The Pennsylvania Minimum Wage 2018

Publication Date: 
January 2, 2018

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Executive Summary

The maps on the front of this brief tell a story (wage changes, map 1, & map 2). Due to the Pennsylvania legislature’s failure to raise our state minimum wage, Pennsylvania’s minimum-wage workers have lost ground relative to their counterparts in surrounding states. Low-wage Pennsylvania workers in large parts of rural Pennsylvania have lost the most ground. In food services, the prototypical low-wage industry, low wage growth in much of rural Pennsylvania has been coupled with the slowest job growth in Pennsylvania and its six neighboring states.

Pennsylvania minimum-wage workers have also lost ground relative to workers in the middle of the wage distribution, in both the short and long run. The Pennsylvania General Assembly last raised the minimum wage in July 2007, to $7.15 per hour or about two fifths (39%) of the-then typical (median) wage for full-time, full-year workers in Pennsylvania ($18.29).

With the Pennsylvania minimum wage now fixed at the federal minimum of $7.25, we project that Pennsylvania minimum-wage earners will earn less than a third (31.9%) of what the typical Pennsylvania worker earns ($22.93 in 2018).

Back in 1968, Pennsylvania minimum-wage workers earned over half (51%) of what the typical Pennsylvania worker made ($1.60 compared to $3.15). 

As of this January, the minimum wage:

  • will have increased in 26 states since December 2013.
  • in Pennsylvania at $7.25 stands 13.8% below the minimum wage in Delaware (where the minimum wage is $8.25), 14.5% below the wage in Ohio ($8.30), 18.6% below New Jersey’s minimum ($8.60), 20.7% below the minimum in West Virginia ($8.75), 27.6% below Maryland’s wage ($9.25), 43.4% below the minimum wage in most of New York state ($10.40, the minimum in New York City, Long Island & Westchester will range from $11 to $13 in 2018), and 72.4% below the minimum wage in the District of Columbia ($12.50). 

Laws already on the books will lead to further increases in the minimum wage between now and January 2024 in six neighboring states and the District of Columbia. Assuming no additional legislative changes, the minimum wage will rise 9% in Maryland, 15% in Ohio and New Jersey, 28% in the District of Columbia and 29% in most of New York state (outside of New York City, Nassau, Suffolk, and Westchester Counties where the minimum wage is already higher and scheduled to rise to $15). As there are active campaigns to raise the minimum wage to $15 in New Jersey and Maryland, it is likely the minimum wage will rise further in those states and across the region before 2024.

Given the rise in minimum wages in the region, we examine the change in real hourly earnings over the last four years for low-wage workers (defined as those at the 10th percentile) and find: 

  • the 10th percentile wage in the last four years (through the first six months of 2017) has risen by $1.02 per hour, to $9.73 per hour in the region (defined as our six neighboring states plus Washington D.C.). That increase amount to $2,104 per year for a full-time, full-year worker.
  • In Pennsylvania, the increase in the 10th percentile has been only a third as large, 33 cents per hour. If our 10th percentile wage had seen an increase as large as neighboring states, full-time, full year workers at this wage level would have another $1,435 in annual income.
  • Counting just those in the 10th percentile and below, Pennsylvania workers received $362 million LESS in their paychecks in the 12 months spanning the second half of 2016 and first half of 2017 than if lawmakers had emulated their peers in neighboring states.

Examining county-level data on employment and average weekly wages drawn from a survey of employers in food services and drinking places (hereafter food services), a sector with a large share of low-wage workers, we observe more growth in wages and employment, especially in New York, northern West Virginia, and Maryland than in Pennsylvania.

  • Overall in Pennsylvania real wages in food services grew by just 5% while on average across the region (Delaware, District of Columbia, Maryland, New Jersey, New York, Ohio, and West Virginia) they grew 7.8% between 2012 and 2016.
  • Not only has wage growth been stronger in the rest of our region where the minimum wage has increased, so has employment growth. As the purchasing power of the minimum wage rose 12% across the region, payroll growth in food services was up 12.3% compared to much slower growth of 6.8% in Pennsylvania where the minimum wage lost 4.7% of its purchasing power from 2012 to 2016.

These trends in wages and employment overall and in food services illustrate that minimum wage increases have neither harmed economic performance in the region nor, in the case of Pennsylvania where the real purchasing power of the minimum wage has declined, boosted the states relative economic fortunes. These results also line up with the finding of the best research evidence on state minimum wage increases, where minimum wage increases since 1990 have been found to have little to no impact on employment but strong positive impacts on wages and incomes for low-wage workers. We recommend that policymakers move to raise the minimum wage starting this July from $7.25 to $9 and ultimately settle on a schedule of increases that raise the wage to $15.

We estimate:

  • a minimum wage increase this July to $9 will close the gap that has emerged since 2007 in the earnings of the lowest wage workers and those at the median. Doing so would raise the wages of 791,000 workers, boosting their total earnings by $894 million.
  • that a schedule of minimum wage increases that boost the minimum wage by $1 each year from this July to July 2024 will boost the total earnings of all workers affected by $9.1 billion, lifting earnings for 2.1 million Pennsylvania workers (or 37% of workforce).

The majority of workers in Pennsylvania that would get a raise if the minimum wage were increased to $9 this July are adults (80.6%) working 20 or more hours a week (75%) with a family income less than $75,000 (67.8%). 

A minimum wage increase in Pennsylvania is long overdue and would provide a critical boost to family incomes while making important progress towards reducing income inequality. 

Read the rest of the report