Growing evidence shows that minimum wage increases help to increase take-home pay and reduce poverty without reducing employment. That’s why Arkansans overwhelmingly voted to raise the minimum wage in 2018. As we wrote last week, the CBO confirmed the positive impact of a higher federal minimum wage.
However, some have pointed to a potential wrinkle at the state-level – although a minimum wage of $11.00/hour isn’t the highest in dollar terms, it would be the highest state-level minimum wage as calculated against the state’s median income. That’s what’s known as the “relative minimum wage.” The highest state-level relative minimum wage in the research literature is 0.59, meaning that the minimum wage is about 59% of the median wage. At $11.00, Arkansas’s relative minimum wage would be 0.70.
A new study addresses this issue by looking at county-level data in states that have raised the minimum wage. They found state-level increases to the minimum wage that put the relative minimum wage as high as 0.82, more than Arkansas’s new relative minimum wage.
The results confirm what the previous evidence on the minimum wage suggested; the researchers found “no adverse effects on employment, weekly hours or annual weeks worked,” but did find positive impacts on wages that lead to “substantial declines in household and child poverty.”