One Thing the New CBO Minimum Wage Report Proves: State Policies Matter
As with almost all economic policies, there would be ripple effects from a federal hike. Obviously, anyone earning below the new proposed federal minimum of $10.10 would be affected. But so, too, would some workers who are just above that level. If you’re earning four dollars above the current minimum wage and suddenly that rises by nearly three dollars, your pay might get bumped by market forces even if it’s still technically above minimum wage.
But the size of that ripple effect, it turns out, is directly related to a state’s minimum wage. In fact, it’s kind of easy to calculate, according to CBO, and it can have a big impact on what slice of a state’s residents is affected. The size of the ripple effect above and beyond the proposed federal $10.10 level is about half of the difference between that and the state’s current minimum. Here are some examples from CBO that show how the math works out:
Thus, in states where the current minimum wage is $7.25, CBO anticipates that workers earning up to about $11.50 per hour would probably be affected by the $10.10 option. In states with a higher minimum wage, the ripple effect would be much smaller. For instance, under current California law, the minimum wage is scheduled to increase to $10.00 in 2016, and in that state, only workers earning up to $10.15 per hour would probably be affected by an increase to $10.10 in the federal minimum, by CBO’s estimate.
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