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Consequences Of Minimum Wage Indexing

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  • WILLIAM E. EVEN
  • DAVID A. MACPHERSON

Abstract

During the 1980s, the minimum wage fell relative to prices and average wages in the U.S. economy. If the minimum to average wage ratio had been constant at the level maintained through the 1970s, the minimum wage would have been $5.51 in 1993. If the 1993 minimum wage had increased to $5.51, payments to minimum wage workers would have increased by an estimated $20.3 billion, and the number of people earning that wage would have risen from 2.0 million to 14.7 million. Elasticity estimates generated from other studies indicate that employment would have fallen 240,000 (4.4%) among 16–19 year olds and 349,000 (3.0%) among 20–24 year olds. Wage payments to minimum wage workers would have substantially increased, but the effect on family income distribution would have been small. Many minimum wage workers are children living with parents or adults in a family with other earners. Consequently, 75% of minimum wage workers account for less than half of their family's income.

Suggested Citation

  • William E. Even & David A. Macpherson, 1996. "Consequences Of Minimum Wage Indexing," Contemporary Economic Policy, Western Economic Association International, vol. 14(4), pages 67-77, October.
    • Handle: RePEc:bla:coecpo:v:14:y:1996:i:4:p:67-77
    DOI: 10.1111/j.1465-7287.1996.tb00634.x
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    References listed on IDEAS

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    Cited by:

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    3. Rubery, Jill., 2003. "Pay equity, minimum wage and equality at work," ILO Working Papers 993668723402676, International Labour Organization.
    4. Partridge, Mark D. & Partridge, Jamie S., 1999. "Do Low-Income Families Benefit from Minimum Wage Increases? Evidence from State-Level Minimum Wage Laws," The Review of Regional Studies, Southern Regional Science Association, vol. 29(1), pages 37-50, Summer.
    5. Šimpach Ondřej & Langhamrová Jitka, 2013. "Forecasting Future Salaries in the Czech Republic Using Stochastic Modelling," Business Systems Research, Sciendo, vol. 4(2), pages 4-125, December.

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