Earlier in 2013, EPI released an analysis of the Fair Minimum Wage Act of 2013, a bill introduced by Sen. Tom Harkin (D-Iowa) and Rep. George Miller (D-Calif.) that would raise the federal minimum wage in three incrementalincreases of $0.95 from its current level of $7.25 per hour to $10.10 per hour. The Harkin-Miller proposal would then index the minimum wage to inflation, so that as prices rise in subsequentyears, the minimum would automatically be adjusted to preserve its real value. At the same time, the bill would raise the base wage paid to tipped workers from the current $2.13 per hour -- where it has stood since 1991 -- in incremental increases over six years until it equals 70 percent of the full minimum wage.
Since that analysis was released, five states have raised their state minimum wages: California, Connecticut, New Jersey, New York, and Rhode Island. The increases in these states underscore the broad recognition that the current federal minimum wage is too low. These increases slightly alter our earlier estimates of the impact of a federal minimum-wage increase to $10.10 because workers in these states who would have been affected by the federal increase will now have higher wages as a result of their higher state minimums. Yet the conclusion of our previous analysis remains unchanged: Raising the federal minimum wage to $10.10 by 2016 would lift incomes for millions of American workers and provide a modest boost to U.S. GDP.
This paper provides an update to our original analysis that reflects these higher state minimum wages, and changes in economic conditions over the past year. It begins by providing some context for the current minimum wage and the Harkin-Miller proposal, describing how today's minimum and the proposed new minimum compare with historical benchmarks. It then provides a demographic overview of the workers who would be affected (both directly and indirectly) by raising the federal minimum wage to $10.10. Finally, it details the GDP and job creation effects that would
occur as a result of such an increase.