A New Minimum?


by Rachel Vilsack —

A blog last month looked at the issue of Minnesota’s minimum wage. As the Minnesota Legislature resumed session this month, there has been continued discussion on increasing the state’s minimum wage. This raises the question: How many jobs, in which regions, and in which occupations, would be affected if there were a substantial increase in the state minimum wage? To find the answer, we take the higher minimum wage level of the House bill (HF0092), $9.50 an hour for large employers, and estimate how many jobs would see wages increase to meet the new level.

Overall, 387,710 jobs in Minnesota, or 14.7 percent of total occupational employment, paid under $9.50 an hour during first quarter 2013 based on the employment and wage estimates. This percentage varies by region as seen in the Figure below. The Twin Cities Metro (12.5 percent) and Southeast (16.3 percent) regions had the lowest percentage of jobs paying less than $9.50 an hour, while Northeast (19.8 percent) and Southwest (19.7 percent) had the highest percentage of jobs that would be impacted by an increase in the minimum wage.

graph

The following industries have the biggest share of jobs paying less than $9.50 an hour: accommodation and food services (58.5 percent); retail trade (44.1 percent); arts, entertainment and recreation (41.5 percent); administrative and support services (30.4 percent); other services (26.8 percent); agriculture, forestry, fishing and hunting (23.4 percent).

The following occupational groups have the biggest share of jobs paying less than $9.50 an hour: food preparation and serving related (62.9 percent); sales and related (30.8 percent); building and grounds cleaning and maintenance (27.5 percent); personal care and service (26.7 percent); farming, fishing and forestry (20.9percent); transportation and material moving (15.6 percent); arts, design, entertainment and media (10.6percent).

Occupations with the highest percentage of jobs paying less than $9.50 per hour are highly concentrated in the leisure and hospitality sector. Other occupations where a portion of jobs pay less than $9.50 per hour include: cashiers (62.1 percent); maids and housekeeping cleaners (43.7 percent); helpers, production workers (41.2 percent); child care workers (40.2 percent), pharmacy aides (27.4 percent); teacher assistants (20.6 percent); and home health aides (15.6 percent).

The exact number of jobs that would be affected by a proposed $9.50 an hour minimum wage might not be known, but the increase could be expected to have varying impacts across regions and occupations as suggested by these estimates. Additional analysis would be required to estimate the effect of the proposed minimum wage increase on consumer spending power in Minnesota, the effect on individuals and families who depend either fully or partly on minimum wage incomes, and the channels of adjustment employers would likely use to absorb the increased wage bill. Understanding the number and share of affected jobs and job openings is an important first step toward helping communities and their representatives make informed choices in the coming legislative session.

 

9 thoughts on “A New Minimum?

  1. iseek July 7, 2014 / 6:18 pm

    Hi Jon,

    The net consequence of a minimum wage increase is complex because businesses and workers respond in a variety of ways. The economic literature is quite extensive in this field and you’ll find a lot online just searching on “minimum wage channels of adjustment”.

    Thanks,
    Rachel

    Rachel Vilsack | Agency Performance Manager
    Analysis and Evaluation Office
    Department of Employment and Economic Development

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  2. Kim June 30, 2014 / 9:30 pm

    I have the same questions that Jon poses above: what is the threat to small businesses, and what is the consideration given to inflation?

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  3. Carissa June 30, 2014 / 8:19 pm

    I like how this article did not look at whether or not we needed minimum wage, but instead took a look at what kind of workers would be most likely impacted by the change in minimum wage. I liked to factual representation on how it would effect the work force.

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  4. Jon June 30, 2014 / 5:59 pm

    With the increase in the state minimum wage, is there a concern for smaller companies going out of business due to the inability to pay the increased wage? Also, while this increase to $9.50 would hypothetically increase MN consumer spending power, this may be negated by the need for companies to raise the price of their goods and services in order to compensate for the increasing labor costs.

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  5. iseek June 30, 2014 / 4:24 pm

    Hi Mark,
    You are correct in noting that an increase in the minimum wage effects to consumer buying power and what a businesses would be able to offer its employees in other benefits. Workers currently making wages around the proposed minimum wage may also be impacted. Keep in mind that there will be an incremental increase in the minimum wage between 2014 and 2016: http://dli.state.mn.us/LS/MinWage.asp.

    Thanks,
    Rachel

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  6. iseek June 30, 2014 / 4:19 pm

    Hi Matt,
    As you note there are large and small employer provisions for the changing minimum wage laws; see http://dli.state.mn.us/LS/MinWage.asp for specifics and the incremental increases in the minimum wage between 2014 and 2016. Minnesota’s LMI Office has looked at the current numbers of jobs paying the small and large employer minimum wages: see http://mn.gov/deed/images/Minimum%20wage.pdf

    Thanks,
    Rachel

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  7. Matt June 25, 2014 / 7:39 pm

    Hi, I’m curious, in your blog you use data from large employers. How many employees constitutes a large employer? The reason I ask is that I wonder how much the percentages of employees making less than $9.50 would change in a field like food services, when one takes into account non-chain restaurants or cafes. Or does using large employers still give a good estimate overall? Also, in the last paragraph, we need “to understand the channels of adjustment employers would likely use.” Wouldn’t it make sense to study both large and small employers, since large employers (chain restaurants) have a lot more resources at their disposal to deal with an increase in the minimum wage and would deal with the increase differently than small employers?

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  8. Mark M. June 25, 2014 / 1:41 pm

    I enjoyed the article. With all the recent talk about the proposed increase in minimum wage and the optimism it has caused, I think it’s important to realize how it might effect the consumer buying power and how it would effect what businesses would be able to offer its employees in other benefits. Do you forsee this effecting companies in the fields mentioned whose employees make an hourly wage slightly above the proposed $9.50/hr.?

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