A Glimmer of Positive News: Wages Rose for Bottom 10 Percent (Unlike for Everybody Else)

This post originally appeared on TalkPoverty.org.

In a report released this week, I found that 2014 continued a 35-year trend of broad-based wage stagnation.

Real, inflation-adjusted hourly wages stagnated or fell across the board, with one notable, glimmer of positive news: Unlike the rest of the wage distribution, wages actually increased at the 10th percentile between 2013 and 2014.

The figure below shows changes in real hourly wages throughout the wage distribution between 2013 and 2014. What is particularly striking is that almost every decile and the 95th percentile experienced real wage declines from 2013 to 2014, with two exceptions. First, there was a very small increase at the 40th percentile wage, up 3 cents, or 0.3 percent. But a more economically significant increase occurred at the 10th percentile where hourly wages were up 11 cents, or 1.3 percent.

So, why did wages at the bottom tick up when they fell for nearly everyone else? What is so special about that wage that sits below 90 percent and above 10 percent of workers (i.e., is not generally earned by particularly privileged workers)?

Figure A

Percent change in real hourly wages, by wage percentile, 2013–2014

Percent change, 2013–2014
10th 1.30049%
20th -0.67228%
30th -0.42556%
40th 0.25237%
50th -0.43183%
60th -0.74864%
70th -0.84497%
80th -1.02100%
90th -0.65219%
95th -0.98396%
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The data below can be saved or copied directly into Excel.

Note: The xth-percentile wage is the wage at which x% of wage earners earn less and (100-x)% earn more.

Source: EPI analysis of Current Population Survey Outgoing Rotation Group microdata

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The answer is simple: we still have some labor standards that provide wage protections. More specifically, 18 states increased their minimum wage in 2014 (either through legislation or through automatic inflation adjustments). The states with minimum wage increases in 2014, displayed in green below, represent 57 percent of the workforce.

Figure B

States with minimum-wage increases in 2014

State Abbreviation Category
Alabama AL No change
Alaska AK No change
Arizona AZ Indexed
Arkansas AR No change
California CA Legislative
Colorado CO July
Connecticut CT Legislative
Delaware DE Legislative
District of Columbia DC July
Florida FL Indexed
Georgia GA No change
Hawaii HI No change
Idaho ID No change
Illinois IL No change
Indiana IN No change
Iowa IA No change
Kansas KS No change
Kentucky KY No change
Louisiana LA No change
Maine ME No change
Maryland MD No change
Massachusetts MA No change
Michigan MI Legislative
Minnesota MN August
Mississippi MS No change
Missouri MO Indexed
Montana MT Indexed
Nebraska NE No change
Nevada NV July
New Hampshire NH No change
New Jersey NJ Legislative
New Mexico NM No change
New York NY Legislative
North Carolina NC No change
North Dakota ND No change
Ohio OH Indexed
Oklahoma OK No change
Oregon OR Indexed
Pennsylvania PA No change
Rhode Island RI Legislative
South Carolina SC No change
South Dakota SD No change
Tennessee TN No change
Texas TX No change
Utah UT No change
Vermont VT Indexed
Virginia VA No change
Washington WA Indexed
West Virginia WV No change
Wisconsin WI No change
Wyoming WY No change

 

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The data below can be saved or copied directly into Excel.

Note: California, Connecticut, Delaware, District of Columbia, Michigan, Minnesota, New Jersey, New York, and Rhode Island legislated minimum-wage increases. In the remaining states in green, the minimum wage increased due to indexing to inflation.

Source: EPI analysis of Cooper (2014) and NCSL (2014)

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When we compare states with and without a minimum wage increase, we find clear evidence that the minimum wage is the reason people at the 10th percentile wage didn’t see the negative trends found elsewhere in the workforce. The figure below compares the wages in these states with those in states without minimum wage increases. Wages at the 10th percentile rose by 1.6% in states with minimum wage increases, while in states without such an increase, they pretty much stagnated—increasing by a scant 0.3%.

Figure B

Percent change in real hourly wage at the 10th percentile in those states that increased their minimum wage in 2014 versus those that did not, 2013–2014

2013–2014
States with minimum wage increase in 2014 1.60335%
States with no change in minimum wage in 2014 0.28369%
ChartData Download data

The data below can be saved or copied directly into Excel.

Note: The xth-percentile wage is the wage at which x% of wage earners earn less and (100-x)% earn more.

Source: EPI analysis of Current Population Survey Outgoing Rotation Group microdata

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The great news in this story is that policy can actually affect the labor market. And, it is imperative that we use all the policy levers at our disposal to help rejuvenate the economy, create jobs, and build stronger wage and income growth for the 99%.