The Employment Effects of a $15 Minimum Wage in the U.S. and in Mississippi

A Simulation Approach

Key Findings

The policy’s effects on workers by 2024

  • Increasing the minimum wage to $15 would increase earnings for 41.5 million workers, or
    29.2 percent of the U.S. workforce.
  • Among those getting raises, annual pay would increase 17.3 percent, or about $3,470 (in
    2016 dollars) on average.

Effects on businesses and consumers by 2024

  • Three industries account for more than 40 percent of the U.S. private sector workers who
    would get increases: retail trade (18.2 percent), restaurants (15.6 percent), and health
    services (10.5 percent). The remaining low-wage workers are scattered among a broad variety
    of industries. Total wage costs would increase 1.9 percent across all employers.
  • Restaurants comprise the most affected sector: 67.8 percent of workers in the restaurant
    industry would receive a wage increase. Total wage costs in restaurants would increase 11.3
  • Automation, increases in worker productivity and reduced employee recruitment and
    retention costs would offset some of these payroll cost increases.
  • Businesses could absorb the remaining payroll cost increases by increasing prices by 0.6
    percent through 2024. This price increase is well below the annual inflation rate of 1.7
    percent over the past five years. Prices in restaurants would increase 4.3 percent by 2024.
  • The consumers who would pay these increased prices range across the entire income

Net effect on employment in the U.S. and in Mississippi by 2024

  • We estimate a very small increase in employment growth, relative to what would occur
    without the minimum wage increase: 90,000 more jobs by 2024, which corresponds to 0.1
    percent of projected 2024 employment. By comparison, census benchmark revisions of
    annual employment have averaged 0.3 percent over the past decade and the Congressional
    Budget Office projects that employment in the U.S. will grow 3.15 percent in the same time
  • Our estimates for Mississippi project a similar positive (0.1 percent) effect on employment.

Summary of key findings

  • A $15 nationwide minimum wage by 2024 would generate a significant increase in living
    standards for about 41.5 million workers and their families in the U.S. while creating a
    minimal effect on employment and a small price increase borne by all consumers. The effects
    in Mississippi would be roughly similar.
  • How can such a major improvement in living standards occur without adverse employment
    effects? While a higher minimum wage induces some automation, as well as increased
    worker productivity and slightly higher prices, it simultaneously reduces worker turnover and
    increases worker purchasing power.
  • Our results leave open the possibility that minimum wages much higher than $15 might
    generate negative employment effects. At $15, however, the negative and positive effects on
    employment largely offset each other. A phased-in $15 minimum wage will be absorbed partly
    by employee turnover reductions and productivity increases, and mainly by modest price
    increases in restaurants and by increases in consumer spending.