Minimum wages have been defined as “the minimum amount of remuneration that an employer is required to pay wage earners for the work performed during a given period, which cannot be reduced by collective agreement or an individual contract”.1
This definition refers to the binding nature of minimum wages, regardless of the method of fixing them. Minimum wages can be set by statute, decision of a competent authority, a wage board, a wage council, or by industrial or labour courts or tribunals. Minimum wages can also be set by giving the force of law to provisions of collective agreements.
The purpose of minimum wages is to protect workers against unduly low pay. They help ensure a just and equitable share of the fruits of progress to all, and a minimum living wage to all who are employed and in need of such protection. Minimum wages can also be one element of a policy to overcome poverty and reduce inequality, including those between men and women, by promoting the right to equal remuneration for work of equal value.
Minimum wage systems should not be seen or used in isolation, but should be designed in a way to supplement and reinforce other social and employment policies. Several types of measures can be used to tackle income and labour market inequality, including pro-employment policies, social transfers, and creating an enabling environment for sustainable enterprises.
The purpose of a minimum wage, which sets a floor, should also be distinguished from collective bargaining, which can be used to set wages above an existing floor. Figure 1 shows a hypothetical wage distribution with a "minimum wage zone" and a "collective bargaining zone" which can be used to establish minimum standards and to set wages above an existing floor.
Figure 2 illustrates that the effectiveness of minimum wages depends on many factors, including the extent to which they afford protection to all workers in an employment relationship, including women, and youth and migrant workers, regardless of their contractual arrangements, as well as all industries and occupations in the economy [coverage]; whether they are set and adjusted at an adequate level that covers the needs of workers and their families, while taking into account economic factors [level]; and whether employers comply with minimum wage regulations [compliance].
Figure 1. The distribution of wages [hypothetical wage distribution of a population of 56 wage-earners]
How to read this figure : Figure 1 shows a hypothetical wage distribution of a population of 56 wage-earners before the introduction of a minimum wage. The level of wages is on the horizontal axis, and the number of wage earners is on the vertical axis.
We see the full range of market wages, including a relatively small proportion of workers with extremely low pay on the left end of the wage distribution. For example, 1 employee has a wage of 1$, 2 employees are paid 3$, while 5 employees receive wages of 8$.
The yellow circle called the “minimum wage zone” shows that a minimum wage should in principle remain targeted at the lowest-paid employees, to eliminate “unduly low pay”; the blue circle is the “collective bargaining zone” and illustrates the principle that collective bargaining can be used to set wages above an existing floor.
Figure 2. Main dimensions of effective minimum wages2
1 ILO: General Survey
concerning the Minimum Wage Fixing Convention, 1970 [No. 131], and the Minimum Wage Fixing Recommendation, 1970 [No. 135], Committee of Experts on the Application of Conventions and Recommendations, 2014.
2
ILO: Advances and Challenges in Labour Protection. Conditions of Work and Equality Department Policy Brief.
This fact sheet was updated February 19 with a new section on tipped workers.
The federal minimum hourly wage is just $7.25 and Congress has not increased it since 2009. Low wages hurt all workers and are particularly harmful to Black workers and other workers of color, especially women of color, who make up a disproportionate share of workers who are severely underpaid. This is the result of structural racism and sexism, with an economic system rooted in chattel slavery in which workers of color—and especially women of color—have been and continue to be shunted into the most underpaid jobs.1
This fact sheet is an update of Why America Needs a $15 Minimum Wage, published by EPI and the National Employment Law Project, February 2019.
Unless otherwise indicated, the figures presented in this fact sheet come from a forthcoming EPI analysis of the 2021 Raise the Wage Act.
1. Kate Bahn and Carmen Sanchez Cumming, “Four Graphs on U.S. Occupational Segregation by Race, Ethnicity, and Gender,” Washington Center for Equitable Growth, July 1, 2020.
2. The analysis is based on the 2021 Raise the Wage Act.
3. Sylvia Allegretto and David Cooper, Twenty-Three Years and Still Waiting for Change: Why It’s Time to Give Tipped Workers the Regular Minimum Wage, Economic Policy Institute, July 2014.
4. Estimated effects of the 2021 Raise the Wage Act throughout this fact sheet are from a forthcoming Economic Policy Institute analysis of the legislation and include benefits for both directly affected workers [those who would otherwise earn less than $15 per hour in 2025] and indirectly affected workers [those who would earn just slightly above $15 in 2025].
5. Ellora Derenoncourt and Claire Montialoux, “Minimum Wages and Racial Inequality,” Quarterly Journal of Economics 136, no. 1 [February 2021]; David Autor, Alan Manning, and Christopher L. Smith, “The Contribution of the Minimum Wage to U.S. Wage Inequality over Three Decades: A Reassessment,” American Economic Journal: Applied Economics 8, no. 1 [January 2016].
6. See also Laura Huizar and Tsedeye Gebreselassie, What a $15 Minimum Wage Means for Women and Workers of Color, National Employment Law Project, December 2016.
7. For racial/ethnic wage gaps, see Appendix Table 1 of Elise Gould, State of Working America Wages 2019, Economic Policy Institute, February 2020.
8. Ellora Derenoncourt and Claire Montialoux, “Minimum Wages and Racial Inequality,” Quarterly Journal of Economics 136, no. 1 [February 2021].
9. Alina Selyukh, “‘Gives Me Hope’: How Low-Paid Workers Rose up Against Stagnant Wages,” National Public Radio’s All Things Considered, February 26, 2020; Kimberly Freeman Brown and Marc Bayard, “Editorial: The New Face of Labor, Civil Rights is Black & Female,” NBC News, September 7, 2015; Amy B. Dean, “Is the Fight for $15 the Next Civil Rights Movement?” Al Jazeera America, June 22, 2015.
10. Economic Policy Institute calculation using Current Employment Statistics data from the Bureau of Labor Statistics. Values calculated using the listed states’ share of total U.S. nonfarm employment in calendar year 2019 [prior to the COVID-19 pandemic]. For recent minimum wage changes, see the Economic Policy Institute Minimum Wage Tracker, //www.epi.org/minimum-wage-tracker/. We include the District of Columbia in this list even though it is not a state.
11. Yannet Lathrop, Impact of the Fight for $15: $68 Billion in Raises, 22 Million Workers, National Employment Law Project, November 2018.
12. Based on calculations from the Economic Policy Institute’s Family Budget Calculator, which measures the income a family needs to attain a secure yet modest standard of living in all counties and metro areas across the country.
13. Congressional Budget Office projections for the consumer price index were applied to the Economic Policy Institute’s Family Budget Calculator.
14. Economic Policy Institute analysis of the legislation, forthcoming.
15. Bureau of Labor Statistics, Occupational Employment Statistics, May 2019 National Occupational Employment and Wage Estimates United States [online database].
16. Economic Policy Institute analysis of Current Population Survey outgoing rotation group microdata, 2017–2019
17. Economic Policy Institute analysis of Current Population Survey outgoing rotation group microdata, 2017–2019
18. Economic Policy Institute analysis of Current Population Survey outgoing rotation group microdata, 2017–2019
19. Quarterly Census of Employment and Wages, 2011–2019.
20. Business for a Fair Minimum Wage, “Federal Business for a Fair Minimum Wage—$15: Signatories List in Formation,” accessed January 22, 2021.
21. Business for a Fair Minimum Wage, “Federal Business for a Fair Minimum Wage—$15: Signatories List in Formation,” accessed January 22, 2021.
22. Patriotic Millionaires, “Endorsed Bill: The Raise the Wage Act,” accessed January 22, 2021.
23. Greater New York Chamber of Commerce, “Celebrating Juneteenth,” June 18, 2020.
24. Kate King, “New York Boosts Minimum Wage and Some Businesses Balk,” Wall Street Journal, January 4, 2021.
25. Arjun Panchadar, “Amazon Raises Minimum Wage to $15, Urges Rivals to Follow,” Reuters, October 2, 2018.
26. Abha Bhattarai, “Amazon Boosts Minimum Wage to $15 for All Workers Following Criticism,” Washington Post, October 2, 2018.
27. Melissa Repko, “Target Raises Minimum Wage to $15 an Hour Months Before its Deadline,” CNBC, June 17, 2020.
28. Michael Grothaus, “Walmart Is Giving 165,000 Employees a Pay Raise Between $15 and $30 per Hour,” Fast Company, September 18, 2020.
29. Lucia Maffei, “Wayfair Sets $15 Minimum Wage for All U.S. Workers,” MassLive, January 8, 2021.
30. Sarah Nassauer and Micah Maidenberg, “Costco Raises Minimum Wage to $15 an Hour,” Wall Street Journal, March 6, 2019.
31. Hobby Lobby, “Hobby Lobby Raises Minimum Wage” [press release], September 14, 2020.
32. Gillian Friedman, “Best Buy to Join Retailers Paying a $15 Minimum Wage,” New York Times, July 22, 2020.
33. Chobani, “Chobani Increases Employees’ Starting Wage to at Least $15/Hour,” [PR Newswire release], Vending Marketwatch, October 30, 2020.
34. Janine Puhak, “Starbucks to Raise Minimum Wage to $15 for US Employees over Next Three Years,” WDRB.com, December 12, 2020.
35. Sanderson Farms, “Sanderson Farms Increases Pay Rates for Hourly Employees” [press release], June 3, 2019.
36. Kara McIntyre, “Lidl to Raise Atlanta-Area Starting Pay to $15 An Hour,” Patch [Atlanta, Ga.], January 5, 2021.
37. Henry Ford Health System, “Henry Ford Among the First Michigan Health Systems to Raise Minimum Pay Rate to $15 Per Hour” [press release], October 9, 2020.
38. Michael Kransz, “Michigan Health System with 8 Hospitals Increases Minimum Wage to $15 an Hour,” MLive.com, October 19, 2020.
39. Betty Lin-Fisher, “Akron Children’s Hospital to Raise Its Minimum Wage to $15,” Akron Beacon Journal, October 3, 2019.
40. Kelly Gooch, “Ohio Children’s Hospital to Boost Minimum Pay for 3,000 Employees,” Becker’s Hospital Review, October 3, 2019.
41. Michaela Ramm, “Mercy Announces Minimum Wage Increase, General Pay,” The Gazette, December 22, 2020.
42. North Kansas City Hospital, “North Kansas City Hospital and Meritas Health Raise Minimum Base Wage,” December 21, 2020.
43. LifeBridge Health, “Lifebridge Health Raises Minimum Living Wage for Hospital Team Members to $15 an Hour” [press release], Greater Baltimore Committee, January 8, 2021.
44. Amalgamated Bank, “Fight for $15” [web page], accessed January 22, 2021.
45. Amanda Mull, “Corporations’ Social Crusades Often Leave Out Workers,” The Atlantic, June 28, 2019.
46. Wells Fargo, “Wells Fargo to Raise Minimum Hourly Pay Levels in a Majority of Its U.S. Markets” [news release], March 4, 2020.
47. Scott Souza, “Franklin Savings Bank Raises Minimum Wage in NH To $15,” Patch [Merrimack, N.H.], October 31, 2019.
48. Tomi Kilgore, “Facebook Raising Minimum Wage to $20 Per Hour for Bay Area, New York and D.C.” MarketWatch, May 13, 2019.
49. Charter Communications, “Charter Statement Regarding Plans to Permanently Raise Minimum Wage to $20/Per Hour over Next Two Years for All Hourly Employees,” April 6, 2020.
50. David Cooper, Raising the Federal Minimum Wage to $15 by 2024 Would Lift Pay for Nearly 40 Million Workers, Economic Policy Institute, February 2019.
51. David Cooper, Raising the Federal Minimum Wage to $15 by 2024 Would Lift Pay for Nearly 40 Million Workers, Economic Policy Institute, February 2019.
52. David Cooper, Raising the Federal Minimum Wage to $15 by 2024 Would Lift Pay for Nearly 40 Million Workers, Economic Policy Institute, February 2019.
53. Paul J. Wolfson and Dale Belman, “15 Years of Research on U.S. Employment and the Minimum Wage,” Tuck School of Business Working Paper no. 2705499, 2016.
54. Ellora Derenoncourt and Claire Montialoux, “Minimum Wages and Racial Inequality,” Quarterly Journal of Economics 136, no. 1 [February 2021].
55. Doruk Cengiz, Arindrajit Dube, Attila Lindner, and Ben Zipperer, “The Effect of Minimum Wages on Low-Wage Jobs: Evidence from the United States Using a Bunching Estimator,” Quarterly Journal of Economics 134, no. 9 [May 2019].
56. Arindrajit Dube, “Minimum Wages and the Distribution of Family Incomes,” American Economic Journal: Applied Economics 11, no. 4 [October 2019]; Kevin Rinz and John Voorheis, “The Distributional Effects of Minimum Wages: Evidence from Linked Survey and Administrative Data.” U.S. Census Bureau Center for Administrative Records Research and Applications Working Paper 2018-02, 2018.
57. George L. Wehby, Dhaval M. Dave, and Robert Kaestner, “Effects of the Minimum Wage on Infant Health,” Journal of Policy Analysis and Management 39, no. 2 [Spring 2020]; Kerri M. Raissian and Lindsey Rose Bullinger, “Money Matters: Does the Minimum Wage Affect Child Maltreatment Rates?” Children and Youth Services Review 72 [January 2017]; Lindsey Rose Bullinger, “The Effect of Minimum Wages on Adolescent Fertility: A Nationwide Analysis,” American Journal of Public Health, March 2017.
58. Peter Dorman and Lawrence Mishel, “A Majority of Workers Are Fearful of Coronavirus Infections at Work, especially Black, Hispanic, and Low- and Middle-income Workers,” Working Economics Blog [Economic Policy Institute], June 16, 2020.
59. Cristian Alonso, “Beyond Labor Market Outcomes: The Impact of the Minimum Wage on Nondurable Consumption,” Journal of Human Resources, forthcoming.
60. Ben Zipperer, “Low-Wage Workers Will See Huge Gains from Minimum Wage Hike, CBO Finds,” Working Economics Blog [Economic Policy Institute], July 9, 2019.
61. Ken Jacobs, Ian Eve Perry, and Jenifer MacGillvary, The Public Cost of a Low Federal Minimum Wage, University of California Berkeley, Labor Center, January 2021.
62. Ken Jacobs, Ian Eve Perry, and Jenifer MacGillvary, The Public Cost of a Low Federal Minimum Wage, University of California Berkeley, Labor Center, January 2021.
63. Ken Jacobs, Ian Eve Perry, and Jenifer MacGillvary, The Public Cost of a Low Federal Minimum Wage, University of California Berkeley, Labor Center, January 2021.