The Case for a Local Minimum Wage
In the last couple of weeks, national politicians have begun to talk seriously about economic inequality and increasing the income of the working poor. "It's well past the time to raise a minimum wage," President Obama said in an economic address last week. "It will be good for our economy. It will be good for our families."
Democrats in both the House and the Senate have proposed a hike from the current $7.25 to $10.10, with further increases pegged to inflation. This is a much-needed jump. But even at the new rate, full-time minimum wage employees would earn just 37 percent of the median full-time wage across America, as University of Massachusetts Amherst economist Arindrajit Dube pointed out in a recent New York Times op-ed. Real purchasing power would still be much lower than it was several decades ago.
And given the substantial differences in housing and living costs across U.S. cities and metros, a single minimum wage makes little sense. Workers need much more to get by in San Francisco or New York than in smaller, less expensive cities.
Already, state and municipal governments are at the leading edge of efforts to raise the minimum wage, adopting local minimums significantly above the federal requirements. Last month, voters in SeaTac, Washington – a town notable for its major airport, filled with minimum-wage workers at newsstands and fast-food joints – narrowly approved a huge hike in their minimum wage to $15. And in a more modest move, but one that will affect far more workers, the District of Columbia City Council recently backed an $11.50 minimum wage. Nineteen states have set their minimum wages above the federal level. California, Connecticut, New York , Rhode Island, and New Jersey are set to do the same over the next year or two.
But what should these local minimum wages look like?
Dube suggested a wage floor of 50 to 60 percent of the median wage, writing to me that this was "close to the international standard and our own norm during the 1960s and 70s." The labor market data and research firm EMSI provided current data on median wages, which we used to estimate suggested minimum wages of 50 and 60 percent of the median wage by metro.
The map above, by the Martin Prosperity Institute's Zara Matheson, shows how the median wage differs across America's largest metros. The metros highlighted in yellow are those where median full-time wages are less than $20 an hour. These are places were setting the minimum wage at half of the metro median would result in a floor below the federal $10.10 proposal. These metros include Buffalo, New York and much of the Sunbelt, including New Orleans, Tucson, Las Vegas and all of Florida’s major metro areas – Orlando, Miami, Jacksonville and Tampa.
The metros marked in green are those where 50 percent of the metropolitan median is a figure between $10.20 and $12.50. These include Providence, Rhode Island; much of the Midwest, stretching from Pittsburgh to Detroit to Minneapolis; Los Angeles and Portland, Oregon.
The metros marked in teal and blue are those with the highest median wages. Workers in these cities would require a minimum wage of more than $12.50 to reach just half of the metro's current median wage level. These are all coastal knowledge metros: Seattle ($12.75), New York ($12.90), Boston ($12.98), San Francisco ($13.95), Washington, D.C. ($15.20) and San Jose ($15.72).
Workers in fewer than 20 of the nation's 52 largest metros (those with populations of more than one million people) would make 50 percent of their area's median wage under the current Congressional proposal for a $10.10 minimum wage. And, there is not a single large metro where a minimum wage of $10.10 would be greater than or equal to 60 percent of the metro's current median full-time wage.
The table below zooms in on the top and the bottom of this spectrum, showing the metros with the highest and lowest suggested minimum wages based on our calculations.
|Suggested Minimum Wages Based on Median Wage Levels For Large Metros|
|Metro Area||Median Hourly Earnings||60 Percent of Median||50 Percent of Median|
|San Jose-Sunnyvale-Santa Clara, CA||$31.43||$18.86||$15.72|
|San Francisco-Oakland-Fremont, CA||$27.89||$16.73||$13.95|
|New York-Northern New Jersey-Long Island, NY-NJ-PA||$25.80||$15.48||$12.90|
|Hartford-West Hartford-East Hartford, CT||$23.55||$14.13||$11.78|
|Minneapolis-St. Paul-Bloomington, MN-WI||$23.16||$13.90||$11.58|
|Metro Areas with Lowest Median Wages|
|Tampa-St. Petersburg-Clearwater, FL||$19.09||$11.45||$9.55|
|New Orleans-Metairie-Kenner, LA||$18.98||$11.39||$9.49|
|Miami-Fort Lauderdale-Pompano Beach, FL||$18.91||$11.35||$9.46|
|Las Vegas-Paradise, NV||$18.89||$11.33||$9.45|
|Louisville/Jefferson County, KY-IN||$18.82||$11.29||$9.41|
|Oklahoma City, OK||$18.79||$11.27||$9.40|
|San Antonio-New Braunfels, TX||$18.48||$11.09||$9.24|
In many of the cities near the top of the list, local efforts have already raised the minimum wage above federal standards. But those rates are still quite below our suggested minimum. This January, for example, San Jose's minimum wage will rise to $10.15, while the minimum wage in nearby San Francisco will increase to $10.74. Many of the metros at the bottom of the table, in contrast, are in states like Louisiana and Florida, which have not raised their minimum wages above the federal minimum. No metro has set a minimum wage that would bring the salaries of the lowest-paid workers in line with the metro median.
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Some business owners and conservative economists argue that raising the minimum wage will drive up prices and could force some people out of work. But Dube notes that raising the minimum wage can help the economy in other ways. In a 2010 study, he and his colleagues found that a hypothetical 10 percent hike in the minimum wage would have no statistically significant negative effects on restaurant or retail industry employment. And in a forthcoming Department of Labor study, Dube found that, on an aggregate level, this same increase in the minimum wage reduces poverty by about 2 percent.
But raising the minimum wage is clearly just a first step. Wages in the $22- to $25-an hour range will be needed to create good, family-supporting jobs – comparable to what manufacturing jobs paid back in the day – in many of America’s largest cities. As Dube rightly noted in an email:
Creating a service-sector equivalent of a manufacturing job is an important goal – and a very challenging one. I think the minimum wage can play a role, but I don't see it doing it alone. The federal minimum wage is too blunt a tool to take it to something like $22 an hour.
It will take a much bigger push to upgrade the 60 million low-paying service jobs that make up nearly half of America's work force. A federal minimum wage of $10.10 is just the first step to address what Obama called "the defining challenge of our time: Making sure our economy works for every working American." What we really need is a minimum wage that reflects the very different conditions faced by workers and families in cities and metros across the United States.
Top Image: A group of protesters walk through the Walmart retail store parking lot on Black Friday in Elgin, Illinois, November 29, 2013 (REUTERS/Jeff Haynes).