Kansas House Bill 2022 proposes to increase the minimum wage to $15 per hour in Kansas by 2021. The bill sponsored by Rep. Jim Ward, (D) Wichita, appears to follow a national trend towards expecting a minimum wage to serve as a so-called living wage. The Kansas Senate is also considering SB 141, a minimum wage bill topping out at $13 per hour by 2024, but with small increases each year after that. Kansas’ minimum wage is currently $7.25 an hour. SB 141 is sponsored by eight senators, including Oletha Faust-Goudeau of Wichita.
We reached out to Representative Ward and Senator Faust-Goudeau to discuss the rationale and possible unintended consequences for their proposals, but they haven’t responded.
In 2015 Seattle increased the minimum wage for large employers (over 500 employees) that contribute to medical benefits from $9.47 to $11.00; the rate increased to $13 per hour in 2016, it went to $15 per hour for 2017 and currently is $16 per hour. Small employers have slighty lower minimums. In June 2017 the National Bureau of Economic Research put out a study examining the impact the minimum wage change had on workers.
The study found that following the second wage increase to $13 an hour, which is an 18 percent increase from the previous year, hours worked contracted by 9 percent. The net effect was that the average worker actually took home $125 less per week. The mandated minimum wage in fact hurt the same low wage workers the law was meant to help because employers balanced the wage increase by cutting back on hours.
The authors updated their analysis last October, telling the New York Times the results were more nuanced. People who worked more than 600 hours in the nine months leading up to the change saw only a small decline in hours and had an average net increase of $84 per month. Those who worked less than 600 hours lost more work and only had a net gain of $4 per month. But those not employed when the first minimum increase kicked in fared the worst, causing one of the paper’s authors to speculate that the minimum wage priced some workers out of the market. “For folks trying to get a job with no prior experience, it might have been worth hiring and training them when the going rate for them was $10 an hour,” but perhaps not at $13 per hour.
Economist Chris Edwards with Cato Institute says mandated increases do more harm than good and cites research showing a minimum wage increase “…does not alleviate overall poverty the way that supporters believe that it will.” Edwards cites work by labor economist Joseph Sabia of San Diego State University, who finds that minimum wages reduce the work available for unskilled workers and that few beneficiaries of minimum wage increases live in poor households. Sabia and his research partner found “…only 13 percent of workers who would be affected live in poor households, while nearly two-thirds live in households with incomes over twice the poverty line, and over 40 percent live in households with incomes over three times the poverty line. Other research suggests that poor single-female headed households make up less than 5 percent of all affected workers.”
Leading economist Arindrajit Dube, who is a proponent of higher minimum wages, has noted that for minimum wages to be effective, they should correlate to approximately 50 percent of a region’s median income, maybe 60 percent in certain economic regions. The Bureau of Labor Statistics says the median wage across all occupations in Kansas is $16.90, so at Dube’s recommended 50 percent correlation, the minimum wage would be $8.45. In a paper from 2014, Dube put Kansas’ ideal minimum wage at $8.85 an hour, based on the 2012 median wage adjusted to 2014 dollars.
There are many anecdotal stories about negative impacts on restaurants and other entertainment businesses that rely on lower-cost labor but few research studies so far. Still, potential impacts on the venues considered important for attracting young professionals may be another consideration in the debate.
On January 1, 2019 20 states raised state minimum wages. The majority of them were inflation adjustments that equaled a few cents. Looking closer to Kansas, Missouri and Arkansas both voted in 2018 to increase minimum wages. Missouri will increase until minimum wage is $12 an hour by 2023. It is a 53% increase from 2018. Arkansas is increasing to $11 an hour by 2021.