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The Elusive Minimum Wage
Post-Pandemic Wage Problem
Years of post-pandemic price shocks have cooled, but for many Americans, the damage is already done. Eggs are no longer five dollars a dozen, but they still cost twice as much as they did in July 2019. Rents are no longer rising but they’re still 19% higher than they were before Covid. And wages have lagged largely behind, especially minimum wages.
Prices are nearly 20% higher than they were before the pandemic. This is especially tough for workers making the federal minimum wage, whose $7.25 per hour went much further when it was set in 2010 then it does today. While this purchasing power has been slowly receding for years, it dropped abruptly post-pandemic, to its lowest level in 16 years.
The concept of ‘real wages’, or the value of money earned by workers after taking into account the effect of inflation, can be further extended to explore geographic differences. Workers in states like California might seem better off with their higher minimum wages, but those gains have been eaten away by an extremely high cost of living. With few exceptions, low-wage workers across the country are seeing their dollars diminish.
How Low Will Wages Fall?
The federal minimum wage hasn’t been raised in 15 years. One might argue that wages should remain low because a dollar in Alabama goes farther than it does in California. Indeed, the 22 states that still rely on the $7.25 federal minimum wage tend to be cheaper places to live. But their relative affordability increasingly fails to make up for this low wage. In Pennsylvania, the purchasing power of $7.25 has dropped 26% since 2010. In Georgia, its purchasing power has dropped by almost 30%. Even affordable regions are becoming less affordable.
This trend affects many households across America. Over one million workers in the U.S. earn minimum wage or less. Employees in Alabama, Georgia, Louisiana, Mississippi, South Carolina, Tennessee, Wyoming, and American Samoa can even earn less than minimum wage. The federal minimum applies only to larger businesses that operate across state lines. Many forms of self-employed “gig-work” like driving for Uber and delivering food can also result in workers earning less than the minimum, which is legal since they are technically self-employed. Post-pandemic inflation is hurting these contingent workers most of all.
The Fight for $15
“Fight for $15” is a frequent slogan of the labor rights movement. The chant refers to a wage of $15 per hour, which advocates consider the minimum wage necessary to live a dignified life. The movement has had some success, with several states meeting or exceeding this benchmark.
But notably, while there has been progress on establishing a $15 minimum wage, no state has managed to implement a minimum wage that achieves an actual purchasing power of $15 an hour. In other words, most states that passed laws to create a $15 minimum wage failed to achieve the core principle behind their goal—establishing a minimum wage that meets living standards. Even the 13 states that have indexed minimum wage to inflation struggle to achieve a minimum with this purchasing power.
The state of Washington, for instance, raised their minimum wage to $15.74 in 2023. But the actual purchasing power of that wage—relative to inflation and regional cost of living—was $14.33. In fact, the purchasing power of the state’s minimum wage was actually higher in 2019, when the $13.50 minimum bought $14.90 worth of goods and services.
The District of Columbia is the only region in the U.S. to enforce a minimum wage with over $15 of purchasing power. Their minimum wage of $17 equates to $15.06 worth of goods and services.
The million plus workers who earn a minimum wage or less are some of America’s most vulnerable residents. These low-paid workers are more likely to be young, more likely to be female, and more likely to be Black. What is to be done? Should “we Fight for $15”? Research from the Congressional Budget Office shows that tying a $15 minimum wage to inflation would lift approximately 20% of poor Americans out of poverty by 2030.
Yet, that solution may not be so simple. The CBO also estimates that a $15 minimum wage would put about 400,000 Americans out of work. But other academic research contests that finding, arguing that businesses would benefit from increased productivity and less turnover. Economists essentially can’t make up their minds about how raising the federal minimum wage will affect overall economic health in the next decade.
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Between 2008 and 2015, the various islands making up the U.S. territories received half the total media attention of equivalent-size states (4,936 vs. 10,138 articles).
An uptick in coverage of the territories in 2016 and 2017 was largely driven by the Puerto Rican debt crisis and the devastation of Hurricane María in the Caribbean.
North Korea’s 2017 announcement that Guam would be the target of its nuclear missile program also contributed to increased coverage that year.
In 2018 The New York Times reported heavily on the destruction caused by Typhoon Yutu in the Northern Marianas Islands.
The historic election of 2020 and the COVID-19 pandemic exacerbated the disparity in coverage between states and territories.
While native residents of the territories are generally U.S. citizens (except in American Samoa where they are U.S. nationals), they do not have the right to vote in general elections. Coverage about COVID-19 levels in different states and counties often excluded the territories.
The Enormous Federal Data Disparity
Federal data collection largely stops short of U.S. territories. Over the next 10 years, the Census Bureau will release approximately 264 key datasets for the 50 states. But for the territories of Guam, the Northern Marianas, American Samoa and the Virgin Islands, the Census Bureau will release only three total datasets over that same period: one decennial count and two economic surveys.
All told, the data collected by the Census Bureau will help direct at least 2.8 trillion dollars annually to 353 federal-assistance programs. While data on the 50 states helps the government direct funding where it’s needed most, a lack of territory data forces officials to operate in the dark.
For its most populous territory, Puerto Rico, federal data collection is a little better. The Census Bureau conducts an annual “Puerto Rican Community Survey” for the region’s 3.2 million residents. But the resulting estimates don’t use the same rigorous control methods as the “American Community Survey.” And data is only available on the county level instead of more specific geographies like zip codes and census tracts.
A Blindfold for Local Officials
Around the turn of the 20th century, the U.S. expanded its colonial influence over seas. Long left to the rule of the U.S. Navy, the nation’s territories were neglected by the government that claimed to rule them. This neglect hampered the development and assessment of the regions’ social programs. In recent years, a lack of federal data has hindered the ability of island territories to respond to disasters like the COVID-19 pandemic and extreme weather.
For example, in 2018, Typhoon Yutu devastated the Northern Mariana’s islands. By 2020, the recovery effort had just gotten underway when the spread of COVID-19 crushed the region’s critical tourism industry. When the federal government asked the region’s department of labor to estimate how many workers lost their jobs during the pandemic, they had no idea.
Speaking to the Honolulu Civil Beat, the head of Northern Mariana’s labor department Vicky Benavente said, “This is one lesson we learned. Data is so critical for justifying our asks to the federal government.”
State governments had ready access to reliable data. They used monthly reports from the Current Population Survey to monitor pandemic-induced rises in unemployment. Working without this data, the Northern Marianas government had to rely on a survey of employers conducted every two years. By 2021, so many businesses had shut their doors that few were left to reply.
About the Data
We sourced current and historical minimum wage data from the Department of Labor. To estimate cost-of-living differences, we used state-by-state regional price parities (RPP) provided by the Bureau of Economic Analysis. At the time this article was completed, RPP data had not yet been released for 2023, so we used 2022 data to estimate cost of living differences for that year. Inflation was accounted for using the CPI-U.
To estimate the impact of raising minimum wage, we used microdata from the Current Population Survey, accessed via IPUMS. We filtered this data for the months in which respondents participated in the earner study, in which they provided detailed information about their current wages and employment.
Thumbnail artwork designed by Chloe Phan.
Further Reads
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