WHO EARNS MINIMUM WAGE AN ANALYSIS OF THE CHARACTERISTICS IN UTAH? OF THOSE EARNING MINIMUM WAGE

WHO EARNS MINIMUM WAGE IN UTAH? AN ANALYSIS OF THE CHARACTERISTICS OF THOSE EARNING MINIMUM WAGE A RESEARCH REPORT BY THE CENTER FOR PUBLIC POLICY & ADMINISTRATION THE UNIVERSITY OF UTAH OCTOBER 2006

WHO EARNS MINIMUM WAGE IN UTAH? Executive Summary The debate over the minimum wage has continued since before its inception in 1938 through the present with legislation entered into U.S. Congress and several states to raise the wage above the $5.15 level set in 1997. The call to change the minimum wage is driven by its decreasing value over time. Since 1968, the value of the minimum wage has experienced a declining trend punctuated by periodic adjustments, but because the federal minimum wage is set by Congress and is not indexed for inflation its value continues to decline. The decline in the real value of the minimum wage is particularly felt by those who may be supporting a family and earning the minimum rate. From 1959 (when these data began to be collected) to 1981 the minimum wage tracked very closely to the federal poverty level for a family of three. Since 1981, however, the annual earnings of a head of household earning minimum wage have fallen further below this poverty measure. Another trend that began in 1981 is the decreasing number of people earning minimum wages in the United States. This number continues to decline to the point that in 1999 about 2.5 percent of the workforce earned minimum wage and there is evidence that this percentage has continued to decline. The Congress has not increased the minimum wage in over nine years. This is the longest period without an increase since the rate was established at $0.25 in 1938. Several states have decided to change the minimum wage rate in their states well above the federal rate. Currently, 21 states have rates above the federally established rate and six more states will vote on increases in November, 2006. The states with the highest rates are Washington ($7.63) and Oregon ($7.50) with both states rates indexed for inflation. An important question in the debate over the minimum wage is who is earning minimum wage? If, as some assume, nearly all minimum wage earners are teenagers working at fast-food restaurants, then increasing the minimum wage will only inflate the price of a combo meal. If this situation is the case then an increase in the minimum wage could mean the loss of jobs for some when profits are squeezed by increasing costs of labor. On the other hand, if those earning minimum wage include a significant number of heads of households including single parents, then the level of the minimum wage rate could be vitally important to someone trying to survive on one or more minimum wage jobs. This study seeks to answer the question of who earns minimum wage in Utah by utilizing national Census data, Community Population Survey (CPS) data, Utah Department of Workforce Services (DWS) data and original survey research of Utah s businesses. National Census data shows that there are approximately two million workers (2.5% of the hourly-paid workforce) who earned minimum wage or less in the United States. The characteristics of these workers is that they tend to be younger (ages 20-24 is the largest group), female (66%), mostly Caucasian (a slightly higher percentage of minimum wage workers are White than the regular hourly-paid workforce), and work part-time. Most minimum wage workers work in food services occupations and most are fairly well educated (29% with high school diplomas and another 34% with some college education). Sixty-five percent of all workers earning minimum wage in the U.S. have never been married. ii

The 2000 Census and DWS data on employment provide information on those earning minimum wages in Utah. The 2000 Census showed that 94,000 Utahns earned minimum wage or less in 1999 and that if the minimum wage rate would have been $7.00 at that time, the number of at or below minimum wage would have grown to 178,000. Child care workers, waiters/waitresses (servers) and teaching assistants would have been some of the occupations most likely to receive minimum wages. DWS data for 2006 uses average earnings which would mask those earning wages at the lowest levels, but these data also indicate that if the minimum wage were $7.00 today, 84,000 would make wages at or below that rate. A survey conducted in September 2006 of 3,800 Utah businesses was consistent with the information gathered from the Census, CPS and DWS. A very high percentage of those earning minimum wage in Utah work part-time (82%). Only 17 percent were age 19 or younger and most were men (55%). The survey results indicate that highest percentage of minimum wage earners in Utah are White. Minimum wage workers were found primarily in food service with significant numbers in recreation/fitness centers, office maintenance and retail (grocery stores). Most were concentrated along the Wasatch Front with over half in the Salt Lake City metropolitan area. A very large percentage of minimum wage workers were employed by medium-sized businesses (71%). iii

List of Tables Table Table 1 Table 2 Table 3 Table 4 Table 5 Table 6 Table 7 Table 8 Table 9 Table 10 Table 11 Title Historic Statutory Changes to the Federal Minimum Wage State Minimum Wage Rates Greater than the Federal Minimum Wage (As of August 21, 2006) Voting in November 2006 Whether to Increase the State Minimum Wage Occupations with Median Earnings At or Below Minimum Wage Affecting the Most Workers Occupations with Median Earnings At or Below Minimum Wage With the Lowest Median Earnings Average Monthly Wage by Industry Sector in Utah Number of Workers in Utah who Would be Likely to Get a Raise, By Demographic and other Characteristics Average Affected Workers How Important are Low-Wage Workers Earning to Their Families CPPA Estimates of Affected Workers using 2006 CPS Utah Business Survey on Minimum Wage iv

List of Figures Figure Title Figure 1 The Real Value of the Federal Minimum Wage adjusted to 2006 dollars Figure 2 Annual Earnings of Full-Time Worker Earning Minimum Wage compared to the Poverty Threshold for a 3-Person Family Figure 3 Percent of Hourly-Paid Workers At or Below Minimum Wage Figure 4 Age of Minimum Wage Workers Figure 5 Gender of Minimum Wage Workers compared to Total Hourly-Paid Workforce Figure 6 Race of Minimum Wage Workers compared to Total Hourly-Paid Workforce Figure 7 Employment Status of Minimum Wage Workers compared to Total Hourly- Paid Workforce Figure 8 Occupation of Minimum Wage Workers Figure 9 Education of Minimum Wage Workers Figure 10 Marital Status of Minimum Wage Workers Figure 11 Utah Workers Affected by a Minimum Wage Increase to $7.00 Figure 12 Regional Impact Figure 13 Large Majority of Affected Workers in Utah are Adults Figure 14 Hours per Week Worked by Affected Workers in Utah Figure 15 Employment Status of Minimum Wage Workers in Utah Figure 16 Age of Minimum Wage Workers in Utah Figure 17 Gender of Minimum Wage Workers in Utah Figure 18 Race of Minimum Wage Workers in Utah v

Table of Contents A Brief History of the Federal Minimum Wage... 1 The Real Value of the Federal Minimum Wage... 2 Minimum Wages in the States... 3 Who is Earning Minimum Wage?... 5 National Characteristics of Minimum Wage Workers... 5 Characteristics of Those Earning Minimum Wage in Utah... 8 2000 Census Earnings by Occupation and Education in Utah... 8 Utah Statewide Wage and Employment Data,... 9 Utah Department of Workforce Services, First Quarter 2006... 9 Analysis of Current Population Survey (CPS) Data... 10 2006 Survey of Utah Businesses... 16 Survey Results... 16 Conclusion... 20 vi

A Brief History of the Federal Minimum Wage The Fair Labor Standards Act (FLSA) established national standards for minimum wage, overtime pay, child labor, and other labor issues. Originally passed in 1938, the FLSA has been amended several times to reflect changes in the workplace since the Great Depression. Most of these amendments have adjusted the minimum wage as inflation has decreased the value of the minimum wage over time. 1 The federal minimum wage started at $ 0.25 per hour and reached its highest relative value in 1968 at $1.60 per hour which is equivalent to $7.71 in 2006 dollars. Adjustments to the federal minimum wage were made fairly often with occasional gaps of five or six years until 1981 when the minimum wage was not increased for another nine years (see Table 1). The current time period is the longest interval since the last minimum wage increase was made in 1997 (nine years and counting). Year Historic Statutory Changes to the Federal Minimum Wage Table 1 Statutory Federal Hourly Minimum Wage Year Statutory Federal Minimum Wage 1938 $0.25 1975 $2.10 1939 $0.30 1976 $2.30 1945 $0.40 1978 $2.65 1950 $0.75 1979 $2.90 1956 $1.00 1980 $3.10 1961 $1.15 1981 $3.35 1963 $1.25 1990 $3.80 1967 $1.40 1991 $4.25 1968 $1.60 1996 $4.75 1974 $2.00 1997 $5.15 Source: Congressional Research Service, June 16, 2006 There has been considerable activity recently in Congress to amend the FLSA to increase the federal minimum wage. A proposal was made in 2005 by Senator Edward Kennedy (D-MA) to increase the federal minimum wage in incremental stages to $7.25 per hour. That proposal was defeated in the Senate 46-49. Later that year, Senator Rick Santorum proposed legislation to increase the federal minimum wage to $6.25 per hour by 2007. This proposal was also defeated in the Senate 38-61. At least nine attempts have been made over the past two years to introduce legislation to increase the federal minimum wage with the target typically set at $7.25 per hour. So far these attempts at the national level have been unsuccessful. 1

The Real Value of the Federal Minimum Wage The real value (or purchasing power) of the federal minimum wage fluctuates as a result of the level set by Congress, and inflation. Since there is no $9 $8 $7 $6 $5 $4 $3 $2 $1 $- 1947 1951 Figure 1 The Real Value of the Federal Minimum Wage adjusted to 2006 dollars 1955 1959 1963 1967 1971 1975 1979 1983 1987 1991 1995 1999 2003 automatic adjustment for inflation, the minimum wage rate that is established statutorily remains at that level until a new amendment is made to change the rate. Once the rate has been set inflation will erode the value of the minimum wage over time. Figure 1 illustrates the trend of the deflating value of the minimum wage. Following the peaks of 1968 (when the value of the minimum wage was $7.71 in current dollars) and 1979 ($7.41 in 2006 dollars) the value of the minimum wage declined over the next few years. The most recent change in the minimum wage occurred in 1997 and the value of that rate has declined steadily since. Another way to look at the value of the minimum wage rate is to compare the amount earned by a person making minimum wage compared to the poverty level. In response to a request by Representative Jim McDermott (D-WA), the Congressional Research Service evaluated the value of the minimum wage compared to the poverty level for a family of three. 2 From 1959 to 1981, the annual earnings of a full-time worker earning minimum wage closely matched the poverty level. Since 1981, those earning minimum wage have fallen further below this poverty measurement (Figure 2). Figure 2 Annual Earnings of Full-Time Worker Earning Minimum Wage compared to the Poverty Threshold for a 3-Person Family $20,000 $15,000 $10,000 $5,000 $0 1959 1961 1963 1965 1967 1969 1971 1973 1975 1977 1979 1981 1983 1985 1987 1989 Annual Earnings of full-time worker earning minimum wage Source for figures 1, 2: Congressional Research Service 1991 1993 1995 1997 1999 2001 2003 2005 Poverty threshold for a 3-person family 2

The percent of hourly paid workers earning the prevailing federal minimum wage or less has decreased steadily since 1981. The jumps in this percentage in the years 1990-1991 and 1996-1997 reflect changes in the federal minimum wage rate in those years (see Figure 3). The decrease is most likely the result of increasing average wages throughout the economy and the increasing demand for labor. Figure 3 Percent of Hourly-Paid Workers At or Below Minimum Wage 16% 14% 12% 10% 8% 6% 4% 2% 0% 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 Source: U.S. Department of Labor, Bureau of Labor Statistics, 2004 Minimum Wages in the States The federal minimum wage law (FLSA) establishes the lowest rate at which an employee (with few exceptions) may be paid. However, states may pass minimum wage laws that set the rate higher than the national minimum. The rate at which states are raising their own state minimum wage rates is increasing. This year alone (2006) ten states enacted laws increasing the state minimum wage higher than the federal requirement. Currently, 21 states require employers to pay more than $5.15 an hour. In 2007, the total number increases to 23, including 15 states that will have laws in effect requiring their minimum wages to be at or above $7.00 level. 3 (See Table 2). In the West, Alaska, California, Washington, Hawaii, and Oregon all have minimum wages above the federal minimum. In November of 2006 another six states will have higher minimum wage proposals on the ballot that include automatic adjustments for inflation (see Table 3). Of those states voting on higher rates this year, three are Utah s neighbors: Arizona, Colorado, and Nevada. An analyst for the National Conference of State Legislatures expects all of the state minimum wage efforts to pass. 4 3

State State Minimum Wage Rates Greater than the Federal Minimum Wage (As of August 21, 2006) 5 Table 2 2006 State Minimum Wage Planned 2007 State Minimum Wage Planned 2008 State Minimum Wage Alaska $7.15 $7.15 $7.15 Arkansas 6.25 (effective 6.25 6.25 10/1/06) California 6.75 7.5 8.00 Connecticut 7.40 7.65 7.65 Delaware 6.15 6.65 7.15 District of Columbia 7.00 7.00 7.00 Florida 6.40* Inflation Adjusted Hawaii 6.75 7.25 7.25 Illinois 6.50 6.50 6.5 Maine 6.50 (will increase 6.75 (will 7.00 to $6.75 on 10/1/06) increase to $7.00 Inflation Adjusted on 10/1/07) Maryland 6.15 6.15 6.15 Massachusetts 6.75 7.50 8.00 Michigan 6.95 (effective 6.95 (will 10/1/06) increase to $7.15 7.15 (will increase to $7.40 on 7/1/08) on 7/1/07) Minnesota 6.15 6.15 6.15 New Jersey 6.15 (will increase 7.15 7.15 to $7.15 on 10/1/06) New York 6.75 7.15 7.15 North Carolina Federal Level 6.15 6.15 Oregon 7.50* Inflation Inflation Adjusted Adjusted Pennsylvania Federal Level 6.25 (will 7.15 increase to $7.15 on 7/1/07) Rhode Island 7.10 7.40 7.40 Vermont 7.25* Inflation Adjusted Inflation Adjusted Washington 7.63* Inflation Adjusted Inflation Adjusted Wisconsin 6.50 6.50 6.50 *State minimum wage rates adjusted annually for inflation Source: Economic Policy Institute, September 7, 2006 4

Voting in November 2006 Whether to Increase the State Minimum Wage Table 3 State Proposed Hourly Wage Arizona $6.75 Colorado 6.85 Missouri 6.50 Montana 6.15 Nevada 6.15 Ohio 6.85 Source: Economic Policy Institute, September 7, 2006 Who is Earning Minimum Wage? The most recent national data on minimum wage comes from the Current Population Survey (CPS) with published data as recent as 2005. 6 The Bureau of Labor Statistics describes the CPS as follows: The Current Population Survey is a monthly survey of about 50,000 households conducted by the Bureau of the Census for the Bureau of Labor Statistics. The survey has been conducted for more than 50 years. The CPS is the primary source of information on the labor force characteristics of the U.S. population. The sample is scientifically selected to represent the civilian non-institutional population. Respondents are interviewed to obtain information about the employment status of each member of the household 15 years of age and older. However, published data focus on those ages 16 and over. The sample provides estimates for the nation as a whole and serves as part of model-based estimates for individual states and other geographic areas. 7 National CPS data from 2005 identified 479,000 individuals earning exactly $5.15, and another 1.4 million were reported earning wages below the federal minimum wage. Together, these 1.9 million workers (100,000 less than the previous year) with wages at or below the minimum wage made up 2.5 percent of the hourly-paid workforce. National Characteristics of Minimum Wage Workers Age More than half of all hourly-paid workers earning $5.15 or less were under age 25, but the largest single age group by age were aged 20-24. Those in their upper twenties and lower thirties were also significant age groups. Large numbers of seniors do not appear to be earning minimum wage. 30% 25% 20% 15% 10% 5% 0% Figure 4 Age of Minimum Wage Workers Percent of hourly-paid workers at or below $5.15 16-19 20-24 25-29 30-34 35-39 40-44 45-49 50-54 55-59 60-64 65-69 70+ 5

Gender Two-thirds of those earning $5.15 or lower are women. This is in stark contrast to the total number of individuals earning hourly wages, which is almost evenly divided between men and women. 70% 60% 50% 40% 30% 20% 10% Figure 5 Gender of Minimum Wage Workers compared to Total Hourly-Paid Workforce Min. Wage Workers Total Hourly Workforce 0% Women Men Race Workers earning minimum wage are predominantly White. The proportions of minimum wage workers compared to total hourly paid workers is fairly even when analyzed by race, the only racial category with a slightly higher percentage of workers earning minimum wage than their total paid hourly workforce were White workers. 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Figure 6 Race of Minimum Wage Workers compared to Total Hourly-Paid Workforce White Black Asian Hispanic Total hourly-paid workforce Minimum Wage Part-time/Full-time The majority of minimum wage workers are part-time. The opposite is true of other hourly paid workers; most hourly workers are full time. 80% 70% 60% 50% 40% 30% 20% 10% 0% Figure 7 Employment Status of M inimum Wage Workers compared to Total Hourly-Paid Workforce Full-Time Part-Time Total paid hourly rates At or below $5.15 per hour 6

Occupation Most workers earning minimum wage or less worked in the food preparation and serving related occupations. Other selected occupations with the highest percentage of minimum wage workers included personal care service occupations, sales, office/administrative support, and cleaning/ maintenance workers. 70% 60% 50% 40% 30% 20% 10% 0% Figure 8 Occupation of Minimum Wage Workers Distribution in Highest Occupations Food preparation and serving Personal care and service Sales Office support Cleaning and Maintenance Education Most minimum wage workers have graduated from high school. Less than one-third of minimum wage workers do not have a high school diploma. 40% 35% 30% 25% 20% 15% 10% 5% 0% Less than HS diploma Figure 9 Education of M inimum Wage Workers HS graduate Some college Bachelor's degree Marital Status Sixty-two percent of workers earning minimum wage or less have never been married, with 24 percent of this group over the age of 25. More than a third are married or have been married. Single parents may fall under the never been married or other marital status categories. 60% 50% 40% 30% 20% 10% 0% Never married (16-24) Figure 10 Marital Status of Minimum Wage Workers Never married (25+) Married Other marital status Source for figures 4-10: U.S. Department of Labor, Bureau of Labor Statistics, Characteristics of Minimum Wage Workers: 2005 7

Characteristics of Those Earning Minimum Wage in Utah There are a number of data sources that can be used to obtain a picture of minimum wage workers in Utah. In this study, four sources of information will be used to address the question of who earns minimum wage in Utah. 2000 Census data that contains information on earnings by occupation. Utah DWS 2006 data demonstrating average employment and monthly wages in Utah. CPS data as it applies to Utah minimum wage workers. Data from a survey conducted in September of 2006 asking businesses about the characteristics of those paid minimum wage in Utah. 2000 Census Earnings by Occupation and Education in Utah The 2000 Census contains information on earnings. The data is categorized by state, occupation, education and full-time status. The data shows those who worked in 1999 in each occupation and their median earnings. Most of those indicating they worked in 1999 worked less than full-time, although the information does not include hours worked. Of all occupations listed, 38 occupations received median earnings at or below minimum wage levels (as calculated at a full-time wage for those who worked in these occupations at least part-time). These occupations included nearly 94,000 workers in Utah in 1999. If the minimum wage had been $7.00 per hour in 1999, the number of occupations that earned at or below that rate doubles to 76 occupations and 178,000 workers. Table 4 describes the occupations with median incomes below $5.15 per hour ($10,712 per year) that would affect the most workers. Table 5 shows the occupations with the lowest median earnings in Utah. Certain occupations traditionally thought of as earning minimum wage actually demonstrate a considerably higher median wage, for example, construction workers earned a median income of $20,411 and oil and gas mining workers earned a median income of $31,019 in 1999. Demand and the average earnings for these occupations have most likely increased steadily since the 2000 Census. Occupation Occupations with Median Earnings At or Below Minimum Wage Affecting the Most Workers in Utah Table 4 Number Worked in 1999 Median Earnings Cashiers 15,590 $10,221 Child Care Workers 10,530 5,714 Cooks 9,710 10,807 Waiters and Waitresses 9,280 9,572 Other Teachers and Instructors 7,430 6,635 Maids and Housekeeping Cleaners 7,410 8,781 Teacher Assistants 7,195 6,935 Source: U.S. Census Bureau, Earnings by Detailed Occupation: 1999 8

Occupations with Median Earnings At or Below Minimum Wage With the Lowest Median Earnings in Utah Table 5 Occupation Food Preparation and Serving Related Workers, all Other Number Worked in 1999 Median Earnings 15 $1,250 Gaming Cage Workers 4 3,750 Models, Demonstrators, and Product Promoters 795 3,789 Ushers, Lobby Attendants, and Ticket Takers 270 4,643 Manufactured Building and Mobile Home Installers 55 4,900 Crossing Guards 945 5,383 Hosts and Hostesses, Restaurant, Lounge, and Coffee shop 830 5,611 Child Care Workers 10,530 5,714 Source: U.S. Census Bureau, Earnings by Detailed Occupation: 1999 Utah Statewide Wage and Employment Data, Utah Department of Workforce Services, First Quarter 2006 Another data set that provides information on minimum wage is Utah Statewide Wage and Employment Data gathered quarterly by the DWS. This data describes the average employment and monthly wage in specific industry sectors in Utah. The average monthly wage of an individual earning minimum wage ($5.15) would be $893 per month. There were only three industry sectors that reported paying average monthly wages at or below $893 per month (see Table 6) and these affected relatively few people with an average employment of 40. Most likely these would be part-time or tipped jobs since the average monthly wage is below the minimum legal amount (as allowed by FLSA). 9

Industry Sector Average Monthly Wage by Industry Sector in Utah Table 6 NAICS Sector Average Employment Average Monthly Wage % of 5.15 min. wage % of 7.00 min wage Professional and 541 1 $246 28% 20% Technical Services Air Transportation 481 4 691 77% 57% Food Services and 722 35 867 97% 71% Drinking Places Food and Beverage 445 445 919 103% 76% Stores Miscellaneous Store 453 2 919 103% 76% Retailers Food Services and Drinking Places (public sector) 722 71,819 979 110% 81% Scenic and Sightseeing 487 42 1,002 112% 83% Transportation Ambulatory Health 621 491 1,032 116% 85% Care Services Amusement, Gambling 713 2,293 1,035 116% 85% & Recreation Industries Educational Services 611 4 1,109 124% 91% Scenic and Sightseeing 487 28 1,168 131% 96% Transp. (public sector) Real Estate 531 13 1,177 132% 97% Gasoline Stations 447 9,310 1,216 136% 100% Source: Utah Statewide Wage and Employment Data First Quarter 2006 If the minimum wage were to be raised to $7.00 per hour, the average monthly wage would be $1,213. At this rate the number of industry sectors and affected employment would be much higher than at the current minimum wage rate. Thirteen industry sectors report paying average monthly wages at or below a $7.00 per hour minimum wage rate. These industries include food service, health care, real estate, and gasoline service stations. The number of affected who would be earning wages at or under the new minimum wage would number 84,487. Analysis of Current Population Survey (CPS) Data The following analysis was done of the 2005 Current Population Survey by the Economic Policy Institute (EPI). EPI used a model to project wages forward to 2007 and then estimated the number of workers who would be affected directly or indirectly by the increase of the minimum wage in Utah to $7.00. For a complete description of the 10

methodology see Appendix 1. In order to verify the analysis done by EPI, CPPA looked at CPS data from 2006 without the projection of wages forward, nor an individual analysis of who would be indirectly affected. The results of that analysis are reported at the end of this section, but estimates of affected workers are very similar, supporting the validity of the EPI analysis. One hundred and sixty nine thousand Utah workers are likely to receive a raise if the minimum wages is increased to $7.00. Of these, 71,000 currently earn less than $7.00 and will be directly affected with an increase to at least the new required level. An additional 99,000 are indirectly affected already earning $7.00 or more but likely to nonetheless get a wage increase due to increased options for low-wage workers. Research has shown that some employers adjust the wages of earning just above the new minimum wage, in order to maintain pay scales that were in place prior to a minimum wage increase. The spillover effect of raising the minimum wage would be greatest for workers earning near $7.00 and would completely phase out for workers earning near $9.00. Table 7 provides the number of Utah workers who are likely to see a wage increase, by demographic and other characteristics. Number of Workers in Utah who Would be Likely to Get a Raise, By Demographic and other Characteristics Table 7 Characteristic Affected Workers Total workers affected 169,000 Directly affected 71,000 Indirectly affected 99,000 Male 71,000 Female 99,000 16-19 years 47,000 20 Years and older 122,000 1-19 hours 36,000 20-34 hours 62,000 Full time (35+ hours) 71,000 Retail Trade Sector 37,000 Leisure & Hospitality sector 48,000 Sales Occupation 37,000 Married 53,000 Parent 42,000 Source: Economic Policy Institute analysis of Current Population Survey 11

In all, about 16% of Utah workers will see a raise from increasing the minimum wage to $7.00, 6.6% of workers will be directly affected and 9.21% will be indirectly affected (Figure 11). The workers affected directly will receive an average wage increase of $0.82, Figure 11 Utah Workers Affected by a Minimum Wage Increase to $7.00 Directly Affected, 6.60% Indirectly Affected, 9.21% for a full-time, year-round worker that is an increase of $1706 annually. The workers affected indirectly will receive an average wage increase of $0.29, for a full-time, yearround worker that is an increase of $603 annually (Table 8). Not Affected, 84.19% Workers Average Affected Workers Table 8 Percent of all Workers Average Raise Average Annual Increase Directly Affected 6.6% $0.82 $1706 Indirectly Affected 9.2% $0.29 $ 603 All Affected 15.8% $0.51 $1061 Source: Economic Policy Institute analysis of Current Population Survey The percentage of workers who will benefit from an increase in the minimum wage is greater in the areas of the state that are not on the Wasatch Front (Figure 12). All counties besides Weber, Davis, Salt Lake and Utah County would see greater than 17% of their workers receive a raise from a minimum wage increase to $7.00. Weber and Utah County would see a benefit for 14-17 percent of workers, as would parts of Davis and Salt Lake Counties. Other parts of Davis and Salt Lake Counties would see benefits for fewer workers, less than 14%. See appendix 2 for more detail on the methodology used to create the map. 12

Figure 12 Source: Economic Policy Institute analysis of Census Data Almost three quarters of the workers affected are age 20 or older (Figure 13). 72% is slightly lower than the national average (75%) because Utah has the youngest population in the country. Figure 13 Large M ajority of Affected Workers in Utah are Adults 16-19 years, 27.81% 20 years and older, 72.19% Source: Economic Policy Institute analysis of Current Population Survey 13

Over three quarters (79%) of the affected workers work more than 30 hours per week (Figure 4). 43% work full time. Figure 14 Hours per Week Worked by Affected Workers in Utah Percent 45.00% 40.00% 35.00% 30.00% 25.00% 20.00% 15.00% 10.00% 5.00% 0.00% 42.01% 36.69% 21.30% 1-19 Hours 20-34 Hours Full-time (35+ Hours) Source: Economic Policy Institute analysis of Current Population Survey Almost one third of workers affected are married (31%) and a quarter (25% are parents. Approximately 98,000 Utah children have parents who would see a raise. Not all affected workers are poor or support a family on their earnings. However, 36% of families that would be affected rely solely on the wages from a worker who would receive a raise (Table 9). On average, affected families receive 51% of their earnings from a worker who would receive a raise. How Important are Low-Wage Workers Earning to Their Families Table 9 Average share of earnings from affected workers Share of families with 100% of earnings from affected workers All Families 51% 36% Families with Children 50% 36% Number of Children with Parents Affected by Minimum Wage Increase 98,000 Source: Economic Policy Institute analysis of Current Population Survey In order to verify the results from the analysis of the Current Population Survey done by the Economic Policy Institute, CPPA conducted a more simplistic look at the 2006 CPS data. This analysis does not contain the sophisticated model for predicting wage growth to 2007 nor the number of workers that will be indirectly affected. However, results are very similar. Because of the small sample size in the 2006 March Current Population survey, this data should be used primarily to support the analysis done by the EPI and not relied on solely. Because we did not use a model to estimate whether individuals would be indirectly affected, 14

we report the data for those affected directly (making less than $7.00) and for those that are likely to be affected indirectly (making less than $8.50). Our analysis estimates that 85,102 workers will be affected directly and that between 147,327 and 204,849 will be affected both indirectly and directly (Table 10). 54% of workers affected directly are older than 20 and between 65% and 67% would be affected totally, compared to 72% estimated by EPI. Between 38-45% work full time, compared to 42% estimated by EPI. Other comparisons can be done all yielding estimates that are close to the estimates done by EPI. Thus we feel confident that the analysis done by EPI produced accurate estimates. CPPA Estimates of Affected Workers using 2006 CPS Table 10 Earning Less than $7.00 Earning Less than $7.50 Earning Less than $8.00 Earning Less than $8.50 Total Workers 85,102 104,724 147,327 204,849 Female 36,154 52,562 80,049 112,203 Male 48,948 52,163 67,278 92,642 age 16-19 38,958 42,322 51,319 68,608 age 20+ 46,145 62,403 96,008 136,241 Full-time (35+ hours) 25,680 33,516 56,152 93,292 Part-time (1-19 hrs) 20,851 20,851 28,480 28,480 Part-time (20-34 hrs) 38,572 41,787 45,232 65,615 Married 14,616 22,486 28,562 49,892 Parent of children younger than 18 24,146 36,488 46,298 68,563 Responsible for >20% of HH Earnings 29,398 41,000 64,100 99,533 Responsible for >40% of HH Earnings 17,954 26,341 49,441 69,976 Responsible for >60% of HH Earnings 17,954 26,341 49,441 63,943 Responsible for >80% of HH Earnings 14,782 23,169 39,729 50,378 number of children affected* 44,593 70,351 86,991 126,949 * children may be counted twice if both parents are working and in the earnings group. 15

2006 Survey of Utah Businesses As part of this study, Utah businesses were surveyed to assess the number of minimum wage workers and define the characteristics of these workers. The objective of the survey was to identify the number of earning minimum wage in Utah and some of the characteristics of these. A survey sample was acquired from the DWS and a questionnaire mailed to 3,800 Utah businesses. The questionnaire asked: the total number of, the number earning minimum wage, and the number earning between $5.15 and $6.99 per hour. Businesses were then asked various questions regarding the characteristics of their workforce including employment status, age and race. See Appendix 3 for a copy of the survey instrument. Survey Results Surveys were distributed by mail to the business contacts identified by DWS and follow-up calls were made by Dan Jones and Associates to those that had not responded by the return deadline. Businesses that asked for replacement surveys were sent an individual facsimile of the questionnaire. The survey response rate was 730/3,808 or 19.2 percent. Of those who have responded the number of companies that are paying minimum wage is very low. Out of all respondents, 46 companies reported paying one or more minimum wage. A total of 1,247 were identified as receiving minimum wage in these companies. Those businesses paying wages between the current minimum wage and $7.00 per hour were substantially higher, the survey found 124 companies paying a total of 1,512 between $5.15 and $6.99 per hour. Survey results are displayed in Table 11. 16

Utah Business Survey on Minimum Wage Table 11 Survey Question Earning $5.15 or less Total Employees 100,330 Total number of earning minimum wage Number of earning minimum wage: full-time Number of earning minimum wage: part-time Number of earning minimum wage: temporary Number of earning minimum wage: less than age 19 Number of earning minimum wage: over age 61 Number of earning minimum wage: Female Number of earning minimum wage: White Number of earning minimum wage: Black Number of earning minimum wage: Hispanic Number of earning minimum wage: Asian/Pacific Islander Number of earning minimum wage: Native American Number of earning minimum wage: Other Source: CPPA Employer Survey, 2006 Percent of Survey Respondents 1,247 1.2% of total 173 0.4% of all full-time 985 7.9% of all part-time 39 1.2% of all temporary 200 6.3% of all age less than 19 25 1.0% of all age 61 or more 540 2.0% of all female 996 2.2% of all White 11 1.3% of all Black 99 1.5% of all Hispanic 17 0.7% of all Asian/Pacific Islander 8 1.6% of all Native American 1 0.2 of all other Earning between $5.16-$6.99 Percent of Survey Respondents 1,512 1.5% of total 318 0.7% of all fulltime 934 7.5% of all parttime 118 3.7% of al temporary 656 20.7% of all age less than 19 57 2.2% of all age 61 or more 676 2.5% of all female 888 2.0% of all White 17 2.1% pf all Black 220 3.3% of all Hispanic 15 0.7% of all Asian/Pacific Islander 9 1.8% of all Native American 9 2.2% of all other 17

Since the total number of companies responding report they pay some minimum wage and the total number of minimum wage workers is very small, it is difficult to draw definitive conclusions about the Utah workforce from this sample alone. For example, survey respondents listed no Asian/Pacific Islanders earning minimum wage and only two Native American earning minimum wage. While it is unlikely that there are no Asian/Pacific Islander earning minimum wage in Utah, it can be concluded that the number is most likely very low. Based on the survey sample, the percentage of earning minimum wage in Utah is (1.24%) closely matching the national trend of decreasing numbers of workers earning minimum wage. Part-time/Full-time - Of all minimum wage workers in Utah, 85% are part-time. Figure 15 Employment Status of Minimum Wage Workers in Utah 3.3% 14.5% Full-time Part-time Te m p 82.3% Age - Just over 17 percent of those earning minimum wage are 19 years of age or younger. Figure 16 Age of Minimum Wage Workers in Utah 17% 19 or younger 20 or older 83% 18

Gender - A slightly higher percentage of minimum wage workers in Utah are male, 55 percent male compared to 45 percent female. Figure 17 Gender of Minimum Wage Workers in Utah 45.1% 54.9% male female Race - Of those respondents who reported the race of minimum wage workers, the largest racial group of those earning minimum wage were White followed by Hispanic and Asian/Pacific Islander. White earning minimum wage were a larger percentage of the workforce within their racial group than other race categories. Figure 18 Race of Minimum Wage Workers in Utah 9% 87% 2% 1% 1% 0% White Hispanic Black Asian/PI Native American Other The Utah industries with the largest number of minimum wage workers were restaurants (74.6% of the total earning minimum wage), office maintenance (6.4%), recreation/fitness centers (4.7%), and manufacturing (5.6%). Other industries in the state include property management firms, office supply stores, and office management businesses. Utah businesses that paid minimum wage were mostly located in the Salt Lake metropolitan area (61.8%). Other areas with significant numbers of minimum wage workers were in Northern Utah (Ogden, Brigham City, Tremonton, and Logan 19.1%), Southern Utah (St. George 11.1%), and Central Utah (Castledale, Mount Pleasant, Ephraim, and Springville 8.1%). Survey respondents were ranked by size: small, medium and large. Most minimum wage workers are employed by medium-sized businesses (71.0%) followed by large businesses (20.7%) and lastly, small businesses (8.3%). 19

Conclusion In 1997 Congress increased the minimum wage rate to $5.15 an hour, and while inflation has overall remained relatively low in the past decade, the Bureau of Labor Statistics estimates that what you could buy for $5.15 in 1997 now costs $6.54. Overall the real value of the minimum wage has declined following each adjustment in the federal rate. The current interval between federal rate adjustments is the longest period since the minimum wage was instituted in 1938. In response, 21 states have increased their state minimum wage rates higher than the federal rate of $5.15 an hour. In 2007, the total number of states with higher rates increases to 23, including 15 (65 %) states that will have laws in effect requiring their minimum wages to be at or above $7.00 level. This November six additional states will propose raising minimum wage above the national rate including four of Utah s neighboring states. As Utah contemplates the minimum wage and the impact of its decreasing value over time an important component of the issue is our understanding of who earns minimum wage in Utah. As the employment model analyzed in this report demonstrates, less than 17 percent of Utah s workforce would be impacted either directly or indirectly by a change in the State minimum wage. The percent of individuals affected depends on the scope of any legislated change. For example, if the Utah Legislature adopts a $7.00 per hour minimum wage approximately 71,000 to 85,000 workers would be directly affected (that is the estimated number of workers earning between $5.15 and $7.00), and another 99,000 to 120,000 could be indirectly affected by an increase in the minimum wage (those earning slightly more than $7.00 per hour would likely see a raise as a result of the minimum wage increase). The 2000 Census reported the number of workers directly and indirectly affected by an increase in the minimum wage in Utah to be approximately 178,000. The most recent analysis of Current Population Survey (CPS) data indicates those affected by such an increase would be approximately 169,000 workers in Utah. The 2006 Survey of Utah Businesses indicates that nearly three percent of respondents would be directly affected by an increase in the minimum wage to $7.00 per hour. It is estimated that approximately 84 percent of the workforce would not be affected by an increase in the minimum wage. The 2000 Census provided a profile of minimum wage workers in the nation. At the time data was collected for the Census (1999), those earning minimum wage most likely worked part-time, were between the ages of 20-24, female, unmarried, White, had a high school diploma and some college education, and worked in the food preparation and serving, personal care, or cleaning/maintenance services. Utah s minimum wage earner as surveyed in 2006 shows some similarities and some differences from the national minimum wage worker of 1999. In Utah, the minimum wage earner most likely works part-time, is a White male over the age of 20 and works in food service, gasoline service or the recreation industry. The noticeable differences between the 2000 Census data and the 2006 survey data are that minimum wage workers in Utah tend to be male while the national data showed a large female majority. In Utah a much smaller percent of those earning minimum wage were age 19 or under than the national figures. These differences may be the result of the seven years separating the two data sets and the changes in the economy and workplace over that time particularly in the Utah job market. Demand for labor is at an all-time high in Utah which tends to drive the cost of labor, even minimum wage labor, higher. Evidence of this theory would be the percent of workers earning minimum wage in the 2000 Census was 2.5% of hourly workers while the 2006 Utah Survey found only 1.2% of reported workers earning minimum wage. 20

Appendix 1 Estimating wage effects of proposed minimum wage increases The model The first step is to calculate the effect of a minimum wage increase on average wages at different points in the wage distribution. In order to do this, we compiled a dataset using data from the Current Population Survey that contains average wage growth at various points in the wage distribution for each state in each year from 1984-85 to 2004-05. The dataset also contains data on state unemployment rates as well as identifiers for the year and state, which allow us to control for factors that are unique either to a single state (such as industrial makeup) or to a particular year (such as inflation). 8 The key variable of interest is the change in the minimum wage. Past research has shown that the size of the bite of a minimum wage increase is strongly related to its economic impact. Therefore, the measure of a minimum wage increase that we use is the percentage of the workforce in the year before the increase earning between that year s minimum wage and the following year s minimum wage. This allows for the effect of a $1 increase in the minimum wage of a low-wage state to have a different effect than a similar increase in a high-wage state. We then estimate an equation that uses the minimum wage increase, the unemployment rate, and state and year effects to estimate wage growth. The model finds that the effect of the minimum wage declines as you move up the wage distribution, but proves to be significant up to about the 20 th percentile. These wage effects cannot be accounted for by the directly mandated raises required by the law, showing that the so-called spillover effect exists and is significant. It also shows, however, that it is rather modest and does not extend throughout the wage distribution. The theory behind this finding is that employers feel pressure to raise the wages of workers already earning above the new minimum wage in order to keep existing wage differentials. Projecting forward To model the effects of a minimum wage proposal, the first step is to estimate what each worker s wages would be in the absence of a minimum wage increase. The model described above lends itself well to this. We use Economy.com unemployment rate projections and assume that the state effects remain roughly similar and that year effects are roughly similar to the past few years. We are able to do this for various points in each state s wage distribution. We also use Economy.com employment growth projections to grow the workforce. Estimating direct effects For all workers whose predicted wage in 2007 is between the current and proposed minimum wages, we assume they will receive a raise directly due to the minimum wage. The direct effect for these workers is therefore the difference between their predicted 2007 wage and the proposed 2007 minimum wage. 21

Estimating average spillover effects The next step is to estimate the average spillover effect for workers above the proposed minimum wage. This is estimated using the model described above and depends on the size of the direct effect. This is estimated separately for each point in the wage distribution. Workers who were earning just below the proposed minimum wage are also given a spillover effect in accordance with their place in the wage distribution. Distributing the spillover effects We make the assumption that within a given point in the wage distribution the spillover boost received by workers takes on a normal distribution ( bell curve ) around the mean estimated above. This assumption, commonly made in statistics, means that, for example, if the mean boost for workers earning $7.00 is $0.50, then roughly 95% of workers will receive boosts between $0.25 and $0.75. 9 Defining a meaningful spillover boost It is likely that the wage boost received by many workers within the affected range will be very small and not particularly meaningful even if statistically significant. We have chosen to count only workers we expect to receive at least a 20 cent wage boost as a meaningful benefit. This would mean about $400 per year for a fulltime worker. Given the mean boost estimated in the model and the assumption that the wage boosts are distributed normally at any given point in the wage distribution, we are able to estimate the number of workers that will receive meaningful boosts. 22

Appendix 2 Regional Data Description Utilizing the 2000 Census microdata, we were able to map out the distribution and concentration of low-wage workers in each state. Mapping low-wage workers in a state provides an examination of the areas potentially most-affected by a minimum wage increase. We chose to focus on low-wage workers as opposed to a particular wage cut-off because the hourly wage calculations from the Census are too imprecise. We use each state s 20th percentile wage level as a cut-off for the low-wage category. From our previous work on our spillover methodology, we consider this a good basis for estimating the geographic distribution of the people who would be affected by a minimum wage increase. What is a PUMA? A public use microdata area (PUMA) is a geographic area for which the U.S. Census Bureau provides detailed information at the sub-state level. PUMAs are entirely contained within a single state; they do not overlap state borders. Here is the official definition of a PUMA from the Census website: http://www.census.gov/geo/www/geo_defn.html#puma PUMA v. Super-PUMA Essentially, a Super-PUMA is an aggregation of several PUMAs. PUMAs comprise areas that contain at least 100,000 people, while Super-PUMAs comprise areas of at least 400,000 people. 10 http://ipums.org/usa/volii/2000pumas.html 23

Appendix 3 CPPA Survey Employer Survey 1) In the space below, please provide the total number of (full, part-time and seasonal/temporary/on-call) that worked for you during the week of June 18-24, 2006. TOTAL NUMBER OF EMPLOYEES: 2) For the same week (June 18-24, 2006) please provide the number of who worked for minimum wage ($5.15 an hour) including tips. NUMBER OF MINIMUM WAGE EMPLOYEES: 3) For the same week (June 18-24, 2006) please provide the number of who earned between $5.16 and $6.99 an hour including tips. NUMBER OF EMPLOYEES EARNING $5.16-$6.99 AN HOUR: 4) For each group of, please answer the questions listed in the table below for the week of June 18-24, 2006. WORKFORCE CHARACTERISTICS Employment Characteristics Full-time Part-time Seasonal, temporary, on-call Demographic Characteristics 19 years old and YOUNGER 61 years old and OLDER Female Race/Ethnicity White (not of Hispanic origin) Black (not of Hispanic origin) Hispanic Asian/Pacific Islander American Indian/Alaskan Native Other ALL EMPLOYEES WEEK ENDING June 24, 2006 EMPLOYEES EARNING MINIMUM WAGE ($5.15/hr) INCLUDING TIPS To enter the drawing for a free ipod please complete the following (Note entries must be received by SEPTEMBER 1, 2006) EMPLOYEES EARNING BETWEEN $5.16 AND $6.99 AN HOUR INCLUDING TIPS 3551 Contact Name: Contact Phone or Email: 24

End Notes 1 Whittaker, William G., Minimum Wage, Overtime Pay, and Child Labor: An Inventory of Proposals in the 109 th Congress to Amend the Fair Labor Standards Act, June 16, 2006. Congressional Research Service End Notes 2 Gabe, Tom, Memorandum to Honorable Jim McDermott, Historical Relationship Between the Minimum Wage and Poverty, 1959 to 2005. Congressional Research Service, July 5, 2005. 3 Economic Policy Institute, Issue Brief #228. Increasing Missouri s Minimum Wage. September 7, 2006. http://www.epinet.org/issuebriefs/228/ib228.pdf 4 Kenworthy, Ken, USA Today, Wednesday, September 13, 2006, 1A. 5 Economic Policy Institute, Issue Brief #228. Increasing Missouri s Minimum Wage. September 7, 2006. http://www.epinet.org/issuebriefs/228/ib228.pdf 6 U.S. Department of Labor, Bureau of Labor Statistics, Characteristics of Minimum Wage Workers: 2005. Labor statistics from the Current Population Survey. Http://www.bls.gov/cps/minwage2005.htm 7 U.S. Bureau of the Census, Current Population Survey Overview. http://www.bls.census.gov/cps/overmain.htm 8 The model does not control directly for worker demographic characteristics. We found that while variables such as age, gender, and education are strong determinates of where one is in the wage distribution, they do not play a significant role in the wage growth at a narrow range of a state s wage distribution once state effects are controlled for. 9 This also requires us to estimate a standard deviation. We found that setting the standard deviation to be ¼ of the mean provides what we believe to be the best fit. 10 PUMAs of both types, wherever the population size criteria permits, comprise areas that are entirely within or outside metropolitan areas or the central cities of metropolitan areas. PUMA boundaries can only follow the boundaries of the following geographic areas: 1. Counties and statistically equivalent entities; 2. Minor civil divisions (MCDs), but only in the New England states; 3. Census tracts, but only within counties that have more than 100,000 people, and; 4. Places with a population of 100,000 or more people. 5. The use of incorporated place boundaries as PUMA boundaries is only permitted when the PUMAs for these places comprise only the area of these places.