KY Policy Blog

Higher Minimum Wage Is Good for Kentucky Workers and the State’s Economy

By Anna Baumann
April 3, 2013

Raising the federal minimum wage to $10.10 an hour would lift the wages of over one in four Kentucky workers and add $546 million over three years to the Kentucky economy, according to a recent report by the Economic Policy Institute (EPI).

The report looks at how the Fair Minimum Wage Act of 2013 – which proposes to raise the minimum wage incrementally to $10.10 by 2015, index it to inflation and raise the tipped minimum wage to 70 percent of the regular minimum wage – would affect workers and the economy at national and state levels.

If the federal minimum wage had kept up with the average worker’s wage growth over the last four decades, today it would be $10.50 rather than $7.25.

The Fair Minimum Wage Act would directly benefit the 19 percent of Kentucky’s wage-earning workforce who make less than the proposed new minimum wage (336,000 people), and indirectly affect another 8 percent of Kentucky workers who make just above the new minimum and would receive a raise as employer pay scales are adjusted upward (144,000 people).

Who are these workers? The stereotype of middle-class teens making spending money does not reflect the reality that many families rely on income from low wage earners to make ends meet. EPI finds that, in Kentucky, the earnings of the low-wage workers who would be affected by an increase in the minimum wage make up over 50 percent of their total family income. 27 percent of those workers are parents, and 25 percent of the state’s children have at least one parent who would be affected by the wage increase. EPI also finds that, in Kentucky:

  • 89 percent of the potentially affected workforce are at least 20 years old.
  • 41 percent have at least some post-secondary education.
  • 57 percent are women.
  • 57 percent work full-time.
  • 82 percent identify as Non-Hispanic white.
  • As the report outlines, when working families are better able to afford goods and services, consumer spending increases and the economy experiences growth.

EPI estimates that raising the minimum wage as the bill proposes would increase earnings for 27 percent of Kentucky workers. Their annual wages would increase by $2,369 on average and $863 million in total. By 2015, Kentucky would see its GDP grow by $546 million and 2,200 jobs would be created. Nationally, the hike would impact 30 million workers, grow the GDP by $32.6 billion and create about 140,000 new jobs.

The numbers contradict the unsupported but common concern that raising the minimum wage leads to growth in unemployment. A growing body of research shows that higher unemployment is avoided through a variety of ways especially new organizational efficiencies, reduction in costs associated with turnover, reductions in wages of high earners, and minor price increases. In fact a large number of economists and businesses agree that raising the minimum wage is good for the workforce and the economy.

Kentucky wages are low and income inequality is high. Increasing the minimum wage would help many individuals and families, and benefit Kentucky’s economy overall.

See details on how Kentuckians would benefit here.

Note: Corrected on January 16, 2014.

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