Florida’s Minimum Wage Experiment

One of the more interesting results from last night’s election comes out of Florida: voters appear to have narrowly approved an increase of the minimum wage in stages to $15/hour in 2026 (Florida has a 60% requirement for ballot measures to pass, and the current vote total is just above that threshold).

Florida is not the first state to approve such an increase to $15/hour: 7 states have already done so, though no state is yet at that level. California will hit $15 first in 2022. Several US cities, such as New York and Seattle, as well as the “city-state” of Washington, DC are already at $15, but these are generally very high wage cities.

What makes Florida the most interesting of the states to try very high minimum wages is that Florida is not a high wage state. Once the minimum wage is fully phased in (in 2026), the minimum wage will be about 75% of Florida’s median wage (it was $17.23 in 2019). That’s much higher than other states: California will be the next highest at about 66%, with Oregon next around 64%. Oregon will be close to $15, but perhaps a little below, as they index their minimum wage for inflation.

(To make these estimates I am using 2019 median wage data from the BLS OES wage data and assuming 2% annual wage growth. This may not be exactly right, but it’s probably close enough.)

Also important to note in Florida: the median wage is not $17.23/hour all over the state. Several MSAs in Florida currently have a median wage at or even below $15 (Sebring, Florida is the lowest at around $14/hour). There will be some wage growth over the next 6 years in those areas, but still this means that the minimum wage will be applicable to roughly half the labor force.

That brings up another interesting legal question: will the minimum wage apply to salaried workers making less than $30,000 per year? The way the law is written, probably not, but logic would seem to dictate that it should. Otherwise, what’s to stop an employer from hiring an employee on a $2,000/month contract, equivalent to $12/hour for a full time worker?

The minimum wage debate among economists consumes a vast literature, and I am no expert on it, and will make no attempt to summarize it here. But Florida seems to be breaking new territory. My little state of Arkansas currently holds the “record” for a US state starting in 2021, with a minimum wage of $11/hour which will be about 67% of the median wage (and about 78% of the median wage in Hot Springs, Arkansas). Florida’s experiment will certainly give economists a new experiment to study.

Arin Dube, one of the leading researchers of the minimum wage and a strong advocate of raising the wage, suggested in a recent policy paper that a good minimum wage for Florida would be around $9/hour, given their wage distribution. That was in 2014 dollars, so we can roughly adjust that up to $11-$12 in 2026 dollars. Florida voters have chosen to go well beyond that recommendation.

2 thoughts on “Florida’s Minimum Wage Experiment

  1. Joy November 4, 2020 / 9:48 am

    One of the interesting, somewhat recent, papers on minimum wage is Meer and West 2016. According to them, the effect on Florida will show up years after the minimum wage is changed. Abstract: … We argue that the minimum wage will impact employment over time, through changes in growth rather than an immediate drop in relative employment levels. We show that commonly-used specifications in this literature, especially those that include state-specific time trends, will not accurately capture these effects. Using three separate state panels of administrative employment data, we find that the minimum wage reduces job growth over a period of several years. …

    Like

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s