The Minimum Wage In Pennsylvania
After adjusting for inflation the hourly earnings of the bottom fifth of workers in Pennsylvania are lower today than they were in 1979. This decline in earnings has occurred despite the fact that bottom fifth of workers today is better educated and more productive than in the past.
The most important reason wages have fallen for the lowest paid Pennsylvania workers is the purchasing power of the minimum wage has failed to keep pace with inflation. The minimum wage today at $7.25 hour has 18% less purchasing power than it did in 1979 (and 24% less than at its 1968 peak).
An increase in the minimum wage in Pennsylvania would lift the wages of 1.2 million workers and restore much of the purchasing power lost by the minimum wage since 1968.
In collaboration with the Economic Policy Institute the Keystone Research Center has produced detailed estimates (view the full demographic breakdown) of the workers that would be affected by an increase in the minimum wage to $10.10 and in brief finds:
- 87% of the workers who would benefit are adults (age 20 and older).
- 81% of the workers who would benefit work 20 or more hours a week.
- Just under a quarter of the workers who would benefit are parents with children.
- Those parents earn half of their family’s income.
- More than half a million PA children live in households that would get a boost.
The most rigorous economic research over the past 20 years shows that raising the minimum wage boosts worker pay without causing job losses – even in regions where the economy is weak or unemployment is high. For an accessible review of the literature on employment impacts see Why Does the Minimum Wage Have No Discernible Effect on Employment? by John Schmitt of the Center for Economic and Policy Research.
With job losses from a higher minimum wage unlikely we estimate that an increase in the minimum wage to $10.10 would boost total wages in Pennsylvania by $1.8 billion boosting consumer spending and creating as result 6,000 jobs. For a comparison of the differences in impacts in terms of the workers affected and economic impacts of an alternative proposal to raise the minimum wage see the Policy Watch Falling Short: The Impact of Raising the Minimum Wage in PA to $8.75 vs. $10.10.
Since the last increase in the Pennsylvania minimum wage in 2007 to $7.15, inflation has reduced the purchasing power of the minimum wage by 11%. In 2006 when this last increase was being debated in Pennsylvania there were proposals to adjust the minimum wage annually for inflation but they were not adopted. Currently in the 29 states that have a minimum wage higher than the federal minimum wage, 13 (including New Jersey and Ohio) have built in annual cost of living adjustments. Building an annual cost of living adjustment into the state minimum wage is a simple and effective way to prevent inflation from driving more low-wage workers into poverty.
The Tipped Minimum Wage
Many people are unaware that there are two minimum wages in Pennsylvania, one for non-tipped workers which is currently $7.25 an hour, and another for tipped workers which is $2.83 an hour.
While the minimum wage has been increased since 1998, the tipped minimum has remained fixed at $2.83 an hour. This in combination with rising prices means the purchasing power of the tipped minimum wage in Pennsylvania fell 29% between 1998 and 2012, and would now be over $4.00 per hour if it had kept pace with inflation.
Economic dependence on tips leads to high levels of sexual harassment. A new study, The Glass Floor: Sexual Harassment in the Restaurant Industry finds that sexual harassment is pervasive in the restaurant industry and that woman in tipped jobs in restaurants in states with low tipped wages ($2.13 per hour, close to Pennsylvania's level) are twice as likely to experience sexual harassment as women in states that pay the same minimum wage to all workers.
In the 2013 Briefing Paper Nickel & Dimed In Pennsylvania: The Falling Purchasing Power of the Tipped Minimum Wage we estimated that:
- There are 158,000 tipped workers in Pennsylvania, 117,000 of those (74%) food service workers.
- While women account for half (51%) of the overall workforce, they make up over three quarters of the tipped workforce.
- Although tipped workers are on average younger than most workers, nearly nine of every 10 tipped workers (87%) are adults (over 20 years of age) and over a quarter (27%) are 40 years of age or older.
- While just one in 17 employed women (6%) overall live in poverty, one in five female tipped workers in food service lives in poverty. Among all tipped workers who are women, 18% live in poverty.
- Half of all tipped workers make less than $10 per hour (including tips) in Pennsylvania
- Although the vast majority of tipped workers are women (78%), women make 15% less then tipped men (a difference of $1.51 an hour). Among tipped workers in food service, women make 13% less per hour than men (or $1.18 less per hour).
- Tipped workers earn more in states with a higher tipped minimum wage and the gap in earnings between tipped workers and workers overall is smaller the higher the tipped minimum wage is in a state. In other words a good way to reduce inequality in a state is to raise the tipped minimum wage.
- The higher the tipped minimum wage in a state, the smaller the share of tipped workers who live in poverty. Seven states with a tipped minimum wage equal to the overall minimum wage have a poverty rate of 12.1% among tipped workers compared to Pennsylvania’s 17%.