Economist Calculates Just How Inadequate Your State's Minimum Wage Is

A simple tweak to how we calculate our minimum wage could lift millions of Americans out of poverty, one economist is proposing.

In a new proposal from the Hamilton Project, the economic policy arm of the Brookings Institution, economist Arindrajit Dube suggests that lawmakers set state minimum wages at half the median full-time wage for the state. Doing so, he says, would would raise the minimum wage in all 50 states and lift 2.2 million people out of poverty.

Many other developed economies, including those of France, Turkey and Portugal, already have minimum wages that meet Dube's requirement. In the 1960s and '70s, when the minimum wage was worth a lot more than it is today, the U.S. met that requirement too. Today, though, the national minimum wage in America is worth just 38 percent of the median wage -- far below the 50 percent benchmark that Dube is calling for.

As you can see in the graph below, every single state's minimum wage is nowhere near where Dube believes it should be.

Critics of raising the minimum wage often say that higher hourly pay will constrict hiring. But Dube cites years of academic research in the U.S. and around the world that suggests the impact on jobs would likely be negligible.

"Overall, I believe the best evidence concludes that the net impact of the proposed increase in the real statutory minimum wage would be likely small, and likely too small to be meaningfully different from zero," he writes. "In addition, there is growing evidence that increased minimum wages reduce job turnover."

In addition to pegging minimum wage to median wage, Dube proposes that state and local governments consider local costs of living and index their minimum wages to inflation.

The federal minimum wage of $7.25 hasn't been raised since 2009. If it were indexed to inflation, it would be over $9, and if it were pegged to the cost of living, it would be around $10.50. Today, most Americans agree it's time to raise it.

However, it doesn't seem like federal lawmakers have any interest in bringing up the minimum wage at the national level. That's why many states and local governments are going ahead and raising it on their own.

"Minimum wage policies are not an antipoverty panacea," Dube writes in the report. "They do, however, tend to raise wages for America’s lowest-paid workers -- making an adequate minimum wage an important pillar of a national antipoverty agenda."