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COUNCIL OF THE DISTRICT OF COLUMBIA
Office of the Budget Director
Jennifer BudoffBudget Director
TO: Chairman Phil Mendelson
Councilmember Vincent Orange
FROM: Jennifer Budoff, Budget Director
Joseph Wolfe, Senior Capital Budget Analyst
DATE: November 25, 2013
SUBJECT: Increasing the Minimum Wage in the District of Columbia and Effect
on Public Benefits
Several members of the Council of the District of Columbia have introduced bills to increase theDistricts minimum wage. This memo provides information on wages in the District, proposedincreases in the minimum wage, and potential impacts on public benefit eligibility. We concludethat in most cases the proposed minimum wage increases will not materially affect public benefiteligibility.
BackgroundThe minimum wage for the District is statutorily set at $1 per hour above the federal minimumwage,1for a current rate of $8.25 per hour. That rate has been in effect since July 24, 2009. TheDistricts tipped minimum wage has been set at $2.77 per hour since January 1, 2005. There areapproximately 18,351 workers employed in the District who earn less than $10/hour.Approximately 42,988 workers employed in the District earn less than $12.00/hour.2
Three proposals before the Council would increase the Districts minimum wage to about $10.50in 2016, assuming an annual inflation rate of 2.4%. One proposal would raise the Districtsminimum wage to $12.50 in 2018. If the 1968 federal minimum wage of $1.60 had been tied toinflation, the federal minimum wage would currently be about $10.77 (July 2013 dollars).
3
Assuming a future annual inflation rate of 2.4%, the equivalent wage would be about $11.50 in2016.
1D.C. Official Code 32-1003.2Appendix D presents more information provided by the OCFOs Office of Revenue Analysis on wage groups by occupation.3Elwell, Craig K., Congressional Research Service,Inflation and the Real Minimum Wage: A Fact Sheet, September 12, 2013.CPI-W used to calculate current wage.
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Two proposals before the Council would also increase the tipped minimum wage. One wouldmake it equal to the minimum; the other would make it 70% of the minimum. When the federaltipped minimum wage was established, it was set at 50% of the minimum wage. If the 1968tipped minimum wage had been linked to the CPI, it would be about $5.38 today. Assuming afuture annual inflation rate of 2.4%, the equivalent tipped wage would be about $5.75 in 2016.
Two neighboring counties in Maryland Prince Georges County and Montgomery County areconsidering proposals that would raise their minimum wages to $11.50 in 2016. Many otherjurisdictions currently have minimum wages that are higher than the federal minimum, and sixjurisdictions currently have minimum wages higher than the Districts $8.25 wage. Threeadditional jurisdictions plan to have minimum wages higher than $8.25.
Jurisdiction CurrentWages4
FutureIncreases LinkedtoCPI
SanFrancisco,CA $10.55 Yes
SantaFe,NM $10.51 Yes
SanJose,CA $10.00 Yes
Washington $9.19 Yes
Oregon
$8.95 Yes
Vermont $8.60 Yes
DistrictofColumbia $8.25 No
Connecticut $8.25 Increasingto$9.00on1/1/15 No
Nevada $8.25 Yes
California $8.00 Increasingto$10.00on1/1/16 No
Ohio $7.85 Yes
Arizona $7.80 Yes
Montana $7.80 Yes
Florida $7.79 Yes
Colorado $7.78 Yes
Missouri $7.35 Yes
NewYork
$7.25 Increasing
to
$9.00
on
12/31/15 No
The Impact of Increasing the Minimum Wage on Public Benefit Eligibility
The table below examines whether wage earners working full-time would be eligible for variouspublic benefits as hourly wages increases from $8.25 to $11.50. As shown below, mosthouseholds with one wage earner would remain eligible for Medicaid, child care subsidies,housing assistance, and food security benefits with an $11.50 minimum wage.
4Assuming an inflation rate of 2.4%, San Francisco, Santa Fe, and San Jose will have minimum wages higher than $10.50 andless than $11.50 in 2016.
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Minimum Wage Increases and Eligibility for Public Benefits
PublicBenefits
Eligibility
(Maximum%of
theFederal
PovertyLevel)
Household
Size
$8.25/
hour
$17,160/
year
$9.50/
hour
$19,760/
year
$10.50/
hour
$21,840/
year
$11.50/
hour
$23,920/
year
Medicaid(Children
andPregnant
Women)
300%
1 Yes Yes Yes Yes
2 Yes Yes Yes Yes
3 Yes Yes Yes Yes
4+ Yes Yes Yes Yes
Medicaid(Youthand
Adults)200%
1 Yes Yes Yes No*
2 Yes Yes Yes Yes
3 Yes Yes Yes Yes
4+ Yes Yes Yes Yes
ChildCareSubsidy
250%
(300%ifenrolled
10/1/2009)
1 n/a n/a n/a n/a
2 Yes Yes Yes Yes
3 Yes Yes Yes Yes
4+ Yes Yes Yes Yes
Supplemental
NutritionAssistance
Program(SNAP)
130%1 No No No
No2 Yes Yes No No
3 Yes Yes Yes Yes
4+ Yes Yes Yes Yes
HousingChoice
VoucherProgramand
LocalRent
SupplementProgram
~196%
(30%AMI)
1 Yes Yes Yes No**
2 Yes Yes Yes Yes
3 Yes Yes Yes Yes
4+ Yes Yes Yes Yes
Women,Infants,and
Children(WIC)185%
1 Yes Yes Yes No
2 Yes Yes Yes Yes
3 Yes Yes Yes Yes
4+ Yes Yes Yes Yes
TemporaryAssistance
forNeedyFamilies
(TANF)
47%
1 No No No
No2 No No No No
3 No No No No
4+ No No No No
FreeandReduced
MealProgram(FARM)185%
1 n/a n/a n/a n/a
2 Yes Yes Yes Yes
3 Yes Yes Yes Yes
4+ Yes Yes Yes Yes
EarnedIncomeTax
Credit(singlefiler)5
Varies
1 No No No No
2 Yes Yes Yes Yes
3 Yes Yes Yes Yes
4+ Yes Yes Yes Yes
*Calculations
are
based
on
current
FPL.
If
FPL
increases
4.1%
by
2016,
a
1
person
household
could
be
eligible
for
benefits.
A
1personhouseholdwouldalsoqualifyfortaxincentivesviatheAffordableCareActtopurchaseprivatehealthcarecoverage.
**CalculationsarebasedoncurrentAMIandFPL. IfFPLincreasesmorethan6.2%,a1personhouseholdcouldbeeligiblefor
benefits. A1personhouseholdmayalsostillqualifyforcertainsubsidizedrentalprogramsthatprovideflexibilityto
recipientsastheirincomegrows.
5Appendix A presents more information provided by the OCFOs Office of Revenue Analysis on EITC recipients and theinteraction of a rising minimum wage and the EITC.
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Cost of Living and Area Median Wages
According to the Economic Policy Institute (EPI), the District has one of the highest costs ofliving in the United States. A family of one parent and one child needs an annual income of$72,407,6or a full-time hourly wage of more than $34.81, in order to attain a secure yet modestliving standard in the District. EPIs calculations take into consideration the cost of housing,
food, child care, transportation, health care, other necessities, and taxes. Similarly, theMassachusetts Institute of Technology (MIT) estimates that a full-time living hourly wage for afamily of one parent and one child is $26.37. For one adult, MITs living wage is $13.68.
7
The gap between high-income and low-income households in the District is the third-highestamong the 50 largest cities, after Atlanta and Boston. Real, inflation-adjusted wages have grownonly 14 percent for those at the bottom of the earnings scale since 1979, compared with 29percent for middle-wage workers, and 44 percent for high-wage workers.8
The chart below shows how the median wages of occupation groups with more than 2,000employees at the bottom of the Districts economic ladder changed between 2001 and 2012. As
the Districts median wage increased from $19.94 to $29.79, the median wage of waiters andwaitresses at the bottom of the scale increased from $6.98 to $9.23. As a percent of the medianfor all occupations, the median wage of waiters and waitresses actually decreased from 35% to31%. The median wage for food preparation workers increased from $10.02 to $10.29, but as apercent of the median for all occupations, it decreased from 50% to 35%.
6EPI Family Budget Calculator, http://www.epi.org/resources/budget/. Appendix B provides more information on EPIcost of living estimates.7MIT Living Wage Calcultor, http://livingwage.mit.edu/counties/11001.8Biegler, Caitlin, DC Fiscal Policy Institute,A Big Gap: Income Inequality in the District Remains One of the Highest in the
Nation.
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MedianWagesintheDistrictofColumbia9
9Appendix D presents more information provided by the OCFOs Office of Revenue Analysis on occupations and employees.
$6.25
$8.25
$10.25
$12.25
$14.25
$16.25
$18.25
$20.25
$22.25
$24.25
$26.25
$28.25
$30.25
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
AllOccupations(653,760)
JanitorsandCleaners,ExceptMaidsandHousekeepingCleaners(11,030)
RetailSalespersons(6,290)
PersonalCareAides(2,600)
HomeHealthAides(3,880)
CombinedFoodPreparationandServingWorkers,IncludingFastFood(7,880)
Cashiers(6,910)
FoodPreparationWorkers(3,920)
ParkingLotAttendants(2,450)
Bartenders(2,400)
Dishwashers(3,210)
DiningRoomandCafeteriaAttendantsandBartenderHelpers(3,340)
WaitersandWaitresses(9,130)
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APPENDIX A
Earned Income Tax Credit
The Earned Income Tax Credit (EITC) is a refundable tax credit for low-income workers. Theamount of the credit rises with earned income until it reaches a maximum level and then begins
to phase out. As a result, for every $1 increase in income, the EITC reduction is about $.295.Therefore, considering only income and the EITC, an increase in the minimum wage would notgenerate a net loss.
According to the OCFOs Office of Revenue Analysis (ORA), in tax year 2011 there were56,036 EITC recipients in the District, receiving an average credit of $954, and paying anaverage of $308 in income taxes. The charts below, provided by ORA, show the total EITCrecipients by income category and tax filer type, as well as the amount of benefits received andtaxes paid in each category.
DCEITCRecipientsbyIncome
IncomeCategory Number TotalEITCAmountAverage
EITC
Credit TotalTax AverageTax
10Kandunder 17,337 $9,414,729 $543 $400,392 $23
10k20k 20,132 $27,982,999 $1,390 $3,681,023 $183
20k30k 11,591 $12,717,366 $1,097 $6,578,890 $568
30k50k 6,976 $3,344,683 $479 $6,588,050 $944
Total 56,036 $53,459,777 $954 $17,248,355 $308
DCEITCRecipientsbyFilerType
FilerType
Number
TotalEITC
Amount
AverageEITC
Credit
TotalTax
Average
Tax
Single 18,964 $11,496,241 $606 $3,046,715 $161
Joint 2,862 $3,063,671 $1,070 $1,403,309 $490
MarriedCombinedSeparate 539 $516,069 $957 $399,342 $741
HeadofHousehold 33,671 $38,383,796 $1,140 $12,418,042 $369
Total 56,036 $53,459,777 $954 $17,267,408 $308
Notes
JointandMarriedFilingSeparateincludeDomesticPartners
DataSource:CFO/OTR,TY2011
The amount of EITC one can receive is dependent on income, marital status and total number ofchildren. After a minimum income threshold is met, the EITC decreases at a maximum rate of29.5 cents for every new dollar increase in gross income. Therefore, while an individuals creditmay decrease, that individual will not experience a net loss in overall income.
To illustrate this point, ORA tabulated the estimated income gain and EITC loss of a full time(2080 hours) minimum wage employee receiving a wage increase of $1, $2, and $3.25 per hour.
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The results by filing status are in the charts below. These charts show that even though the EITCdecreases in most cases, net income increases regardless of filing status at all three wage levels.It is important to note that actual income gains and EITC loss would vary by individual. Actualtotal hours worked and other sources of income could affect ones actual results.
FilerType Grossincomegain EITCLoss
Netincomegain/loss
(adjustedfortaxes)
SingleFiler,nochildren 2,080.00$ overthreshold 1,747.20$SingleFiler,1child 2,080.00$ (457.80)$ 1,289.40$
SingleFiler,2children 2,080.00$ (604.80)$ 1,142.40$SingleFiler,3+children 2,080.00$ (604.80)$ 1,142.40$
Married,Jointreturn,noChildren 2,080.00$ overthreshold 1,747.20$Married,Jointreturn,1child 2,080.00$ $0 1,747.20$
Married,JointReturn,2children 2,080.00$ $0 1,747.20$Married,JointReturn,3+children 2,080.00$ $0 1,747.20$
HeadofHousehold,nochildren 2,080.00$ overthreshold 1,747.20$HeadofHousehold, 1child 2,080.00$ (457.80)$ 1,289.40$
HeadofHousehold,2children 2,080.00$ (604.80)$ 1,142.40$HeadofHousehold,3+children 2,080.00$ (604.80)$ 1,142.40$
NETANNUAL
INCOME
INCREASE
(INCREASE
IN
SALARY
DUE
TO
NEW
HOURLY
MINIMUM
WAGE,
MINUSLOSTEITCCREDITAMOUNT) $9.25($1increaseoverthecurrent$8.25perhour)
FilerType Grossincomegain EITCLoss
Netincomegain/loss
(adjustedfortaxes)
SingleFiler,nochildren 4,160.00$ overthreshold 3,494.40$SingleFiler,1child 4,160.00$ (928.20)$ 2,566.20$
SingleFiler,2children 4,160.00$ (1,223.60)$ 2,270.80$SingleFiler,3+children 4,160.00$ (1,223.60)$ 2,270.80$
Married,Jointreturn,noChildren 4,160.00$ (215.60)$ 3,278.80$Married,Jointreturn,1child 4,160.00$ (8.40)$ 3,486.00$
Married,JointReturn,2children 4,160.00$ overthreshold 3,494.40$Married,JointReturn,3+children 4,160.00$ $0 3,494.40$
HeadofHousehold,nochildren 4,160.00$ $0 3,494.40$HeadofHousehold, 1child 4,160.00$ (928.20)$ 2,566.20$
HeadofHousehold,2children 4,160.00$ (1,223.60)$ 2,270.80$Head
of
Household,
3+
children 4,160.00$
(1,223.60)$
2,270.80$
NETANNUALINCOMEINCREASE(INCREASEINSALARYDUETONEWHOURLYMINIMUMWAGE,
MINUSLOSTEITCCREDITAMOUNT) $10.25($2increaseoverthecurrent$8.25perhour)
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APPENDIX B
Costs of Living
Below is the income a family of 1 parent and 1 child needs in order to attain a secure yet modest living standardBudget Calculator. Virginia and Maryland portions of the metro area are listed separately.
State Area
Monthly
Housing
Monthly
Food
Monthly
Child
care
Monthly
Transportation
Monthly
Health
care
DCWashingtonArlingtonAlexandria,DCVAMDHUD
MetroFMRArea $1,412 $369 $1,318 $480 $967
NY NassauSuffolk,NYHUDMetroFMRArea $1,583 $369 $1,070 $480 $945
CA SanFrancisco,CAHUDMetroFMRArea $1,795 $369 $720 $480 $1,096
CT StamfordNorwalk,CTHUDMetroFMRArea $1,648 $369 $899 $480 $1,039
NY NewYork,NYHUDMetroFMRArea $1,474 $369 $1,070 $450 $1,050
NY WestchesterCounty,NYStatutoryExceptionArea $1,468 $369 $1,070 $480 $945
MA
BostonCambridgeQuincy,MANHHUDMetroFMR
Area
$1,444
$369
$1,019
$480
$1,037
VAWashingtonArlingtonAlexandria,DCVAMDHUD
MetroFMRArea $1,412 $369 $1,072 $480 $967
CT Danbury,CTHUDMetroFMRArea $1,384 $369 $899 $459 $1,175
CA OrangeCounty,CAHUDMetroFMRArea $1,621 $369 $720 $480 $949
CA
SanJoseSunnyvaleSantaClara,CAHUDMetroFMR
Area $1,610 $369 $720 $480 $987
MD Columbiacity,MDHUDMetroFMRArea $1,569 $369 $785 $459 $931
NH
BostonCambridgeQuincy,MANHHUDMetroFMR
Area $1,444 $369 $824 $570 $1,037
CA SantaCruzWatsonville,CAMSA $1,587 $369 $720 $480 $910
MA EastonRaynham,MAHUDMetroFMRArea $1,255 $369 $1,019 $459 $1,039
MA
BarnstableTown,
MA
MSA
$1,267
$369
$1,019
$459
$1,019
MDWashingtonArlingtonAlexandria,DCVAMDHUD
MetroFMRArea $1,412 $369 $785 $480 $967
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APPENDIX C
Eligibility for Supplemental Nutrition Assistance Program
As shown on the table entitled Minimum Wage Increases and Eligibility for Public Benefits,aswages rise Supplemental Nutrition Assistance Program (SNAP) benefits may phase out for
certain 2-person households. The following analysis explores the impact that proposedminimum wage increases would have on incomes and eligibility for SNAP benefits.
To be eligible for SNAP benefits, households are generally required to pass both gross and netincome tests. For October 1, 2013, through September 30, 2014, gross annual incomes cannotexceed the following, which are set at 130% of the Federal Poverty Level:
Household
Size
Maximum
GrossAnnual
Income
1 $14,937
2
$20,163
3 $25,389
4 $30,615
For this analysis, net incomes are computed by making the following deductions from grossincome:
EarnedIncomeDeduction 20%ofGrossIncome(standard)
StandardDeduction $152permonth(maximumallowedforhouseholdslessthan4)
DependentCareDeduction Monthlycopaymentsof$63.48foronechildand$111.15fortwo
ExcessShelterDeduction 30%ofgrossincomeorthemaximumdeductionallowed($478permonth).
As of November 1, 2013, maximum annual SNAP benefit allotments are $4,164 for a householdof two and $5,964 for a household of three. The actual allotment a household will receive iscalculated by subtracting 30% of the households net income from the maximum allotmentallowed. The assumed deductions above would allow the head of a 2-person household to claimthe maximum SNAP benefit allotment up to the maximum gross eligible income of $20,163,which is the annual income equivalent to a full-time wage of $9.69. These deductions wouldalso allow the head of a 3-person household to claim the maximum SNAP benefit allotmentworking full-time at the proposed minimum wage of $11.50.
The charts below show the change in incomes and SNAP benefits anticipated if the Districtsminimum wage is increased from $8.25 to $11.50. Note that no allowance has been made forfuture increases in the Federal Poverty Level or potential changes in SNAP allotments.
An employee with no dependents working full-time at the current minimum wage of $8.25,which would generate a gross income of $17,160, would be ineligible for SNAP benefits.Therefore, a minimum wage increase would have no impact on the SNAP eligibility of thishousehold. The chart below shows the proposed increases in the minimum wage and income fora 1-person household.
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An employee working full-time with one dependent child would be eligible for SNAP benefits iftheir gross annual income does not exceed $20,163. The maximum wage for an eligible full-time employee would be $9.69. Under the deduction assumptions outlined above, if anemployees wage was increased from $9.69 to $9.70, they would lose annual SNAP allotments
of approximately $1,823. However, a wage increase from $9.50 to $10.50 would increaseannual income by $2,080 and offset the loss of benefits.
If an employee with two dependents working full-time had their wage increased to $11.50, whichwould generate a gross annual income of $23,920, they would remain eligible for SNAPbenefits. Under the assumptions outlined above, the employee would not see a decrease incombined income and benefits. Currently a household of three can have an income of up to$25,392, which is equivalent to a minimum wage of about $12.20, before they become ineligiblefor SNAP benefits.
FullTime@$9.50
Min+SNAP,
$23,650
FullTime@$10.50
Min+SNAP,$25,231
FullTime@$11.50
Min+SNAP,$26,811
$15,000
$17,000
$19,000
$21,000
$23,000
$25,000
$27,000
$29,000
$31,000
CurrentandProjectedIncomefor3PersonHousehold
(1Wage
Earner)
FullTimeIncome CurrentIncome+SNAP
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APPENDIX D
Profile of Wage Groups by Occupation
According to the OCFOs ORA, of the approximately 626,520 workers in the District (not all ofwhom are District residents), approximately 18,360 earn less than $10 per hour, and 42,990 earn
less than $12 per hour. The major occupation groups that are the lowest paid are foodpreparation, sales, personal care and service, transportation and material moving, healthcaresupport, and building and ground maintenance. The ORA chart below shows the approximatetotal number of workers making less than $10, $12, and $20 by occupation type.
Occupation
TotalApprox#
EmployedinDC
Approx#workers
makinglessthan
$10perhour
Approx#workers
makinglessthan
$12perhour
Approx#workers
makinglessthan
$20perhour
FoodPreparationandServing
RelatedOccupations
48,800 12,200 24,400 36,600
SalesandRelatedOccupations 24,500 2,450 6,125 12,250
PersonalCareandService
Occupations
11,330 1,133 2,833 8,498
TransportationandMaterialMoving
Occupations
13,980 1,398 1,398 6,990
HealthcareSupportOccupations 11,800 1,180 2,950 8,850
BuildingandGroundsCleaningand
MaintenanceOccupations
21,130 5,283 19,017
CommunityandSocialService
Occupations
11,290 2,823
OfficeandAdministrativeSupport
Occupations
82,140 20,535
ProtectiveServiceOccupations 24,420 6,105
ConstructionandExtraction
Occupations
11,910 2,978
Installation,Maintenance,and
RepairOccupations
9,560 2,390
Arts,Design,Entertainment,Sports,
andMediaOccupations
26,640 2,664
HealthcarePractitionersand
TechnicalOccupations
29,850 2,985
Life,Physical,andSocialScience
Occupations
19,820 1,982
BusinessandFinancialOperations
Occupations
103,620
ArchitectureandEngineering
Occupations
13,780
Computerand
Mathematical
Occupations
34,280
LegalOccupations 39,930
ManagementOccupations 78,020
ComputerOccupations,AllOther 9,720
ApproximateTotalworkers: 626,520 18,361 42,988 134,666Notes:
The#ofemployeetotalsareapproximate;certaintotalsacrosscategorieswillnottieexactly
DataSource:BureauofLaborStatisticsOccupationalEmploymentandWageestimateData