minimum wage memo draft for distribution 11252013 (1)

8/13/2019 Minimum Wage Memo Draft for Distribution 11252013 (1)

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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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1350 Pennsylvania Avenue, N.W. Suite 508, Washington DC 20004 (202) 724-8139www.dccouncil.us

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

minimum wage memo draft for distribution 11252013 (1)

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