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April 2015
It’s Time to Raise the Minimum Wage in Texas
Analysis of Who Would Benefit from a Minimum Wage Increase in Texas
Garrett Groves, gro[email protected], Jennifer Lee, [email protected],
and Katherine Strandberg, strandberg@cppp.org
Texans pride themselves on working hard and being self-sufficient. But too few workers and their
families earn enough to escape poverty. Texas ranks near the worst states for working families, with 38
percent earning less than $47,000 per year for a family of four.
1
If we want to live in a state where hard
work means real self-sufficiency, then we need to raise the minimum wage in Texas.
Several bills filed during the 84
th
Texas Legislative Session propose raising the state’s minimum wage to
$10.10 per hour in 2016. To help lawmakers and concerned Texans understand the impact of those
legislative proposals, the Center for Public Policy Priorities conducted new analysis to identify the Texans
who would benefit from raising the current federal minimum wage of $7.25 per hour to a new statewide
minimum wage of $10.10 per hour in 2016.
2
Key Finding:
Nearly 2.4 million Texans, or 1 in 4 for-profit and non-profit workers, would receive a pay increase
if the state adopted a minimum wage of $10.10 per hour in 2016.
3
Who Benefits from a Minimum Wage Increase?
Of the nearly 2.4 million Texans who would benefit from an increase in the state minimum wage to
$10.10 per hour in 2016:
4
Age: 60 percent are in their prime working years (25-54). Only 3.1 percent are teenagers between
the ages of 16-18.
Families with children: Nearly fifty percent live in households with children, and 14.7 percent of
all workers who benefit are single mothers.
Race and ethnicity: 1 in 3 are Non-Hispanic White, and over half are Hispanic or Latino, even
though they only make up a little more than a third of the for-profit and not-for-profit workforce.
Education level: 43 percent have at least some college education, and 15 percent have completed
a postsecondary degree.
Industry: Nearly half are concentrated in three industry sectors: the retail trades; accommodation
and food services; and the health care and social assistance industry. However, workers in nearly
every industry would benefit from an increase in the minimum wage.
Policy Recommendations:
The Center for Public Policy Priorities recommends that the 84
th
Texas Legislature:
● Raise the minimum wage to $10.10 per hour.
● Adjust the minimum wage annually by tying it to the consumer price index. The state should
also consider a clearly defined small business exemption from the new minimum wage that
protects workers as well as the state’s smallest employers.
● Repeal the state law that prohibits localities from setting wage standards.
● Encourage municipalities to create living wage standards for their own employees that are in
line with their cost of living.
Source: CPPP analysis of 1-year 2013 American Community Survey Public-Use Microdata Sample (PUMS) for Texas.
5
Minimum Wage Context
It’s tempting in Texas to believe that our thriving economy protects us from rising poverty and growing
inequality. It’s true that of the 5 million jobs created in the U.S. during the 21st century, more than 2
million were created here in Texas.
6
But it’s also true that the Texas economy relies on a larger share of minimum- and low-wage jobs than
most other states. There are 400,000 workers in Texas who make at or below the current federal
minimum wage of $7.25 per hour – more than any other state – and all of them need a raise.
7
Working
full-time at a minimum wage job provides $15,080 at the end of the year, an amount that is clearly
insufficient to support a family, yet alone a single working individual.
26.8%
40.8%
19.9%
40.2%
21.5%
43.1%
22.4%
19.7%
25.7%
0%
10%
20%
30%
40%
50%
Bexar
County
Cameron
County
Dallas
County
El Paso
County
Harris
County
Hidalgo
County
Tarrant
County
Travis
County
State
Average
Chart 1: Percent of For-Profit and Not-for-Profit Workforce to
Benefit from Minimum Wage Increase to $10.10 per Hour in 2016
Texas also has a higher share of working poor families than other states. In 2013, 38 percent of working
families in Texas earned less than twice the federal poverty rate, or $47,248 per year for a family of
four.
8
In total that’s almost 1.2 million Texas families who are making difficult choices about forgoing
necessities such as housing, food or transportation despite working hard to make a living.
Twenty-nine other states, including Arkansas, Ohio, Arizona, and West Virginia raised their minimum
wage above the federal minimum of $7.25 per hour.
9
Many municipalities across the country have done
the same, but not in Texas. While the cost of living varies greatly across Texas, state law currently
prohibits local regulation of wage standards with the exception of wages paid to government employees
or contractors.
10
In addition to raising the state minimum wage, removing the prohibition of local
minimum wage rates would give municipalities the flexibility to decide the right wage floor for their local
economies.
Growing evidence from leading economists indicates that higher minimum wage standards may have
positive economic effects on communities and a minimal or neutral effect on job growth. The issue is
also receiving growing private sector support. In addition to several large employers such as Wal-Mart,
Target, Starbucks and McDonalds all publicly committing to raising their minimum wage in 2015, a poll
of small businesses last year found that 61 percent of business owners support an increase to $10.10 per
hour, along with adjusting the minimum wage annually to keep pace with the cost of living.
11
Those business owners recognize that employees are also customers. As the cost of living rises faster
than wages do, workers become unable to spend enough to help drive economic activity. Businesses
also know that when workers are paid a higher wage, they are more likely to remain on the job,
reducing costs in hiring and training for new employees.
What It Means to Live on the Minimum Wage
According to the CPPP Family Budget Calculator, the federal minimum wage of $7.25 per hour does not
provide enough to cover an individual’s most basic living expenses in Texas. In fact, a worker in Houston
or Austin would need two full-time minimum wage jobs to cover the nearly $30,000 a year he or she
needs for food, housing, health care and transportation expenses. And the situation becomes even more
challenging for workers trying to support a family. A two parent family in Houston with two children
needs a combined full-time hourly income of $30.07, or $62,546 a year, in order to meet basic expenses
without room for savings of any kind.
12
The figures below show the hourly wages that are necessary for Texas families to meet basic living
expenses according to family size and location. These calculations assume that 1) all adults are full time
workers, 2) their employer(s) do not cover monthly health insurance premiums, and 3) they have no
emergency savings — which means that a simple car repair or significant illness could be financially
ruinous.
Table 1: Hourly Wages Needed to Meet Basic Living Expenses in Texas Cities
City
Single Person
1 Parent, 1 Child
2 Parents,
2 Children
2 People with
No Children
Austin
$14.09
$21.68
$31.51
$20.57
Brownsville
$11.78
$16.69
$25.06
$18.03
Dallas/Ft. Worth
$13.84
$20.83
$30.37
$20.44
El Paso
$11.60
$16.88
$23.89
$17.84
Houston
$14.05
$20.84
$30.07
$20.66
Lubbock
$12.15
$18.20
$26.34
$18.40
McAllen/Edinburg
$11.88
$17.28
$25.64
$18.10
San Antonio
$12.86
$20.21
$29.67
$19.75
Source: www.familybudgets.org. 2012 data, not adjusted for inflation to 2015.
Note: Hourly wage data for two-parent families is per household, not per person.
Recent Evidence Shows Raising the Minimum Wage Not Connected to Job Loss
In 2014 more than 600 economists, including seven Nobel Prize winners, sent a letter to Congress and
the president requesting a minimum wage increase to $10.10 per hour by 2016. They cited
developments in the research showing that a minimum-wage increase could stimulate the economy as
low-wage workers spend their additional earnings, raising demand and job growth.
One of the first case studies to challenge the assumption that an increase in wages results in businesses
employing fewer workers was published by David Card and Alan Krueger in 1993. They studied over 400
restaurants in the competitive fast food industry along the New Jersey and Pennsylvania state border
after a state minimum wage increase in New Jersey. They found that there was no evidence of reduced
employment in New Jersey or of a reduction in the number of establishments. In fact, their study
showed the exact opposite, that increasing the minimum wage led to an increase in employment.
13
Card and Krueger followed up their case study with a meta-analysis of over 30 long-term studies on the
effects of minimum wage increases in 1995. Again, they found that minimum wage increases did not
decrease employment.
14
That meta-analysis was updated by Hristos Doucouliagos and T.D. Stanley in
2008, and again by John Schmitt in 2013. Both analyses confirmed that there were little or no decreases
in employment with modest increases in the minimum wage.
15
There is some conflicting evidence on the impact of raising wages on the availability of jobs. A 2015
study by Jonathan Meer and Jeremy West at Texas A&M University found that while employers are not
likely to fire employees due to a minimum wage increase, they may be less likely to hire new employees
in the ensuing years.
16
After reviewing the existing research in 2014, the Congressional Budget Office
reported to the U.S. Congress that their best assessment of the effects of a national minimum wage
increase to $10.10 per hour would result in a 0.3 percent reduction in employment, or about 500,000
workers across the country, once fully implemented by the second half of 2016.
17
However, their
assessment also included a likely range from a negligible reduction in employment to a reduction of one
million workers.
The larger issue, however, is not simply determining the effect of a minimum wage increase on job
growth, but to understand if the benefits to low-wage workers outweigh the costs. And here there may
be greater consensus among researchers. In a 2013 survey of leading economists across the country, 34
percent stated that raising the minimum wage would make it harder for low-wage workers to find
employment, and 32 percent stated the opposite with 27 percent remaining undecided. But when the
same experts were asked if the benefits to low-skilled workers for raising the minimum wage
outweighed any adverse effects on employment, only 11 percent disagreed.
18
Best Practices and Policy Recommendations
As of 2015, the majority of U.S. states have some form of minimum wage policy that sets a wage
minimum, or floor, above the federal minimum. Each has tailored its wage laws to fit its own unique
economic needs. Some of the most common policies and practices are described below.
Consumer Price Index and Incremental Change
Of the 29 states and the District of Columbia that have a minimum wage above the federal floor of $7.25
per hour, 14 have tied increases in pay to the Consumer Price Index (CPI) to ensure that wages will keep
pace with increases in the cost of living. Tying the minimum wage to CPI also prevents the need for
repeated legislative efforts to raise the minimum wage floor as inflation erodes its value.
Six states are currently raising their minimum wages in annual increments, or stages. Based in part on
evidence that small increases in the minimum wage have little or no discernable effect on employment
numbers or consumer prices, we recommend moving toward a higher state minimum wage in annual
stages and indexing the final wage target to CPI once fully implemented.
Small Business Exemptions
Some policymakers have argued that raising the minimum wage may place an undue burden on very
small businesses that do not have large enough annual revenues to sufficiently cover new costs. The
federal Fair Labor Standards Act (FLSA), which sets the national minimum wage at $7.25, does not apply
to small businesses with annual gross revenue under $500,000 unless they engage in interstate
commerce or work for the federal, state or local government.
19
Eleven states also have an exemption
from higher minimum wages for small businesses. Six of those states define a small business by the
number of employees, with a range from 1 employee in Michigan to 10 employees in Florida. The other
five states define a small business by annual gross revenue, with a range from $150,000 in Ohio to
$500,000 in Minnesota and Arizona.
Minnesota’s small business exemption creates a separate wage floor for small businesses that is $1.50
less than the full minimum wage floor for larger businesses. This two-tiered system helps ensure small
businesses remain competitive while also boosting wages for their employees. As of August of 2014,
companies with annual gross revenue of more than $500,000 per year in Minnesota are classified as
large employers and pay $8.00 per hour, which will be increased to $9.00 in August and $9.50 the
following year. Small employers with gross annual revenue under $500,000 will be increased
incrementally from $6.50 to $7.25 per hour over the next few years. These minimum wage scales are
similar to those used by the federal government, but differ on two key issues: 1) they include tipped
workers, for whom the federal minimum is currently set at $2.13 per hour, and 2) they will be indexed
to the inflation rate as of 2018.
20
In order to protect the smallest businesses in Texas, we recommend a two-tiered minimum wage that
reduces the hourly minimum wage by $1.50 for small businesses with less than $500,000 of annual gross
revenue.
Local Control and Removing State Pre-emption Laws
A growing number of cities are setting their own minimum wages in response to rising costs of living in
their regions.
21
These local wage rates, which have been increasingly common since the first was
established in 2003, vary from $8.50 per hour in Bernalillo County, New Mexico, to $15 per hour in San
Francisco and Seattle.
Texas is one of 19 states with a law that prohibits cities from setting their own minimum wage
standards, effectively suppressing wages across the state. To view minimum wage fact sheets for Texas’
eight largest counties, visit bit.ly/MinWageTXblog.
Policy Recommendations
CPPP recommends that the 84
th
Texas Legislature:
● Raise the minimum wage to $10.10 per hour.
● Adjust the minimum wage annually by tying it to the consumer price index. The state should
also consider a clearly defined small business exemption from the new minimum wage that
protects workers as well as the state’s smallest employers.
● Repeal the state law that prohibits localities from setting wage standards.
● Encourage municipalities to create living wage standards for their own employees that are in
line with their cost of living.
Appendix A: Demographic Information
Age of Workers Who Benefit
There is a widely held assumption that
minimum wage jobs are filled with low
skilled young people, who with little
debt or family obligations can afford to
be paid the federal minimum wage.
However, seventy percent of all workers
who benefit in Texas from a minimum
wage increase are between the ages of
25 and 64, and only three percent of
workers affected by a minimum wage
increase are between the ages of 16-18.
Source: CPPP analysis of 1-year 2013 American Community Survey Public-Use Microdata Sample (PUMS) for Texas.
22
16-18
3%
19-24,
23.5%
25-34
26.0%
35-54
34.1%
55-64
9.5%
65+
3.9%
Chart 2: Age of Workers Who Benefit
Texas Average
0%
10%
20%
30%
40%
50%
Bexar
County
Dallas
County
Cameron &
Hidalgo
Counties
El Paso
County
Harris
County
Tarrant
County
Travis
County
Chart 3: Regional Focus - Age of Workers Who Benefit
By County
16-24 25-34 35-54
Workers Who Benefit with Children in the Home
Nearly 49 percent of workers who
benefit from a $10.10 minimum wage
have children at home. In fact, one in
five workers who benefit are single
parents. A total of 344,000 workers, or
14.7 percent of all workers who benefit
are single mothers, while another
102,000 or 4.3 percent, are single
fathers.
Source: CPPP analysis of 1-year 2013 American Community Survey Public-Use Microdata Sample (PUMS) for Texas.
23
No Children
50.9%
Married
Couple
29.7%
Single
Mother
14.7%
Single Father
4.3%
With
Children,
49.1%
Chart 4: Workers Who Benefit with
Children in the Home
Texas Average
0%
10%
20%
30%
40%
50%
60%
70%
Bexar
County
Cameron
County
Dallas
County
El Paso
County
Harris
County
Hidalgo
County
Tarrant
County
Travis
County
Chart 5: Regional Focus - Workers Who Benefit with Children in
the Home
No children With children (under 18)
Educational Attainment of Workers Who Benefit
Workers who benefit from a
minimum wage increase
represent every level of
educational attainment, including
graduate level degree holders.
However, a quarter did not
complete high school, and
another third stopped their
education after receiving their
diplomas or high school
equivalent.
Source: CPPP analysis of 1-year 2013 American Community Survey Public-Use Microdata Sample (PUMS) for Texas.
24
Less than high
school diploma,
25%
HS diploma or
equivalency,
32%
Some college,
28%
Associate's
degree, 5%
Bachelor's
degree, 8%
Beyond
bachelor's
degree, 2%
Chart 6: Educational Attainment of
Workers Who Benefit
Texas Average
0%
10%
20%
30%
40%
Bexar
County
Cameron &
Hidalgo
Counties
Dallas
County
El Paso
County
Harris
County
Tarrant
County
Travis
County
State
Average
Chart 7: Regional Focus - Educational Attainment of Workers
Who Benefit By County
Less than high school diploma HS diploma or equivalency
Some college Associate's Degree and Above
Race and Ethnicity of Workers Who Benefit
Raising the minimum wage to
$10.10 would benefit workers
across racial lines, though not
always in equal measure. Hispanic
and African Americans workers
represent a larger share of workers
who benefit than their share of the
for-profit and not-for-profit
sectors. Alternately, White and
Asian workers represent a smaller
share of workers who benefit than
their share of the private and not-
for-profit sector workforce.
Source: CPPP analysis of 1-year 2013 American Community Survey Public-Use Microdata Sample (PUMS) for Texas.
25
Table 2: Race and Ethnicity of Workers Who Benefit
Percent of
Workers Who
Benefit
Percent of For-Profit
and Not-for-Profit
Sector Workforce
Hispanic or Latino
51.5%
35.3%
Non-Hispanic
White Alone
32.4%
47.7%
Black or African
American
11.4%
10.7%
Asian Alone
3.2%
4.7%
Other
1.5%
1.5%
31.0%
3.9%
49.5%
8.3%
42.8%
4.4%
60.6%
51.3%
69.0%
96.1%
50.5%
91.7%
57.2%
95.6%
39.4%
48.7%
B E X A R
C O U N T Y
C A M E R O N
C O U N T Y
D A L L A S
C O U N T Y
E L P A S O
C O U N T Y
H A R R I S
C O U N T Y
H I D A L G O
C O U N T Y
T A R R A N T
C O U N T Y
T R A V I S
C O U N T Y
Chart 8: Regional Focus - Hispanic or Latino
Workers Who Benefit
Not Hispanic or Latino Hispanic or Latino
Male and Female Workers Who Benefit
While more Texas women than
men would benefit from an
increase in the minimum wage to
$10.10 per hour, the margin is
thin; 51.4 percent are female,
while 48.6 percent are male. It is
important to note that while there
is a near equal number of male
and female workers who benefit,
jobs that pay close or equal to the
minimum wage are more likely to
be dominated by women. The
Bureau of Labor Statistics reports
that, as of 2013, 63 percent of
Texans working at or below the
minimum wage were women.
26
Source: CPPP analysis of 1-year 2013 American Community Survey Public-Use Microdata Sample (PUMS) for Texas.
27
Male
48.6%
Female
51.4%
Chart 9: Male and Female Workers Who
Benefit Texas Average
46.2%
45.5%
51.1%
45.2%
52.3%
42.9%
48.1%
50.6%
53.8%
54.5%
48.9%
54.8%
47.7%
57.1%
51.9%
49.4%
B E X A R
C O U N T Y
C A M E R O N
C O U N T Y
D A L L A S
C O U N T Y
E L P A S O
C O U N T Y
H A R R I S
C O U N T Y
H I D A L G O
C O U N T Y
T A R R A N T
C O U N T Y
T R A V I S
C O U N T Y
CHART 10: REGIONAL FOCUS - MALE AND
FEMALE WORKERS WHO BENEFIT BY COUNTY
Male Female
Workers Who Benefit by Industry
Nearly half are concentrated in three industry sectors: the retail trades; accommodation and food
services; health care and social assistance industry. However, workers in nearly every industry would
benefit from an increase in the minimum wage.
Table 3: Workers Who Benefit by Industry
Number of Workers
Who Benefit
Percent of Total
Workers Who Benefit
Retail Trade
435,099
20.0%
Accommodation and Food Services
358,830
16.5%
Health Care and Social Assistance
269,067
12.4%
Manufacturing
175,908
8.1%
Construction
168,822
7.8%
Administrative and support and waste management
services
150,561
6.9%
Other Services, Except Public Administration
137,718
6.3%
Educational Services
77,059
3.5%
Transportation and Warehousing
74,733
3.4%
Finance and Insurance
59,427
2.7%
Wholesale Trade
52,801
2.4%
Professional, Scientific, and Technical Services
51,084
2.4%
Real Estate and Rental and Leasing
39,377
1.8%
Arts, Entertainment, and Recreation
34,107
1.6%
Agriculture, Forestry, Fishing, and Hunting
31,520
1.5%
Information
25,980
1.2%
Mining, Quarrying, and Oil and Gas Extraction
23,683
1.1%
Utilities
5,712
0.3%
Source: CPPP analysis of 1-year 2013 American Community Survey Public-Use Microdata Sample (PUMS) for
Texas.
28
Appendix B: Workers Who Benefit by County
Regional analyses were conducted by county. Cities have been listed as an additional point of reference.
Information is provided only for those counties with sufficient sample sizes to provide statistical significance.
County
Major City within the
County
Percent of Private and
Not-for-Profit
Workforce Affected by
Increase to $10.10
2016 Estimated
Number of Workers
Hidalgo County
McAllen
43.1
67,317
Cameron County
Brownsville
40.8
34,490
El Paso County
El Paso
40.2
77,819
Webb County
Laredo
38.9
24,027
Taylor County
Abilene
33.0
14,658
Brazos County
College Station
32.7
17,981
San Patricio, Bee, Refugio,
Aransas & Nueces
Corpus Christi
32.0
47,703
Lubbock County
Lubbock
31.8
30,292
Tom Green County
San Angelo
31.1
11,614
McLennan
Waco
29.0
23,415
Gregg County
Longview
28.9
16,485
Wichita County
Wichita Falls
28.4
12,333
Smith County
Tyler
27.2
20,308
Bexar County
San Antonio
26.8
167,441
Montgomery County
Conroe, The Woodlands
26.1
34,043
Potter & Randall
Amarillo
26.0
19,906
Jefferson County
Beaumont
24.8
23,653
Ector County
Odessa
24.4
12,427
Tarrant County
Fort Worth
22.4
155,617
Denton County
Denton, Flower Mound
22.3
40,186
Bell County
Temple, Belton, Killeen
22.0
18,314
Harris County
Houston
21.5
394,771
Williamson County
Round Rock, Georgetown
21.3
26,642
Collin County
Plano, McKinney
20.7
63,227
Dallas County
Dallas
19.9
232,754
Travis County
Austin
19.7
99,894
Midland County
Midland
18.7
12,945
Source: CPPP analysis of 1-year 2013 American Community Survey Public-Use Microdata Sample (PUMS) for Texas.
Data and Methods
The analysis used in this paper is modeled after the methodology of the Institute for Research on Labor
and Employment at the University of California at Berkeley found in Data and Methods for Estimating
the Impact of Proposed Local Minimum Wage Laws
29
, with guidance and input from researchers
Annette Bernhardt and Ian Perry.
Data source
The data source for the analysis is the 1-year 2013 American Community Survey Public-Use Microdata
Sample (PUMS) for Texas.
30
Sample definition
The sample consists of individuals at least 16 years old, working at least 14 weeks in the prior year, and
with positive earnings from wages or salaries. Individuals excluded from the analysis are the
unemployed, self-employed workers, unpaid family workers, and public-sector employees who would
not be affected by a state minimum wage law. Additionally, household-level characteristics such as
presence of children in the household and family type were included in the analysis.
Geography
The analysis uses data for residents of Texas. The level of analysis is at the state and the local level. We
base local-area analysis on place-of-work, not place-of-residence, as workers may not live in the areas
they work.
We define local areas using Place-of-Work Public Use Microdata Areas (POWPUMAs), statistical
geographic areas that contain at least 100,000 people and are built on counties. The Amarillo area is
comprised of two POWPUMAs that cover Potter and Randall counties. We combine Potter and Randall
counties to analyze the impact on Amarillo-area workers. The Corpus Christi area is comprised of two
POWPUMAs that cover Nueces, San Patricio, Bee, Refugio, and Aransas counties. We combine these
counties to analyze the impacts on Corpus Christi-area workers.
Estimating hourly wages
The American Community Survey asks individuals to report their income in the prior year, weeks worked
in the prior year, and usual hours worked per week. We compute an hourly wage variable using these
three variables. For example, if an individual reported earning $30,000 in the prior year, working 50
weeks, and 35 hours per week, we calculate the hourly wage as:
$30,000 / (50 weeks * 35 hours per week) = $17.14 per hour
Survey respondents report weeks worked in the prior year in intervals, such as 50-52 weeks or 40 to 47
weeks worked. We use the midpoint of each interval as the weeks worked value for each respondent.
To account for measurement error, we dropped data for respondents with a computed hourly wage of
$6.525 or less (90 percent or less of the current minimum wage). This dropped approximately 15.9
percent of the sample.
Using the computed hourly wage variable, we estimate that approximately 330,000 working Texans
were earning minimum wage or less in 2013. For comparison, the Bureau of Labor Statistics estimates
400,000 Texas workers earned minimum wage or less in 2013.
Estimating wage growth
Because any proposed minimum wage increase would not take effect until 2016, we needed to project
worker’s wages in 2016 to accurately estimate who would be affected by an increase. We used a two-
step process to project 2016 wages. First, because the ACS data were collected during 2013, we adjusted
estimated wage growth to the present year (2015) using the Consumer Price Index (CPI) in the Texas
Comptrollers’ Biennial Revenue Estimate between 2013 and 2015.
31
Second, we project wages from the
present year to 2016 using the CPI between 2015 and 2016. For example, see Table 1 below.
Table 1. Example of hourly wage adjustments
Computed hourly wage using 2013 ACS data
$8.00
Hourly wage adjusted to 2015
$8.40
Projected hourly wage in 2016
$8.78
State analysis of workers affected by minimum wage increase
Estimating percentages of workers affected by minimum wage increase
Using projected hourly wages in 2016, we calculate the percentage of workers in the sample whose
projected hourly wage would be less than $10.10. We calculate all percentages out of the sample
universe, which includes individuals at least 16 years old, working at least 14 weeks in the prior year in
the private or not-for-profit sectors, and with positive earnings from wages or salaries. We exclude
individuals who are unemployed, self-employed, unpaid family workers, and public-sector employees.
We include in our analysis workers earning slightly above the expected minimum wage increase to
$10.10 because employers typically increase the wages of workers slightly above newly mandated
minimum wages to maintain a hierarchy of wages. This group of workers are indirectly affected by the
minimum wage increase, and the effect on workers earning just above the minimum wage is referred to
as the “spillover” or “ripple” effect.
Estimates of the magnitude of “spillover” effects range within a relatively narrow band. The Institute for
Research on Labor and Employment (IRLE) at UC Berkeley used two scenarios. The first scenario
assumed a spillover effect on workers earning between 100 and 115 percent of the new minimum wage.
(In the case of a new minimum wage of $10.10, indirectly affected workers would be those earning
between $10.10 and $11.615 per hour). The second scenario assumed a slightly larger spillover effect on
workers earning up to the value of the new minimum wage plus the difference between the new and
old minimum wages. (In the case of a new minimum wage of $10.10, indirectly affected workers would
be those earning between $10.10 and$12.95 per hour.)
Jeannette Wicks-Lim from the Political Economy Research Institute at the University of Massachusetts
Amherst, used Current Population Survey (CPS) data from 1983-2002 to empirically estimate the
magnitude of the spillover effect from past minimum wage increases. She found minimum wage
increases indirectly affected workers earning up to 123 percent of the new minimum wage, but the
largest number of workers affected were those who earned 115 percent of the new minimum wage.
32
In
its most recent report, the Congressional Budget Office (CBO) estimates that workers earning up to
$11.50 per hour would be affected by a minimum wage increase to $10.10.
33
Using methods above, we considered the range of spillover effects on a minimum wage increase to
$10.10 to be between $11.50 and $12.95. With input from researchers at IRLE, we assume the spillover
effect goes up to workers earning 115 percent of the new minimum wage, or $11.615 per hour.
Table 2. Texas workers directly and indirectly affected by a minimum wage increase
Group of Workers
Definition
Directly affected
Earning less than $10.10/hr in 2016
Indirectly affected
(“spillover” or “ripple” effect)
Earning between $10.10 and $11.615 in 2016
Total affected
Earning less than $11.615/hr in 2016
Estimating numbers of minimum wage workers affected by minimum wage increase
In addition to calculating natural wage growth before estimating the impact of the minimum wage
increase, we also estimate the natural employment growth over the same period so that we can better
estimate the number of workers affected by a minimum wage change in 2016.
Similar to adjusting wages, we use a two-step process to adjust for employment growth. First, we adjust
the 2013 estimates to 2015 using the rate of employment growth between 2013 and 2015 as indicated
in the Comptroller’s Biennial Revenue Estimate. We then project estimates to 2016, the year of the
proposed minimum wage increase, using estimates of employment growth between 2015 and 2016.
We did not make adjustments for either positive or negative changes in employment growth prior to
implementation of a minimum wage increase. There has been much conflicting research on the
employment effects that occur after implementation of a minimum wage increase. (For more, see the
state report.) However, there is no evidence to suggest that employment growth would be affected
prior to implementation of a minimum wage increase.
Table 3. Employment growth adjustments to statewide estimates
Estimated number of workers affected by minimum wage increase to $10.10 based
on 2013 data
2,171,966
Adjustment for employment growth that occurred between 2013 and present year
(2015)
2,281,570
Adjustment for projected employment growth between 2015 and 2016 (year of
proposed minimum wage increase)
2,383,554
Demographic characteristics of workers affected by minimum wage increase
We analyze key demographic variables in the individual-level PUMS files: age, sex, race/ethnicity,
educational attainment, and veteran status. We also analyze the reported occupation and industry of
workers. Finally, we link the household-level PUMS file to the individual-level PUMS file to analyze two
household characteristics of individuals potentially affected by a minimum wage increase:
household/family type and household presence of children.
Local Area Analysis of Workers Affected by Minimum Wage Increase
We define local areas using Place-of-Work Public Use Microdata Areas (POWPUMAs), statistical
geographic areas that contain at least 100,000 people and are built on counties. The Amarillo area is
comprised of two POWPUMAs that cover Potter and Randall counties. We combine Potter and Randall
counties to analyze the impact on Amarillo-area workers. The Corpus Christi area is comprised of two
POWPUMAs that cover Nueces, San Patricio, Bee, Refugio, and Aransas counties. We combine these
counties to analyze the impacts on Corpus Christi-area workers.
Approximately 9.5 percent of the state sample is not included in the data for local-area analysis. This
occurs because survey respondents report place-of-work based on work during the week prior to taking
the survey. Approximately 9.5 percent of individuals who worked at least 14 weeks in the prior year (and
are thus considered “workers” in the state analysis) did not work the week prior to the survey.
Therefore, they did not report a place-of-work and are not included in the local-area analysis.
Estimating percentages and numbers of workers affected by minimum wage increase in local areas
Percentages and numbers of minimum wage workers affected in local areas used the same
methodology as state estimates. We assume employment growth in local areas is the same as
employment growth for the state.
Demographic characteristics of workers affected by minimum wage increase in local areas
We analyze key demographic variables in the individual-level PUMS files: age, sex, race/ethnicity, and
educational attainment. We link the household-level PUMS file to the individual-level PUMS file to
analyze two household characteristics of individuals potentially affected a minimum wage increase:
household/family type and household presence of children.
Because of the smaller sample sizes and differing demographics in local areas, we are able to report a
limited number of demographic characteristics for selected local areas. Furthermore, for each local area,
the demographic characteristics that we are able to report with confidence differ according to the
makeup of that area. For example, in Webb County, we are able to estimate the percent of workers
affected by a state minimum wage law who are Hispanic because of the county’s large Hispanic
population. However, because of the county’s relatively small population, we are not able to provide
estimates of the age distribution of those affected with the same level of confidence.
We calculate margins of error using generalized standard error formulas with design factors
34
and
present margins of error at 90 percent confidence intervals. We do not report local estimates with
moderately high levels of statistical inaccuracy due to small sample size (defined as estimates where the
coefficient of variation is higher than 10).
1
Working Poor Families Project Data, ACS 2013 release.
2
Workers who benefit include those currently earning less than the proposed minimum wage of $10.10 per hour and those
earning between $10.10 and $11.62 per hour. Workers earning between $10.10 and $11.62 per hour are considered
indirectly affected by a minimum wage increase because of ‘spillover’ effects because their wages would likely rise of the
minimum wage rose. The spillover band is defined as between 100 and 115 percent of the proposed minimum wage. The
sample consists of individuals at least 16 years old, working at least 14 weeks in the prior year, and with positive earnings
from wages or salaries. Individuals excluded from the analysis are the unemployed, self-employed workers, unpaid family
workers, and public-sector employees who would not be affected by a state minimum wage law.
3
CPPP analysis of 1-year 2013 American Community Survey Public-Use Microdata Sample (PUMS) for Texas. U.S. Census
Bureau. (2015). 2013 American Community Survey Public Use Microdata Sample [Data file]. Retrieved from
http://www2.census.gov/acs2013_1yr/
4
Additional information can be found in the appendix.
5
U.S. Census Bureau. (2015). 2013 American Community Survey Public Use Microdata Sample [Data file]. Retrieved from
http://www2.census.gov/acs2013_1yr/
6
LoPalo, M. & Orrenius, P. (2014). Texas Leads Nation in Creation of Jobs at All Pay Levels. Southwest Economy, Federal
Reserve Bank of Dallas. http://bit.ly/1MNtoAW
7
The Federal Fair Labor Standards Act sets the national minimum wage at $7.25 per hour. Workers that make below the
federal minimum wage may include tipped workers and small firms that are not subject to the Fair Labor Standards Act.
Governing Data. (2014). Minimum Wage Workers by State: Statistics, Totals. http://bit.ly/1ML3hc0
8
Working Poor Families Project Data, ACS 2013 release.
9
Raise the Minimum Wage. (2015). What’s the Minimum Wage in Your State? http://bit.ly/1MNudcX This data was confirmed
and analyzed by the Worker’s Defense Project in Austin, Texas
10
Center for Public Policy Priorities family budgets calculator. www.familybudgets.org
11
American Sustainable Business Council and Business for a Fair Minimum Wage. (2014). Opinion Poll: Small Business Owners
Favor Raising Federal Minimum Wage. http://bit.ly/1EG8Qtd
12
These numbers were calculated using the tool at familybudgets.org.
13
Card, D. and Krueger, A.B. (1994). Minimum Wage and Employment: A Case Study of the Fast-Food Industry in New Jersey
and Pennsylvania. American Economic Review. 84: 772-793. http://bit.ly/1Glb4vb
14
Card, D. and Krueger, A.B. (1995a). Time-series minimum-wage studies: A meta-analysis. American Economic Review. 85:
238-243. http://bit.ly/1BvkrUs
15
Doucouliagos, H. & Stanley, T.D. (2014) Publication Selection Bias in Minimum-Wage Research? A Meta-Regression Analysis.
Deakin University Economics Working Paper. http://bit.ly/1CqxmfL; Schmitt, J. (2013). Why Does the Minimum Wage Have
No Discernible Effect on Employment? The Center for Economic and Policy Research. http://bit.ly/1MHShOs
16
Meer, J. & West, J. (2015). Effects of the Minimum Wage on Employment Dynamics. Texas A&M University.
http://bit.ly/1wX2gvq
17
Congressional Budget Office. (2014). The Effects of a Minimum-Wage Increase on Employment and Family Income.
http://1.usa.gov/1EylIyC
18
Chicago Booth IGM Forum. (2013). Minimum Wage. http://bit.ly/1be6DZv
19
U.S. Department of Labor, Wage and Hour Division. (2014). Handy Reference Guide to the Fair Labor Standards Act.
http://1.usa.gov/1O9KXNm
20
Minnesota Department of Labor and Industry. (2014). Labor Standards –Minnesota’s minimum-wage law.
http://bit.ly/1AVlOfb
21
National Employment Law Project. (2014). City Minimum Wage Laws: Recent Trends and Economic Evidence on Local
Minimum Wages. http://bit.ly/18DVMXi
22
U.S. Census Bureau. (2015). 2013 American Community Survey Public Use Microdata Sample [Data file]. Retrieved from
http://www2.census.gov/acs2013_1yr/
23
U.S. Census Bureau. (2015). 2013 American Community Survey Public Use Microdata Sample [Data file]. Retrieved from
http://www2.census.gov/acs2013_1yr/
24
U.S. Census Bureau. (2015). 2013 American Community Survey Public Use Microdata Sample [Data file]. Retrieved from
http://www2.census.gov/acs2013_1yr/
25
U.S. Census Bureau. (2015). 2013 American Community Survey Public Use Microdata Sample [Data file]. Retrieved from
http://www2.census.gov/acs2013_1yr/
26
Bureau of Labor Statistics Southwest Information Office. (2014). Minimum Wage Workers in Texas-2013.
http://1.usa.gov/1EocIK3
27
U.S. Census Bureau. (2015). 2013 American Community Survey Public Use Microdata Sample [Data file]. Retrieved from
http://www2.census.gov/acs2013_1yr/
28
U.S. Census Bureau. (2015). 2013 American Community Survey Public Use Microdata Sample [Data file]. Retrieved from
http://www2.census.gov/acs2013_1yr/
29
Welsh-Loveman, J., Perry, I., & Bernhardt, A. (2014). Data and methods for estimating the impact of proposed local minimum
wage laws. Institute for Research on Labor and Employment: University of California at Berkeley.
http://www.irle.berkeley.edu/cwed/briefs/2014-01-data-and-methods.pdf
30
U.S. Census Bureau. (2015). 2013 American Community Survey Public Use Microdata Sample [Data file]. Retrieved from
http://www2.census.gov/acs2013_1yr/
31
Hegar, G. (2015). Biennial revenue estimate.
http://www.texastransparency.org/State_Finance/Budget_Finance/Reports/Biennial_Revenue_Estimate/2016_17/pdf/BRE_
2016-17.pdf.
32
Wicks-Lim, J. (2006). Mandated wage floors and the wage structure: New estimates of the ripple effects of minimum wage
laws. Political Economy Research Institute: University of Massachusetts Amherst.
http://www.peri.umass.edu/fileadmin/pdf/WP116.pdf.
33
http://www.cbo.gov/sites/default/files/cbofiles/attachments/44995-MinimumWage.pdf.
34
U.S. Census Bureau. (2015). PUMS accuracy of the data 2013.
http://www.census.gov/acs/www/Downloads/data_documentation/pums/Accuracy/2013AccuracyPUMS.pdf.
For more information or to request an interview, please contact Oliver Bernstein at [email protected] or
512.823.2875.
About CPPP
The Center for Public Policy Priorities is an independent public policy organization that uses research,
analysis and advocacy to promote solutions that enable Texans of all backgrounds to reach their full
potential. Learn more at CPPP.org.
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