New Study: Three Quarters of Minimum Wage Earners Get a Raise Within 1-12 Months

A new study by economists Jeffrey Clemens (University of California, San Diego) and Michael Strain (American Enterprise Institute) finds time on the job, not wage mandates, drives increased earnings for employees.

Proponents of a nation-wide minimum wage hike, up to $15 per hour or more, often argue in favor of such dramatic increases saying employees haven’t gotten a raise since 2009, referencing the last time the federal minimum wage changed. Putting aside the serious job-killing effects of such large minimum wage increases for a minute, this new research also debunks that argument: “The wage increases we observe…suggest that a very small fraction of individuals can plausibly be described as ‘career minimum wage workers.’”

Clemens and Strain analyze a decade of data on earnings of employees making within 50 cents of the effective minimum wage, and find nearly 75% of these employees get a raise within 12 months of starting as minimum wage earners.

They also observe that this pattern holds for employees both in states that raise their mandated minimum wages and in states that don’t. In states that did not increase their minimum wage rates during this period, 71% of employees got raises within 12 months. They conclude: “Wage increases for minimum wage workers is the norm in both groups of states.”

Union-backed activists and progressive lawmakers touting $15-plus per hour minimum wage proposals as a way to boost incomes ignore that the majority of economic research on minimum wages concur that wage hikes cause significant employment loss. Clemens and Strain’s findings add to this body of evidence with their conclusion that minimum wage mandates only account for a “modest fraction” of the gains minimum-wage earners received over this period. Instead, market factors such as demand for labor and career progression are more strongly correlated with wage gains for these employees.

Read the study abstract below, and access the full study here.

Popular discussion commonly presumes an outsized role for minimum wage increases as a driver of wage increases for minimum wage workers. In this paper, we investigate the accuracy of this presumption using data from the earnings studies of the Current Population Survey (CPS). CPS wage and earnings data enable us to assess the fraction of minimum wage workers who receive a raise within 12 months of their initial appearance as a minimum wage worker. On average from 2010 to 2019, we find that roughly 75 percent of minimum wage workers who remain employed experience a wage increase within 12 months. This fraction is higher during the later years of the sample, when the labor market has been strong, than in the earlier years. The fraction of minimum wage workers receiving wage increases is moderately higher when states enact minimum wage increases than when they do not. We also find that the fraction of minimum wage workers receiving wage increases is correlated with several measures of labor market tightness. Finally, wage gains are quite commonly associated with industry and/or occupation switches. This highlights the importance of career progression for the growth of earnings among entry-level workers. The vast majority of the wage gains realized by minimum wage workers thus appear to be driven by career progression and increases in labor demand. Minimum wage increases play a modest role as a driver of earnings trajectories beyond shaping the initial, typically short-lived, minimum wage job itself.