Effects of a Higher Minimum Wage in the District of Columbia

Research Report

Effects of a Higher Minimum Wage in the District of Columbia

Abstract

Over the next two years, the minimum wage in DC will increase in stages, ultimately reaching $11.50 in July 2016, and thereafter DCs minimum wage will increase with inflation. Based on historical patterns for the DC metro area and an analysis of workers in the food service industry nationwide, we find little evidence that even a substantial increase in minimum wages in DC would result in lower employment. Our estimates of the relationship are imprecise, however, and we cannot rule out modest negative impacts.

Overview

By 2016, the District of Columbia’s minimum wage will reach $11.50 an hour, 56 percent more than the federal requirement. Previous research suggests that higher minimum wages can either lower or raise employment nationally, but that research may not be relevant to DC’s unique demographics and geography.

In 1993, the city raised its minimum wage from $4.25 to $5.25 an hour—a seemingly small increase that actually dwarfs today’s by percentage. A closer examination of the previous increase sheds light on how minimum wage increases could affect the city’s employment today.

Key findings

  • There is no clear evidence of an employment decline in DC compared with Virginia and Maryland following the 1993 minimum wage increase. Specifically, there was no clear evidence of a negative impact in the city’s large retail and food service industries. Employment in the food industry actually grew.
  • In neighboring areas that did not increase the minimum wage, employment grew more slowly or was unchanged. Even when comparing DC with counties that border state lines, no meaningful relationships between minimum wage and employment were found.
  • Today’s minimum wage increase is unlikely to result in lower employment, although a half-a-percent drop in employment for each 10 percent increase in minimum wage is possible. For many families, the increase in wages will dramatically increase household incomes.

Key numbers

  • The federal minimum wage increased from $4.25 to $4.75 an hour in 1996 and then to $5.15 an hour in 1997.
  • DC increased its minimum wage from $8.25 to $9.50 an hour in July 2014. The District will increase its minimum wage again to $10.50 by July 2015 and to $11.50 by 2016, after which its minimum wage will rise with inflation.
  • Two-thirds of DC’s population (62 percent) is black, Asian, or Latino, compared with 34 percent of the US population.
  • DC’s population is four years younger, on average, than the US population. In the District, 13.2 percent of the population is between the ages of 18 and 24, compared with 10 percent of the United States.

Cross-Center Initiative

Cross-Center Initiative: 
To reuse content from Urban Institute, visit copyright.com, search for the publications, choose from a list of licenses, and complete the transaction.