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Falling Short: The Impact of Raising the Minimum Wage in PA to $8.75 vs. $10.10

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Authors: 
David Cooper
Publication Date: 
February 6, 2015
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application/pdf iconDownload the Policy Watch (pdf)
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application/pdf iconDownload the technical appendix (pdf)
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application/pdf iconFigure: Adults impacted $8.75 vs. $10.10 (pdf)
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application/pdf iconFigure: Increase in total wages $8.75 vs. $10.10 (pdf)
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application/pdf iconFigure: Jobs created $8.75 vs. $10.10 (pdf)
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application/pdf iconDownload Table 1 (pdf)

Read the press release

The Pennsylvania General Assembly is considering a proposal to raise the state’s minimum hourly wage above the federal level of $7.25 to $10.10 by July 2016. An alternative proposal would increase the minimum wage to $8.75 for workers age 19 and older by 2017.

This Policy Watch compares the impacts of these proposals. It finds that the increase to $10.10 per hour would:

  • benefit nearly three times as many workers as the increase to $8.75
  • boost total wages more than five times as much
  • create more than eight-and-half times as many jobs

Findings

Using data on the current wages and demographics of Pennsylvania workers, it is possible to estimate the impact of each minimum-wage proposal on the economy. Intuitively, we expect a larger minimum-wage increase to have a larger impact for the simple reason that more workers fall below or near a minimum wage of $10.10 per hour than a minimum wage of $8.75 per hour.

We find that an increase in the minimum wage to $10.10 per hour would:

  • raise the wages of 1,266,000 workers in Pennsylvania (and 1.1 million adults – Figure 1)
  • boost total wages by $1.8 billion (Figure 2)
  • lead to the creation of 6,000 jobs

Raising the minimum wage to $8.75 per hour by 2017 would:

  • raise the wages of 430,000 workers, a third as many as a hike to $10.10 per hour
  • boost total wages in PA by $353 million, less than one-fifth (19%) of the wage gains with an increase to $10.10 per hour (Figure 2 again)
  • lead to the creation of 700 jobs, less than one-ninth (12%) the number of jobs created by raising the minimum wage to $10.10 per hour

Table 1 presents detailed estimates of the number of workers affected by demographic group.

Figure 1.

 

Figure 2.

 

Conclusion

While both proposals to raise the minimum wage would boost earnings and employment in the economy, an increase to $10.10 per hour would benefit many more workers and provide a much bigger boost to the economy.

View detailed data on the demographics of the workers would benefit from an increase in the minimum under both proposals.

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