What Should We Expect from Minimum Wage Mandates? Employment, Income, and Social Justice Implications

Background and Purpose: The United States has had a minimum wage standard in place since 1938, but the rate has failed to keep up with inflation. The current rate, $7.25/hour, was established in 2009; when accounting for inflation, this wage represents a 10% loss in buying power since 2009. Without significant political momentum to raise this wage at the federal level, a number of states and municipalities have initiated their own rate increases. These decisions are contentious, however, with some arguing that raising mandatory wage rates will result in job losses for low-wage workers and price increases in low-wage sectors such as fast food and hospitality. We review the current scientific evidence about the effects of mandatory wage increases across employment sectors, with particular attention to the social justice implications of wage increases of the size recently implemented by cities like Seattle and the District of Columbia, and states like California and New York.

Methods: Using scoping review methodology, we reviewed 466 abstracts of manuscripts published in peer-reviewed journals indexed in the Academic Search Complete, EconLit, PSYCHinfo, and SocIndex databases. These manuscripts were identified using broad search terms, including, “minimum wage,” “labor," and "prices.” From these, we narrowed the sample of articles to those that focused primarily on empirical findings or systematic reviews of the effects of minimum wage increases on labor markets, income, or consumer prices. When search parameters included terms such as “child care” or “day care,” no results were produced, while close to 100 articles addressed effects of minimum wage increases on employment more generally, within specific industries such as fast food, or among specific populations such as teenaged workers. Articles were grouped by market sector (fast food, hospitality, etc.) and research aim (e.g., effects on employment rates vs. effects on health insurance coverage). Findings were summarized. 

Results: We find that most research on the effects on labor markets and prices focus specifically on effects within the fast food and hospitality industries, while little or no research has studied the effects of changes to the minimum wage on the childcare sector. There are conflicting findings within the literature about the effects of minimum wage increases on employment rates and consumer prices, with some studies finding statistically significant negative effects on employment and positive effects on prices, while others—including some systematic reviews—find no such effects. Little attention has been paid to the potential effects of minimum wage increases on marginal tax rates and other considerations of paramount importance to low-income, working families.

Conclusions: We will discuss the implications of what is known about the impacts of mandatory wage increases, with specific attention to the potential for wage increases to address income inequality in the United States. We will also identify gaps in knowledge that are of primary importance for social workers and offer suggestions for future research and advocacy efforts.