The US and Pennsylvania minimum wages are currently $7.25 per hour and have not been changed since 2009. Meanwhile, the minimum wages in neighboring New York and New Jersey are at least $14.13 per hour. Back in 2019, researchers at the Federal Reserve Bank of New York used the “natural experiment” created by the contrasting state minimum wage policies along the PA-NY border to examine how minimum wage changes affected employment and wages in two low-wage sectors, leisure and hospitality, and retail. Here we update their analysis to the third quarter of 2022 and add in a PA-NJ border comparison.
What do we find? Wages increased more in New York and New Jersey, dramatically so in the leisure and hospitality sector. And employment trends differed little with one exception—leisure and hospitality employment grew significantly more in New York. It appears that Pennsylvania and New York workers along our northern border are behaving quite sensibly: Pennsylvania workers are crossing the border to get a living-wage job; meanwhile, fewer New York workers are likely coming to Pennsylvania to take a poverty-wage job. Pennsylvania low-wage employers, meanwhile, can’t find workers or fill vacancies because workers are crossing the border or staying home. Border area Pennsylvania employers desperately need a substantial Pennsylvania minimum wage increase so that they can attract more workers and create additional jobs.
For reasons of length, we focus in this blog on the leisure and hospitality comparisons. (KRC will produce a briefing paper with all our border analyses in the near future.) The “Leisure and hospitality” industry includes restaurants, bars, hotels, casinos, theatres, and other similar venues. The Quarterly Census of Employment and Wages data we analyze begin in 2010 and end quarter 3 of 2022, well into the COVID-19 pandemic. We analyzed quarter 3 data from each county group yearly and indexed states’ employment and inflation-adjusted wage growth to the quarter 3 2013 wage. Table 1 shows the minimum wage each year in Pennsylvania, New York, and New Jersey. (The table also shows the Maryland minimum wage each year. In our full brief, we will also include a PA-MD border analysis.)
In this blog, we compare employment and wages in the NY border county region of Chautauqua, Cattaraugus, Allegany, Steuben, Chemung, Tioga, Broome,Delaware, Sullivan, and Orange, with the same variables in PA border counties (Erie, Warren, McKean, Potter, Tioga, Bradford, Susquehanna, Wayne, and Pike). For the New Jersey comparison, we use data from border counties Burlington, Camden, Gloucester, Hunterdon, Mercer, Sussex, and Warren with PA border county data from Bucks, Delaware, Monroe, Northampton, Philadelphia, and Pike.
Leisure and Hospitality employment in Pennsylvania and New York border counties followed a similar increasing path from 2010 until 2017 (Figure 1). Subsequently, employment in New York border counties skyrocketed, while it dropped slightly in Pennsylvania border counties. The COVID-19 pandemic impacted both regions similarly, but New York leisure and hospitality employment recovered at a much faster pace. Leisure and hospitality wages, meanwhile, rose nearly 50% for New York workers over the full 2013 to 2022 period (Figure 2), far above Pennsylvania’s 10% leisure and hospitality wage growth. New York border county leisure and hospitality workers earned an average of $111 a week more than their Pennsylvania counterparts in Q3 2022, a $5,772 yearly difference for someone employed 52 weeks.
The New Jersey and Pennsylvania border county matchup shows similar trends in the leisure and hospitality industry. Industry employment tracked each other in the two states throughout the entire period, New Jersey employment dropping a bit less than in Pennsylvania after the onset of COVID and then recovered to pre-pandemic levels faster. New Jersey border county leisure and hospitality workers’ earnings have been rising faster than their Pennsylvania border county counterparts since they sharply diverged in 2016. New Jersey leisure and hospitality wages are now 50% higher than in Q3 of 2013, compared to a 25% increase in bordering Pennsylvania counties. In this matchup, Pennsylvania workers have a higher weekly wage than their cross-border counterpart, likely due to the disproportionate impact of Philadelphia wages on the Pennsylvania county group average.
The findings in this update and broadening of the 2019 New York Federal Reserve Bank researchers’ study on New York and Pennsylvania border counties parallel the findings of the original study. With more time passed and further increases in New York and New Jersey minimum wages especially, employment and wage data from leisure and hospitality and, to a lesser degree, the retail sector still show positive effects on average wages coupled with no adverse impact on employment.
So that Pennsylvania workers can support their families and sustain local businesses through increased consumer buying power, and so that Pennsylvania low-wage employers can attract and retain more workers and compete for employees with neighboring states, Pennsylvania needs to substantially raise its minimum wage NOW.