Mandated Wage Floors and the Wage Structure: New Estimates of the Ripple Effects of Minimum Wage Laws

Minimum wage laws have become a key political issue, following on the heels of over 130 successful living wage campaigns around the country. In the debates surrounding these mandated wage floors, one recurring issue has been whether the legislation has wider-ranging impacts on wages than the legally-required raises alone. Advocates on both sides of the debate dispute the potential magnitude of ‘ripple effects’- the non-mandated raises given by employers to maintain a similar wage hierarchy before and after a change in the wage floor. These ripple effects have the potential to greatly expand the overall impact of mandated wage floors. This study uses data from twenty years of the Current Population Survey to assess the magnitude of ripple effects in the context of variations in minimum wage laws, and looks specifically at the retail trade sector to model the potential magnitude of ripple effects under living wage ordinances, where the ‘bite’ of the legislation would encompass a larger share of the workforce.