Activists in New York won a major victory earlier this month, as New York became the first state to set a $15 minimum wage. The victory comes after months of protests across the country, including in Los Angeles and across the state of Washington.
The minimum-wage debate has been a long point of interest for business owners and labor economists alike. In 1992, researchers Ralph E. Smith and Bruce Vavrichek used longitudinal data from the 1984 and 1985 versions of the “Survey of Income and Program Participation” (SIPP) to address a key question: how easy is it for minimum-wage workers to get a raise (with the suggestion that if there is a lot of upward mobility, a lower minimum wage is more acceptable)? At the time of the study, the minimum wage was $3.35 an hour, or about $7.50 when accounting for inflation.
Respondents to the SIPP survey were interviewed every four months about their earnings, other sources of income, and their participation in various social programs. The key questions were how many hours they usually worked per week and what their hourly pay rate was.
Much of the initial results were promising. About 73% of the employees who were initially being paid minimum wage were still employed a year later, with about 90% of them being employed on an hourly basis. Interestingly, these workers saw their wages grow rather quickly. One year after the first survey, 63% had had a raise, with 40% getting a raise within four months.
Flipped around, however, the numbers do not look as promising. Roughly 27% of minimum-wage workers received no raise, and of the people who did receive a raise, 16% saw their wages go from $3.35 to $3.50—a rate that barely keeps up with inflation. In addition, the number of people who received raises in their second year was much smaller, and those who worked part-time—which is increasingly the case in today’s economy—found it far harder to move up.
Smith and Vavrichek found that a few different factors helped someone’s ability to get a raise. First, the often-touted benefit of education: having a high-school diploma increased the chances of a raise by about 9 percentage points. Other positive factors were working as many hours as possible or previously having a high-paying job. Women and men were equally likely to receive increases, but ageism and racism were rampant, as older workers were less likely to advance than younger workers, and black workers less likely than white workers.
