Testimony For the Pennsylvania House Democratic Policy Committee Hearing:
Raise the Wage
March 27, 12:00 PM to 1:00 PM, Room G-50, Irvis Office Building, Pa. Capitol Complex
Claire Kovach, Ph.D., Senior Research Analyst at the Keystone Research Center
Contact: kovach@keystoneresearch.org
Good afternoon. I am a senior research analyst at the Keystone Research Center, the mission of which is to promote a more prosperous and equitable Pennsylvania. I also hold a Ph.D. in sociology from Penn State University.
I want to thank Representative Bizzarro and the members of the committee for holding a public hearing on the important topic of the need for an increase in the Pennsylvania minimum wage.
We at the Keystone Research Center argue that raising the wage to $15 per hour for all Pennsylvania workers (including tipped workers) is crucial to improving the lives of working people and working families in Pennsylvania. Other panelists today will cover a wide range of reasons why a $15-per-hour minimum wage is so critical, so I will focus my comments on providing some numbers on three topics related to the likely impact of a state minimum wage increase and the need to allow localities with higher wages and costs of living to increase their minimum wage above the state minimum wage level. Specifically:
1) With a $15 minimum wage by January 2024, how many Pennsylvania workers would see their wages go up, and how much more income would they see?
2) Who would benefit from this proposed $15-per-hour minimum wage? What are the demographics of the impacted workers?
3) Preemption and its role in the future for the Pennsylvania minimum wage.
Background:
The Pennsylvania and U.S. minimum wages have remained at $7.25 per hour since July of 2009. Meanwhile, every state that borders Pennsylvania has a higher minimum wage, and many in the northeast region and Maryland have reached, or are on paths to reach, $15 per hour soon. The buying power of the minimum wage has plummeted in the almost 14 years since it was last increased in Pennsylvania and is now worth less in real (inflation-adjusted) terms than at any point since 1956.[1] Thirty states and Washington, DC, have already responded to calls to raise the minimum wage above the national level, helping struggling families pay for groceries, rent, utilities, and other necessities.
1) Keystone Research Center estimates that a minimum wage of $15 per hour by January 1, 2024, would raise the wages of nearly 1.6 million Pennsylvania workers, or about 26% of Pennsylvania’s workforce.[2] Our estimates categorize affected workers two groups: those who would directly benefit from the $15 minimum wage, and those who would indirectly benefit. Directly affected workers are those currently making under $15 per hour. We estimate that more than 980,000 Pennsylvania workers would directly benefit. Indirectly affected workers are those who currently earn slightly more than $15 per hour but, as the minimum wage floor increases, are predicted to see a slight wage increase as employers adjust their pay scales. We estimate that nearly 587,000 Pennsylvania workers would benefit indirectly. Overall, we estimate that 1 in 4 Pennsylvania workers would benefit from a $15 minimum wage by the beginning of 2024. Across all those who benefit, we estimate that the average worker would see a $4,300 yearly raise. Because a high share of Pennsylvania’s near-minimum and minimum-wage earners come from families with moderate and low incomes that need to spend almost all the money they earn on basics, most of the increase in wage income from a minimum wage increase would go directly back into the economy. A $4,300 wage increase for one in four Pennsylvania workers—and a bigger increase for a higher share of workers in lower-wage rural areas—would be a big boost in consumer buying power in our communities, one that strengthens and sustains the current economic expansion.
2) While there is more work needed to address gender- and race-based disparities in pay, this minimum wage increase would disproportionately benefit Pennsylvania women and people of color. Of the nearly 1.6 million Pennsylvania workers we estimate would benefit from this increase, 61% are women and 31% are people of color.
One common myth is that a minimum wage increase would primarily benefit teenagers working for pocket money, but that myth is not supported by the data. Fewer than 14% of those who would be impacted are teenagers. In fact, more than half of those who would benefit are 20 to 39 years old, and 18% are 55 years or older. One of every three workers who benefit have at least one child under 18 in their household.
Nearly seven out of ten workers who would benefit work in the big service industries: retail, leisure and hospitality, education, healthcare, and social assistance. These workers are the same ones we’ve called essential workers since 2020, and they’ve shouldered a disproportionate burden of the COVID-19 pandemic.
3) There have been discussions and debates around the idea of eliminating state preemption on the minimum wage in Pennsylvania—i.e., allowing municipalities to set their own minimum wages above the state minimum wage. Several states bordering Pennsylvania already have laws that allow this. Even with a $15-minimum-wage floor statewide, Pennsylvania localities with higher costs-of-living may need to further increase their minimum wage to enable most workers to cover the costs of a basic family budget without public assistance. According to MIT researchers, the average living wage for a full-time worker in Pennsylvania overall is currently $16.41 for a single worker with no children. This wage would keep that worker off anti-poverty programs but wouldn’t cover any purchase of prepared foods or eating outside the home. The worker would also have zero dollars for entertainment and zero dollars for savings.[3] Sixteen dollars and 41 cents for a single adult with no children is a “bare bones” family budget in Pennsylvania.
The Keystone Research Center estimates that 12% of the workers who would benefit from a $15-per-hour minimum wage by 2024 live in Philadelphia County. The single adult living wage for Philadelphia County is $17.53 per hour. If the worker has one child, the living wage needed more than doubles to $36.94 per hour. Removing preemption after setting a strong, statewide $15 minimum wage would allow areas with higher costs of living to set their own minimum wages to be higher than the state’s, while allowing areas with different economies to stay at the state minimum.
As effects from the COVID-19 pandemic continue to ripple their way through the Pennsylvania economy, the labor market has largely rebounded. Pennsylvania’s unemployment rate is 4.3%, close to the lowest it’s been in 30 years.[4] The latest report by the Pennsylvania Minimum Wage Advisory Board estimates that only 63,600 Pennsylvania workers earned at or below the minimum wage in Pennsylvania in 2022, the lowest number in the report’s series.[5] That report shows that employment and wages for hourly Pennsylvania workers increased in 2022, expanding primarily in the range of hourly jobs that pay $15 per hour or more.[6] But our research presented here today shows that nearly a million Pennsylvania workers earn less than $15 per hour, which is below the living wage for the state. A $15 minimum wage now is crucial for the well-being of working Pennsylvania families.
[1] David Cooper, Sebastian Martinez Hickey, and Ben Zipperer, “The value of the federal minimum wage is at its lowest point in 66 years,” Economic Policy Institute, July 14, 2022, https://www.epi.org/blog/the-value-of-the-federal-minimum-wage-is-at-its-lowest-point-in-66-years/.
[2] Keystone Research Center minimum wage impact estimates are based on data from the American Community Survey, the Current Population Survey, and the Economic Policy Institute.
[3] Massachusetts Institute of Technology, Living Wage Calculator User’s Guide/Technical Notes, https://livingwage.mit.edu/resources/Living-Wage-Users-Guide-Technical-Documentation-2023-02-01.pdf.
[4] U.S. Bureau of Labor Statistics, Pennsylvania Economy at a Glance, https://www.bls.gov/eag/eag.pa.htm.
[5] Analysis of the Pennsylvania Minimum Wage, March 2023, page 3, https://www.workstats.dli.pa.gov/Documents/Minimum%20Wage%20Reports/Minimum%20Wage%20Report%202023.pdf.
[6] Analysis of the Pennsylvania Minimum Wage, March 2023, pages 3, 10: “Their wage distributions shifted away from wage categories below $15.01 [minimum wage or below, near minimum wage ($7.26 – $12.00), and $12.01 – $15.00]. The above $15.00 category was the only one to increase in both volume and percentage. Pennsylvania’s share of above $15.00-per-hour workers rose by 10.5 percentage points to 69.5 percent, while the nation’s percentage rose 8.7 percentage points to 68.7 percent.”