How A Minimum Wage Increase Would Benefit The Palmetto State
This week, two campaigns largely aligned in their focus on supporting poor and working class families will compete for Democrats’ votes in the South Carolina primary. While the inequality debate has heated up and focused largely on those at top end of the income scale, South Carolina should steer focus back to supporting those at the bottom. Unlike other states and localities that are increasing their minimum wages further above the federal wage floor, South Carolina has no state minimum wage — so, like 20 other states, the state minimum wage is the federal minimum wage, or $7.25. With a poorer population struggling to earn a decent income, a minimum wage increase — coupled with other supporting policies — would provide great benefits to South Carolina families.
Our assessment of more than 200 minimum wage studies finds that modest minimum wage increases raise incomes of poor and working class people, while resulting in statistically insignificant job losses. A $12 minimum wage would be a greater leap for some states, like South Carolina, than for others. Nonetheless, we believe benefits would substantially outweigh any costs if the minimum wage were increased with a careful phase-in period — for instance, four annual 13.4% increases (to $8.20, $9.30, $10.55 and $12) or five annual increases of 10.6% (to $8.00, $8.85, $9.80, $10.85 and $12.00). Employers of low-wage labor in the Palmetto State would be able to prepare carefully, minimizing any adverse employment effects, and low-wage employees would experience significant increases in income, especially when supplemented by other important policies designed to increase earnings of low-wage workers, such as the Earned Income Tax Credit (EITC).
To demonstrate this potential impact, we turn to some basic economic statistics to diagnose South Carolina’s current employment market. The following charts, which all use Current Population Survey data, demonstrate that South Carolina’s economy needs to do much more so that its workers — and low-wage workers in particular — can provide for themselves
Unemployment Rate & Employment Ratio
Both South Carolina’s unemployment rate and employment ratio, two basic indicators of labor market health, show the state’s population stands to gain from economic policy changes. Last year, South Carolina’s unemployment rate was above the national average. The first chart maps 2015 unemployment rates by state, with the national average, labeled U.S., at 5.3%, while South Carolina comes in higher at 5.9%.
The state employment ratio tells a similar story, as South Carolina figures fall behind the national average. The employment ratio is the fraction of people at least 16 years old who are employed, and 2015 figures by state are displayed in the second chart. While North Dakota had the highest employment ratio, at 0.69, West Virginia, at less than half the working population, had the lowest at 0.49. The national average was 0.59, so at 0.57, South Carolina’s employment ratio was closer to that of West Virginia than North Dakota.
At $15.63, South Carolina’s median wage comes in below the national average. The last chart displays the median wage in each state, showing Washington, D.C. had the highest at $24.58 (Massachusetts was second at $21.19), and Mississippi the lowest at $14.49. The national median was $17.19, leaving South Carolina’s median wage closer to Mississippi’s.
Comparing South Carolina’s median wage to the $12 minimum wage proposal demonstrates that many of the state’s lowest earners would reap significant benefits from the wage boost a minimum wage hike would generate. The $12 figure exceeds 75% of South Carolina’s 2015 median wage and also exceeds what 30% of workers earned in South Carolina in 2015 (the 30th percentile was $11.81).
All states can gain from raising their minimum wages to the $12, but as the 2016 campaign moves across state boundaries, it’s time to consider how potential impact of minimum wage hikes vary by state. We present these figures portraying South Carolina’s current labor market to illustrate the room for policy improvement, and in particular, the benefits a minimum wage increase would provide to the state’s large population of poor and working-class families.
Dale Belman and Paul Wolfson are the authors of “What Does The Minimum Wage Do?”, an academic analysis of more than 200 studies assessing the effects of the minimum wage on employment, wages, incomes, and more.