The $10.10 Minimum Wage Proposal: An Evaluation Across States

Abstract

This paper offers state-level estimates of job loss from increasing the federal minimum wage to $10.10 per hour in 2016. Given the vast differences in nominal wages across geography, a federal increase in minimum wage that is not indexed to local wage levels will have a differential impacts across states. The proposed minimum wage would be binding for between 17-18 percent of workers nationally. We estimate coverage rates ranging from just 4 percent in Washington D.C to as high as 51 percent in Puerto Rico, with 13 states having at least 20 percent of the employed population covered by the proposal. Using labor demand elasticities from previous empirical work, these coverage rates imply national employment losses between 550,000 and 1.5 million workers. The range of state estimates shows that states are deferentially impacted, with high-end loss estimates ranging between 2.8 percent of covered employees in Arkansas to over 41 percent in Puerto Rico. Sensitivity analysis highlights that using even a simple methodology with relatively few assumptions for estimating employment loss from minimum wage changes is subject to a high degree of uncertainty.

Keywords: Minimum Wage, Fiscal Federalism, Employment

JEL Classification: J18, J38