GLOBAL ECONOMICS

FLORIDA DREAMS BLOG



Patrick Grady
A $15 Minimum Wage in Florida Will Cost Jobs
January 5, 2021
Revised January 13, 2020

In the 2020 general election, Florida voters blindly jumped on a national bandwagon and approved Amendment 2 to the state constitution raising the minimum wage to $15 per hour by a narrow margin of 60.8 percent for to 39.2 per cent against (the constitutional hurdle for passage is a 60 percent approval).

This amendment will increase the minimum wage from $8.56 in 2020 to $10 on September 1, 2021, and by an additional dollar per year until reaching $15 in September 2026 (with comparable absolute increases for tipped employees whose minimum wage is $3.02 per hour less). This constitutes a hefty increase of over 75 per cent and will produce the highest minimum wage ever implemented by a ballot measure.

The minimum wage increase will make Florida only the eighth state to increase its minimum wage to $15 an hour and will put it in the same category as the high wage states of California, Connecticut, Illinois, Maryland, Massachusetts, New Jersey, and New York, even though Florida's average weekly wages in second quarter of 2020 only ranked 29th in the country, putting it far behind all these high wage states in pay levels.

The increase in the minimum wage is a prime example of a a ballot measure that was implemented hastily without an adequate consideration of the full implications of its economic consequences for the various local labor markets making up the Florida economy.

Over the years, the high relative rate of growth of Florida's population and employment has been driven by its relatively low wages. Retirees and tourists have been drawn to Florida by the availability of cheap services as well as the weather. Florida's agricultural industries have always been dependent on the availability of low-wage labor. Much of this growing demand for unskilled labor was met by immigrant workers from Latin America and the Caribbean who were willing to work for what were relatively low wages by American standards, but high in relation to their countries of origin. And now that family networks have been established, they will continue to come expecting to find jobs, even if the jobs become less available and harder to find as a result of the increase in the minimum wage.

Employers who are required to pay higher wages will seek ways to use less labor and will consequently provide fewer jobs. This will make it more difficult for immigrants as well as young people leaving school to find entry level jobs and to break into the labor force.

The extent to which the minimum wage increase will eliminate jobs depends on the relationship between the minimum wage and market clearing wages in the local labor market. That is why a $15 per hour minimum wage will do less, if any, damage in high wage jurisdictions like California and New York and the other Northeastern states that have already announced scheduled increases in the minimum wage to $15. It also will have relatively little impact on workers who have greater skills and experience and are employed in larger corporations and professional firms where employees are salaried.

If the minimum wage is below the market clearing wage in all the local labor markets, it will have no impact on labor demand. However, if it is above the market wage in some local labor markets for occupations or industries, microeconomics tells us that it will reduce labor demand in the affected industries and occupations because it will raise the wages paid above the marginal value produced by the workers at the previous higher level of employment.

This is the description usually provided in introductory economic textbooks of how an increase in the minimum wage works in a partial equilibrium model of supply and demand in a particular labor market. However, there is some disagreement among economists on the impact of minimum wage increases in more general equilibrium and Keynesian macroeconomic models incorporating national or, even state, labor markets.

Some economists believe that increases in minimum wages can also push up the wages of workers at the bottom of the wage scale because productivity can be boosted for workers earning above the minimum wage if they take over some of the work done by the displaced workers. In addition, others believe that, to the extent that wages are determined based on relative contributions rather than the absolute marginal value of product produced by the worker, an increase in the minimum wage can boost wages more generally at the bottom of the wage scale, raising incomes and purchasing power. There is also the possibility of shifting increases in wages forward through price increases. All these broader considerations becloud the analysis of the impact of minimum wage increases, particularly if the increases are small.1 However, there is more agreement among economists that a large increase in the minimum wage, like that introduced in Florida, will have a significant negative effect on the employment of low-wage workers.2

The greatest percentage reductions in employment can be expected to occur in those smaller predominantly rural counties of Florida in the Panhandle and center of the state with wages under 70 per cent of the state average and the fewest alternative employment opportunities (Chart 1 and Table 1). It is there that employers will have the most incentive to cut jobs. Large, urbanized counties like Palm Beach, Miami-Dade, Broward, Hillsborough, and Duval with thriving, dynamic economies will be less affected because of their higher wage structures. However, all counties in Florida have significantly lower wages than the average for the United States, which is 15.1 per cent higher. The comparison is even more striking with the high wage states in the Northeast and on the West Coast. For example, the average weekly wages in New York are almost 50 per cent higher than in Florida. While an increase in the minimum wage to $15 per hour may not do much harm in the New York, a state like Florida with low wages is much more likely to suffer serious economic damage and substantial job losses, particularly in low-wage, largely rural counties.

The differential impact of the increase in the minimum wage across the state goes a long way towards explaining why Amendment 2 raising the minimum wage got enough votes to pass. Over 70 percent of the vote in favor came from the three large, urbanized counties of Miami-Dade, Broward, and Orange counties where the impact would be less. In contrast, the small rural counties of Calhoun, Lafayette, Gilchrist, and Baker, which have wages less than 70 per cent of the Florida average and would be hit hardest by the minimum wage increase, voted around 65 per cent against the Amendment.3

The different circumstances in Florida compared to other higher wage states and among the diverse Florida counties is the reason why an across-the-board increase in the minimum wage is not a sound economic policy decision for Florida. A referendum sparked by the national push for a $15 minimum wage may have appealed to the hearts of Florida voters, which were opened by the national news media's uncritical promotion of the benefits of increased minimum wages. However, most Floridians were probably not fully aware of the likely larger negative impact on employment in the Sunshine State and especially of the adverse effect on rural Florida counties. Economic policy should be made with our heads, not our hearts.


Table 1
Covered employment and wages in the United States and all counties in Florida, second quarter 2020

Area Employment Average Weekly AWW
June 2020 Wage (% of FL Avg)
United States 148,556,525 $1,188 115.1%
Florida 8,838,211 $1,032 100.0%
Alachua 134,446 $979 94.9%
Baker 7,588 $697 67.5%
Bay 74,725 $876 84.9%
Bradford 6,651 $773 74.9%
Brevard 221,776 $1,063 103.0%
Broward 819,355 $1,084 105.0%
Calhoun 2,858 $696 67.4%
Charlotte 47,750 $808 78.3%
Citrus 32,203 $739 71.6%
Clay 53,758 $827 80.1%
Collier 145,782 $1,018 98.6%
Columbia 24,856 $777 75.3%
De Soto 9,084 $783 75.9%
Dixie 2,790 $690 66.9%
Duval 525,212 $1,074 104.1%
Escambia 137,918 $893 86.5%
Flagler 24,047 $750 72.7%
Franklin 3,292 $660 64.0%
Gadsden 15,315 $784 76.0%
Gilchrist 3,636 $711 68.9%
Glades 1,882 $942 91.3%
Gulf 3,726 $803 77.8%
Hamilton 3,125 $884 85.7%
Hardee 6,637 $727 70.4%
Hendry 11,319 $793 76.8%
Hernando 45,147 $793 76.8%
Highlands 26,917 $725 70.3%
Hillsborough 707,966 $1,107 107.3%
Holmes 3,525 $679 65.8%
Indian River 52,297 $881 85.4%
Jackson 14,610 $749 72.6%
Jefferson 2,438 $676 65.5%
Lafayette 1,377 $711 68.9%
Lake 101,288 $793 76.8%
Lee 264,337 $946 91.7%
Leon 152,885 $927 89.8%
Levy 8,819 $694 67.2%
Liberty 1,889 $778 75.4%
Madison 4,534 $680 65.9%
Manatee 128,034 $876 84.9%
Marion 105,060 $795 77.0%
Martin 68,391 $894 86.6%
Miami-Dade 1,157,209 $1,109 107.5%
Monroe 40,374 $905 87.7%
Nassau 23,740 $860 83.3%
Okaloosa 85,664 $1,015 98.4%
Okeechobee 11,440 $790 76.6%
Orange 868,533 $1,051 101.8%
Osceola 99,833 $797 77.2%
Palm Beach 606,613 $1,138 110.3%
Pasco 122,676 $834 80.8%
Pinellas 438,378 $1,001 97.0%
Polk 228,343 $869 84.2%
Putnam 16,399 $820 79.5%
St. Johns 78,987 $911 88.3%
St. Lucie 79,878 $875 84.8%
Santa Rosa 40,191 $811 78.6%
Sarasota 169,540 $941 91.2%
Seminole 200,174 $1,033 100.1%
Sumter 31,503 $876 84.9%
Suwannee 11,411 $715 69.3%
Taylor 6,419 $829 80.3%
Union 3,399 $750 72.7%
Volusia 173,536 $855 82.8%
Wakulla 5,943 $795 77.0%
Walton 27,386 $817 79.2%
Washington 6,108 $725 70.3%

Note:Preliminary data for second quarter 2020.

Source: Source: https://www.bls.gov/regions/southeast/news-release/countyemploymentandwages_florida.htm#qcewflchart1



Notes

1.   John Wihbey, "Minimum wage: Updated research roundup on the effects of increasing pay," Journalist's Resources, Harvard Kennedy School, July 27, 2016.

2.   Michael R. Strain, "A $15 minimum wage would wreck US economic recovery," Bloomberg, October 20, 2020.

3.   Tampa Bay Times Editorial Board, "How Florida wound up with a $15 minimum wage | Editorial," Nov. 4, 2020.


  • "Will Miami, the Spanish-Speaking Capital of Latin America, Run Into Anglo Resistance?"
  • "Which Florida Counties are Growing the Fastest?"
  • "Florida Dodges the Hurricane Dorian Bullet"


  • This article explores and updates themes from Florida Dreams: All About the Amazing Rise of the Sunshine Mega-State (Amazon, 2019).

    Florida Dreams is available from Amazon.com.

    KindlePaperback