Food Security and the Federal Minimum Wage

William M. Rodgers III

Heldrich Center for Workforce Development

Rutgers University

November 2013

Motivation

• Proposal to Raise Federal Minimum Wage from $7.25 to $10.10 by July 2015.

• The Increases are a Household Issue:– Women comprise 56% of beneficiaries– Over 88 percent of beneficiaries are at least 20 years of age– 55% of the affected workers work full time– 70% are families with incomes less than $60,000– More than 25% are parents– Over one-third are married – (Source: Cooper and Hall, EPI, March 13, 2013)

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Motivation cont.

Statement supporting proposals to increase the federal minimum wage from $7.25 to $10.10 per hour.

• “Raising the minimum wage puts dollars in the pockets of people who are by necessity most likely to spend them immediately at the grocery store, the childcare provider, the auto-repair shop and other local businesses.”

Margot Dorfman, CEO, U.S. Women’s Chamber of Commerce (March 5, 2013).

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Household Food Security

• Food secure: Access by all members at all times to enough food for an active healthy life

• Food insecure:– Limited or uncertain availability of nutritionally adequate

foods, or– Uncertain ability to acquire food

• Hunger: An uneasy or painful sensation caused by a (involuntary) lack of food

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The 1996 and 1997 Increases in the Federal Minimum Wage

• October 1st, 1996– $4.25 to $4.75 per hour

• September 1st, 1997– $4.75 to $5.15 per hour

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The 2007, 2008 and 2009 Increases in the Federal Minimum Wage

• July 24th, 2007– $5.15 to $5.85 per hour

• July 24th, 2008– $5.85 to $6.55 per hour

• July 24th, 2009– $6.55 to $7.25 per hour

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Research Questions

• What impact did the 1996 and 1997 increases in the federal minimum wage have on food security?

• What impact did the 2007, 2008, and 2009 increases in the federal minimum wage have on food security?

• What impact would increasing the federal minimum wage to $10.10 per hour have on food security?

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Summary of Preliminary Findings

• Food security rates increased from 1995 to 1999, but fell from 2005 to 2011, mirroring macroeconomic fluctuations.

• The increases in the minimum wage raised food security, especially the 1996/97 increases.

• Food security is lower in households where the householder has no more than a high school degree, is nonwhite, or is a single-parent.

• These householders benefit disproportionately from the increases.

• Increasing the federal minimum wage to $10.10 would provide food security to approximately 29 million hourly wage workers.

• The increases would have the greatest impact on southern households. 10 of the Top 15 beneficiaries are Southern states. 8

Measuring Food Security:Households are assigned a food security status based on their

pattern of responses to the following questions.

 Now I’m going to read you several statements that people have made about their food situation. Please tell me whether the statement was often, sometimes, or never true in the last 12 months.

1. “I worried whether our food would run out before we got money to buy more.”

2. “The food that we bought just didn’t last, and we didn’t have money to get more.”

3. “We couldn’t afford to eat balanced meals.”4. * “We relied on only a few kinds of low-cost food to feed the children

because we were running out of money to buy food.”5. * “We couldn’t feed the children a balanced meal because we couldn’t

afford that.”6. * “The children were not eating enough because we just couldn’t afford

enough food.”9

Measuring Food Security cont.:

7. In the last 12 months, did you or other adults in your household ever cut the size of your meals or skip meals because there wasn’t enough money for food?

8. How often did this happen – almost every month, some months but not every month, or only one or two months? 

9. In the last 12 months, did you ever eat less than you felt you should because there wasn’t enough money to buy food?

10. In the last 12 months, were you ever hungry but didn’t eat because you couldn’t afford enough food?

11. Sometimes people lost weight because they don’t have enough to eat. In the last 12 months, did you lose weight because there wasn’t enough food?

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Measuring Food Security cont.:

12. In the last 12 months, did you or other adults in your household ever not eat for a whole day because there wasn’t enough money for food?

13. How often did this happen – almost every month, some months but not every month, or in only one or two months? 

14. * In the last 12 months, did you ever cut the size of any of the children’s meals because there wasn’t enough money for food?

15. * In the last 12 months, did any of the children ever skip meals because there wasn’t enough money for food?

16. * How often did this happen – almost every month, some months but not every month, or in only one or two months?

17. * In the last 12 months, were the children ever hungry but you just couldn’t afford more food?

18. * In the last 12 months, did any of the children ever not eat for a whole day because there wasn’t enough money for food?

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Household Food Security Scale:Categorical Measure

(Households with Children)

Source: U.S. Department of Agriculture. 12

EMPIRICAL MODELS: Identifying the impacts of the increases in the minimum wage:

FSij = α0 + α1%Affectedij + α2 EPOPij + α3FDSTMPij + εij

FSij denotes the change in the i th state’s food security at the j th income

category from period t, a period before the increase in the minimum wage and t+1, a period after the increase in the minimum wage,

– %Affectedij denotes the i th state’s share of working householders earning between $4.25 and $5.14 or $5.15 to $7.24 per hour in the j th income category prior to the minimum wage increase,

EPOPij denotes the i th state’s change in employment-population ratio of householders in the j th income category from period t to t+1, and

FDSTMPij denotes the i th state’s change in food stamp usage of householders in the j th income category from period t to t+1, and

– εij denotes an error term.

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The Data• Current Population Survey Food Security

Supplements: 1995 to 1999, and 2005 to 2011.

– 1995, 1997 and 1999 Survey Month: April

– 1996 Survey Month: September

– 1996 Survey Month: August

– 2005 to 2011 Survey Month: December

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Timeline of CPS Food Security Supplement and Increases in the

Minimum Wage

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The Data cont.:Building State-Year Aggregates

• Sample Restrictions:– Each household head must have complete information: age,

sex, race, ethnicity, and educational attainment– Information on household structure, number of household

members, urban residency, food stamp usage and amount.• Pre and Post Analysis:

– Pre: Pool 1995 and 1996, 2005 and 2006– Post: Pool 1998 and 1999, 2010 and 2011

• Variation by Household Income and State (Change in Food Security, food stamp usage and EPOP)– Income categories:

• Less than $12,500;• $12,500 to $34,999; and • $35,000 or more 16

Notes: Author’s calculations from the 1995, 1996, 1998, and 1999 CPS Food Supplement. To be included in the sample, the household must have complete information for all of the following variables: household family income, structure, size, and urban residency status, as well as the reference person’s hourly wage, gender, race/ethnicity, age, educational attainment, and industry and occupation of employment. 17

The Nominal Hourly Wage Distribution of Reference Persons, 1995/96 and 1998/99

(in Percent)

Notes: Author’s calculations from the 2005, 2006, 2010, and 2011 CPS Food Supplement. To be included in the sample, the household must have complete information for all of the following variables: household family income, structure, size, and urban residency status, as well as the reference person’s hourly wage, gender, race/ethnicity, age, educational attainment, and industry and occupation of employment. 18

The Nominal Hourly Wage Distribution of Reference Persons, 2005/06 and 2010/11

(in Percent)

Notes: Author’s calculation from BLS and BEA data.19

Change in Macroeconomic Indicators

Notes: Author’s calculations from selected years of the CPS Food Supplement. To be included in the sample, the household must have complete information for all of the following variables: household family income, structure, size, and urban residency status, as well as the reference person’s hourly wage, gender, race/ethnicity, age, educational attainment, and industry and occupation of employment. 20

Household Food Security

Minimum WageVariable

All Nonwhite No More than High School

Diploma

Single parents

Pooled: % Affected in 1996 and 2006

0.132b (0.061)

0.075 (0.103)

0.222a (0.069)

0.287a (0.088)

1995/96-1998/99: % Affected in 1996

0.276a (0.078)

0.255c (0.157)

0.386a (0.085)

0.286b (0.112)

2005/06-2010/11: % Affected in 2006

0.014 (0.113)

-0.020 (0.160)

0.026 (0.130)

0.366a (0.138)

Notes: Models also control for changes in employment-population ratio and food stamp usage.

State dummy variables are also included. The pooled model includes a dummy variable denoting the cross section. Models are estimated using weighted least squares, where state population is the weight.

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The Impact of the Increases in the Minimum Wage on Food Security

(Change in Food Security as a function of Percent Affected prior to Increase)

  Year Proposed Increase

% Affected

Predicted Food

Security Change

(% Points)

Predicted Food

Security Level

(percent) Individual

s Total

Individuals Food Secure

Individuals Change in Food

Security

Current $7.25 84.1 308m 259m

2013 $8.20 11.0 1.5 85.6 311m 266m 7m

2014 $9.15 16.6 2.2 87.8 314m 276m 10m

2015 $10.10 23.4 3.1 90.9 317m 288m 12m

Cumulative Total 29m

Notes: “% Affected” comes from Appendix Table 2 in David Cooper and Doug Hall, “Raising the Federal Minimum Wage to $10.10 Would Give Working Families, and The Overall Economy, a Much-Needed Boost.” Economic Policy Institute, 13, 2013. http://www.epi.org/publications/bp357-federal-minimum-wage-increase/. The coefficient for “All” households In the pooled model of the previous slide is multiplied by “% Affected” to obtain the predicted change in food security.

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Estimated Food Security Effects of Proposed Increases in the Federal Minimum Wage

Southern States Comprise 10 of the Top 15 States with the Largest Benefits

State % Total Affected Pred. % Point Change in Food

Security

2010-12 Food Security

Pred. Food Security

Arkansas 30.4% 4.0% 85.1% 89.1%

Mississippi 28.2% 3.7% 83.3% 87.0%

Montana 28.1% 3.7% 85.9% 89.6%

Louisiana 27.5% 3.6% 84.3% 87.9%

South Carolina 27.2% 3.6% 84.6% 88.2%

Kentucky 27.1% 3.6% 84.4% 88.0%

West Virginia 27.1% 3.6% 88.8% 92.4%

North Carolina 27.0% 3.6% 83.4% 87.0%

Texas 27.0% 3.6% 81.6% 85.2%

Tennessee 26.6% 3.5% 83.8% 87.3%

Idaho 26.5% 3.5% 87.4% 90.9%

Michigan 26.5% 3.5% 86.6% 90.1%

Ohio 26.1% 3.4% 83.9% 87.3%

South Dakota 26.1% 3.4% 87.1% 90.5%

Alabama 26.0% 3.4% 87.9% 91.3%

Overall Average 23.0% 3.0% 85.8% 88.8%

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Preliminary Conclusions

• Food security rates are pro-cyclical. From 1995 to 1999 they increased, but fell from 2005 to 2011.

• The increases in the minimum wage raised food security, especially the 1996/97 increases.

• Food security is lower in households where the householder has no more than a high school degree, is nonwhite, or is a single-parent.

• These householders benefit disproportionately from the increases.

• Increasing the federal minimum wage to $10.10 would provide food security to approximately 29 million hourly wage workers.

• The increases would have the greatest impact on southern households. 10 of the Top 15 beneficiaries are Southern states. 24

Next Steps

• Impact on Low Food Security Status and Hunger Status

• Impacts on Children and Adults

• Item Analysis – Which food security questions drive impact?

• Improve controlling for macro conditions during the 2007/08/09 increases

• Specification Tests

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Specification Tests

FSi,(1996-1995) = γ01 + γ1

1 %Affectedi,1996 + γ21 StateEPOPi,(1996-1995) + εi,(1996-1995),

FSi,(1998-1996) = γ02 + γ1

2 %Affectedi,1996 + γ22 StateEPOPi,(1998-1996) + εi,(1998-1996),

FSi,(1999-1998) = γ03 + γ1

3 %Affectedi,1996 + γ23 StateEPOPi,(1999-1998) + εi,(1999-1998),

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