effects of Raising America’s Minimum Wage to $12 and to $15 per Hour
We examine the employment effects and antipoverty implications of raising the federal minimum wage to $12 per hour and to $15 per hour, respectively, by 2020.
We examine the employment effects and antipoverty implications of raising the federal minimum wage to $12 per hour and to $15 per hour, respectively, by 2020. We focus on how raising the federal minimum wage would affect the very low-wage workers whom the policy is intended to help. Overall, we find significant trade-offs in raising the federal minimum wage.
While a minimum-wage hike would benefit millions of workers with higher earnings, it would also hurt millions of others who would lose earnings because they cannot attain or retain a job. Our estimates show that raising the federal minimum wage to $12 per hour by 2020 would affect 38.3 million low-wage workers. Using our central estimate, we find that raising the minimum wage would cost 3.8 million low-wage jobs. In total, income among low wage workers would rise by, at most, $14.2 billion, of which only 5.8 percent would go to low-wage workers who are actually in poverty.
Similarly, we find that increasing the federal minimum wage to $15 per hour by 2020 would affect 55.1 million workers and cost 6.6 million jobs. Aggregate income among low-wage workers would rise by $105.4 billion, after accounting for income declines from job losses. However, only 6.7 percent of the increase in income would go to workers who are actually in poverty.
Because the exact effect of the minimum wage on employment remains unsettled, we check the robustness of our results by employing a range of estimates from the literature that imply modest, moderate, and severe employment consequences. In each case, we analyze how the change in earnings resulting from a minimum-wage increase would be distributed across income levels.