The last federal minimum wage increase occurred in 2009 raising the hourly minimum compensation to $7.25. One lesser known fact is that the hourly rate does not automatically adjust for inflation, thereby eroding the purchasing power of individuals who earn it. As a result of federal inaction and rising costs of living, several states and municipalities have elected to raise the minimum wage above the federal level. Twenty-two states and the District of Columbia plan to increase, the wage floor in 2019. Some states already have. For example, in New York City the minimum wage increased for large employers from $13 to $15 an hour on January 1, 2019.
The current debate on the benefits of raising the minimum wage rarely acknowledges that individuals of all ages are compensated at the lowest required amount. This reality contrasts starkly with the common perception that only temporary employees and high school students are paid at this rate. Over 2.2 million employees earn wages at or below the minimum wage. Forty-six percent of earners are older than 25 and 19% are older than 45, highlighting that the minimum wage permeates all facets of the working population.
Forty-six percent of earners are older than 25 and 19% are older than 45, highlighting that the minimum wage permeates all facets of the working population.
Opponents of minimum wage increases point to rising labor costs that could reduce employment, though little consensus exists on whether such effects materialize beyond teen employment. Proponents argue that increasing salaries will have wide ranging benefits, such as improved diet and enabling workers to address delayed health care needs; however, little evidence exists to support such claims. I recently conducted a study with my colleague, Elena Andreyeva, to explore the effect of state-level minimum wage increases on a broad set of health and dietary outcomes between 1993 and 2015 among individuals most likely affected by changes to the minimum wage: 21 to 64 year olds attached to the labor force with no more than a high-school degree.
We evaluated the impacts of minimum wage increases on health care access, self-reported health, and health behaviors (alcohol consumption, smoking, weight, fruit and vegetable intake). We found that a $1 increase in the minimum wage reduced daily fruit and vegetable consumption and increased the likelihood of obesity. This implies an increase in unhealthy food consumption, possibly connected to purchasing more meals at restaurants. These impacts were largest among individuals who were high-school graduates, married, and between the ages of 30 and 65.
We found that a $1 increase in the minimum wage reduced daily fruit and vegetable consumption and increased the likelihood of obesity.
Higher minimum wages were associated with fewer days reported with health-related limitations. We did not detect large overall impacts on health care access or self-reported health. Instead, the benefits of minimum wage increases were concentrated among subsamples. The reduction in reported days with health-related limitations was strongest among non-White, middle-aged (30-39), and married individuals. Married, White respondents and those with a high school degree were more likely to have visited a doctor for an annual check-up. Young adults (age 21-29), women, unmarried individuals, and those with a high school degree reported fewer days with mental health problems, possibly indicating that easing immediate monetary concerns may improve mental health in the long-term.
We did not detect large overall impacts on health care access or self-reported health. Instead, the benefits of minimum wage increases were concentrated among subsamples.
Our findings are broadly in line with previous research showing that the minimum wage seems to have little overall effect on self-reported health and that the impact is concentrated among specific socio-demographic groups. General policy recommendations need to take into account that specific groups, especially the younger population and singles, seem to benefit quite substantially from the current increases in the minimum wage.
Increasing the minimum wage may be especially beneficial in states and occupations at the bottom of the wage distribution with few benefits (such as health insurance). Increasing the minimum wage too much can have repercussions for fringe benefits and overall welfare. If minimum wage policy affects the salary of occupations higher up the wage distribution then this can lead employers to eliminate health insurance benefits to offset the increase in salary.
Given the value of health insurance, a general policy guideline should be to implement minimum wage increases among those at the bottom of the wage distribution who predominately do not receive health insurance benefits.
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