How does a $15/hr minimum wage affect wages of those not making minimum wage?

Ask an Economist
Question: 

We live in Florida and the $15/hr passed. Does everyone else get screwed or is there some built-in scaling involved? For example, my daughter is a nurse's aide in Dayton, Ohio, and makes $12 an hour. With the increase she would be very happy jumping up $3 an hour, but what does that mean for the other nurse's aides who've been working longer than she has, who are making, say, $15.45 an hour right now? Do they get some kind of scaled bump to offset or are they just out of luck? And If they get a bumped scale, how does that impact the next profession one level up from them, which would be LPN, respiratory therapists, RNs and then physician's assistants? It seems to me that $15/hr has some overwhelming and far-reaching implications. It is going to be hard to go to work knowing the guy across from me is making $3/hr less than me and I have a degree and he just walked in off the street with no skills or experience.

Answer: 

Increases in the minimum wage tend to cause firms to raise wages for those whose wages were initially above the new minimum in order to maintain the former pay hierarchy. The biggest effect is on workers closest to the minimum wage. There is also some evidence that firms shift hours to workers paid above the new minimum while reducing the hours of the least skilled workers whose wage rose due to the minimum wage. Both the higher pay and the higher hours will tend to raise income for those who were already paid above $15 per hour.

Answered by:
University Professor
Category: 
Last updated on December 3, 2020