Pennsylvania's 2024 Minimum Wage and Its Impact on Philadelphia Workers and Businesses
Understanding the Proposed New Minimum Wage
Pennsylvania last raised its minimum wage from $7.15 to $7.25 per hour on July 24, 2009, to align with the increased federal minimum wage. It has not changed since then.
An increased minimum wage in Pennsylvania proposed under House Bill 1500 narrowly passed by 103 Yeas to 100 Nays in the Democratically-controlled House. The proposed increase is to $11 per hour starting January 1, 2025. This hourly wage goes up to $13 a year later and $15 two years later.
The bill's chances of passing the Republican-controlled Senate are doubtful. Republicans control 28 of the 50 Senate seats, with Democrats holding only 22 seats. The last Pennsylvania Senate elections were held in 2022. Senators serve for four-year terms, so the next Pennsylvania Senate elections will be held in 2026.
Despite the lack of a path to passage in the Pennsylvania Senate, the bill's passage in the House encouraged significant debate about its merits.
The legislative background leading to this change was the lack of any increase for nearly 15 years. Pennsylvania's minimum wage of $7.25 puts it among the 20 states in the USA with the lowest minimum wage rate, matching the federal minimum of $7.25 per hour. The other 30 states have minimum wages that are significantly higher than the federal minimum.
The minimum wage rate in neighboring states is higher, as follows:
- West Virginia $8.75 per hour
- Ohio $10.45 per hour
- Delaware $13.25 per hour
- Rhode Island $14 (2024) to $15 per hour (2025)
- Maryland $14 (2024) to $15 per hour (2025)
- Massachusetts $15 per hour
- New York $15 per hour
- New Jersey $15.13 per hour
- Connecticut $15.69 per hour
The Economic Impact
Supporters say that a minimum wage increase is overdue. They say it would lift many people out of poverty and reduce dependence on government assistance programs.
Research published by the Keystone Research Center says that a Pennsylvania wage increase could affect the living standards of close to one million employees, many of whom live in Philadelphia.
Federal job data shows that 1.3 million PA workers earn less than $15 per hour, 418,000 make less than $12 per hour, and 60,000 make $7.25 or less per hour (75% of these low-paid workers receive tips).
Real-Life Stories
The Bradford Era newspaper reported on the situation of a Philadelphia worker, Kareem Jones, a home care worker who would benefit from the increase. Jones cares for his brother at home but cannot make ends meet on the current minimum wage. Jones saves the state money that would have to be spent if workers like him did not exist.
ABC News reported on small businesses' reactions. Pizza restaurant manager Christopher Stamoulis thinks the impact of the minimum wage in Philadelphia, at $15 per hour, is too great. Food prices would have to go way up, meaning fewer customers buying pizzas.
Ken Curry operates multiple daycare centers in Philadelphia. He plans to lay off some workers unless he receives financial assistance from the government for an increase in Philadelphia workers' minimum wage or a small business wage adjustment.
Addressing Criticisms and Concerns
Critics say business owners will cut jobs, lay people off, reduce hours, and take drastic steps to cover the more than doubling of the labor cost for minimum-wage workers. Even so, the Independent Fiscal Office January 2024 report notes that an increase to $11 per hour would have virtually zero impact on PA jobs. However, increasing the minimum wage to $15 per hour might cause the loss of about 5,000 jobs.
For comparison, over 400,000 people are working in the jobs that would be most impacted, such as cashiers, retail salespeople, and fast-food workers.
Rather than significant job loss, small businesses are likely to be forced to raise prices to cover increased costs. Price increases may reduce consumer spending and potentially harm local economies, especially since many prices have increased due to inflation in recent years. On the other hand, when low-paid workers earn more, they spend more, providing stimulus for the local economy.
The PA Minimum Wage Advisory Board states that 68% of those earning at or below the minimum wage are female and minorities, with two-thirds working in the restaurant industry and bars. The proposed rule changes include a 60% threshold for the hourly minimum wage for those in jobs who receive tips.
A higher minimum wage helps decrease disparities of the traditionally lower pay for women and minorities.
Solutions and Support Systems
Some government programs and initiatives are designed to assist businesses in adjusting to the wage increase. Some PA businesses receive state grants and tax breaks. Businesses can employ strategies to manage the transition, such as automation or operational efficiency improvements.
To maximize the wage increase benefits, workers may benefit from financial planning and explore skills development training to improve their employment prospects.
Conclusion
A minimum wage increase has benefits, yet this dramatic change is not without serious costs. As the situation evolves, ongoing engagement with the topic is encouraged because of the importance of staying informed about labor policies and their impacts.
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