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Minimum Wage Trends: Understanding Past and Contemporary Research

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Publication Date: October 2006

Publisher(s): Economic Policy Institute

Author(s): Liana Fox

Topic: Labor (Labor conditions, wages, salaries, and benefits)

Type: Brief

Abstract:

The federal minimum wage of $5.15 is currently at its lowest real (i.e., inflation-adjusted) value in over 50 years. Historically, when the federal government has failed to raise this floor, states have stepped in. In fact, a greater percent of the U.S. workforce is currently covered by higher state minimum wages than ever before. Twenty-two states plus the District of Columbia have minimum wages above the federal rate, covering 58% of the nation's labor force.

This Briefing Paper examines the evidence regarding the economic effects of state minimum wage increases, identifying the beneficiaries of an increase as well as any potential negative consequences. Analysis of the 2005 Current Population Survey reveals that the workers potentially affected by a minimum wage increase are mainly adults who typically work full time and provide significant income to their families.

If the federal minimum wage were increased to $7.25 per hour by 2008, 14.9 million workers would see their wages rise. The vast majority (80%) of workers affected are adults age 20 and above. Twenty-six percent of these workers are parents, and as a result over 7.3 million children of low-wage workers would see their parents' income increase if the federal minimum wage was increased to $7.25 per hour by 2008. From a historical perspective, this demographic portrait is consistent with the make-up of workers benefiting from the last federal minimum wage increase (Bernstein and Schmitt 1998).