Public Policy Corner: New ANCOR Research Examines Impact of Raising the Federal Minimum Wage

by Donna Martin, ANCOR

During the early months of the Biden administration, there was a strong push among House and Senate Democrats to raise the federal minimum wage from the current rate of $7.25 per hour to $15 per hour. Despite this initiative having been dropped during the American Rescue Plan negotiations, ANCOR anticipates that the conversation will continue and wanted to be equipped with credible and detailed data on the impact to providers, state budgets, and Medicaid funding in general.

With this in mind, ANCOR contracted with Stephen Pawlowski from Burns & Associates, a division of Health Management Associates (HMA-Burns), to provide policymakers with information about the costs providers will incur if the federal minimum wage increases. HMA-Burns conducted a literature review of the economic effects of an increased minimum wage, and from that research developed a formula to quantify the impact of a higher minimum wage on current wages. That enabled us to develop state-by-state estimates.

Specifically, the research concludes that “a $15 federal minimum wage would increase service providers’ costs by nearly $10 billion. Based on current laws regarding states’ financial responsibilities for Medicaid costs, the states’ share of this expense would be $3.9 billion.” The research went on to describe that there is “substantial variability in the state-by-state impact based primarily on each state’s current minimum wage.” While the report analyzes the fiscal impact, it does not weigh in on whether or not a $15 per hour wage is an appropriate wage rate for the scope of direct support professionals’ job responsibilities. Our own experience leading the industry, however, confirms that direct support would should not be considered a minimum-wage occupation.

Read and download the report today!

Donna Martin is the Director of State Partnerships & Special Projects at ANCOR.