Here’s where a minimum wage hike would do the most good E-mail Tweet Facebook Google Plus Linkedin Share icons by Claire Zillman, reporter" itemprop="author" class="article-byline-author"> Claire Zillman, reporter @FortuneMagazine June 20, 2014, 11:12 AM EDT Earlier this month, Vermont increased its minimum wage to $10.50 – the highest in the nation and the first statewide rate to exceed the $10.10 hourly rate advocated by President Barack Obama. While the raise is good news for workers in Vermont – the eighth state this year to boost its minimum wage – the Green Mountain State is actually one of the few states that didn’t need an increase. Even before last week’s hike, the state’s $8.73 minimum wage was the third-highest in the country, behind only Oregon and Washington, where workers earn at least $9.10 and $9.32 an hour, respectively. And the new wage will directly affect a relatively small number of people. Vermont had the one of the lowest total number of hourly worker in 2013 – 182,000 – second only to Wyoming’s 176,000, according to the Bureau of Labor Statistics. So, with Vermont clearly out of the running, which state needs a minimum wage increase the most? The Economic Policy Institute tried to answer this question by examining how many state residents would be directly affected by a minimum wage hike to $10.10 and what sort of state stimulus such a raise would produce. After crunching the numbers, there was a clear winner: Texas, where the current minimum wage is the federally mandated $7.25 an hour. Out of an estimated total workforce of nearly 11 million in Texas, a $10.10 minimum wage would directly affect 1.95 million people – in other words, that many Texans would get a raise because a $10.10 wage would surpass what they currently make. (Another 920,000 Texans would be indirectly affected since they make just above $10.10 and a minimum wage hike would likely adjust pay scales overall.) In no other state would that many residents be affected by a hike to $10.10 an hour. Florida is a distant second; just over 1 million of its residents would directly benefit from such a boost. What outpaces other states even more is the economic benefit that Texas would receive from a $10.10 minimum wage. The EPI estimates that the state would see a gross domestic product impact of $3.1 billion, that’s nearly $2 billion more than the potential stimulus in Florida — again the runner-up. It’s not just the total number of workers in Texas – the second most populous state in the U.S. – that puts the state in this position. It’s also the state’s incredibly large low-wage workforce. According to the Bureau of Labor Statistics, there are 400,000 workers in Texas whose hourly wage is at or below the federal standard of $7.25 – more than double that of any other state. While that’s a lot in absolute terms, it also represents a large portion of the state’s overall workforce: 6.4% — the fifth highest percentage in the country, behind Tennessee, Idaho, Arkansas and Alabama. So, what’s the matter with Texas? How did it get here? First off, the Lone Star State is one of 28 states that this year offers a minimum wage equivalent to the federal minimum wage of $7.25, abides by a lower rate, or has no minimum wage at all. States that have instituted a higher state minimum wage like, say, Vermont will automatically have fewer affected people should the federal minimum wage increase to $10.10. Another major reason: Texas’ unions — or lack thereof. Just 6% of the state’s workforce is unionized – the ninth lowest in the United States – due in large part to its status as one of the country’s 24 right-to-work states, which means workers cannot be compelled to join a union or pay its dues. Without union representation, workers can’t bargain collectively, which means that “all the market pressure is to push down on wages because you can’t get toehold in the labor market since [workers] have no way to enforce [their] rights,” says Lee Adler, of the School of Industrial and Labor Relations at Cornell University. A study released in 2011 found that the decline in unionization since 1973 has held down wages in union and nonunion workplaces alike. The dip in nationwide unionization has accounted for a third of the increase in wage inequality among men since 1973 and a fifth of the increased inequality among women, according to the study. Immigration also contributes to Texas’ large low-wage population, according to David Cooper, author of the EPI report. While economists have mixed opinions over what immigration means for U.S. employment and wages — some estimates imply that immigrant workers reduce the wages of low-skilled workers by 4.7% while others find that immigration raises the wages of all U.S. workers, according to the Brookings Institution – there’s little doubt that illegal immigrants are subject to sub-minimum wage pay and fear retaliation if they challenge it. “What’s historically true, whenever you have large numbers of immigrant workers – generally speaking – that means there’s a number of people who are undocumented,” Adler says. About 16.2% of Texas’ population was foreign born in 2012, according to Pew Research, up from 13.9% in 2000. “The overwhelming truth is that undocumented immigrant workers are extremely vulnerable to being exploited with low wages and unsafe working conditions,” says Adler. A 2009 study by the Center for Urban Economic Development at University of Illinois at Chicago found that 47.5% of foreign born unauthorized female workers reported being a victim of minimum wage violations compared to 24.2% and 16.1% of their authorized immigrant and U.S.-born counterparts, respectively. Education, too, is a factor. In Texas, 34.5% of adults have an associate’s degree or higher, according to a 2012 survey by the Working Poor Families Project, compared to 39.9% nationwide in 2012, which breeds a low-skilled, low-wage workforce, says Leslie Helmcamp, a policy analyst at the Center for Public Policy Priorities, a nonpartisan policy institute in Austin, Texas. As children in Texas grow up poor, post-secondary education and higher skilled jobs fall out of reach. “Six in 10 kids in the state are economically disadvantaged; they’re very low-income so their families lack the resources for college,” Helmcamp says. Low-wage work becomes cyclical, generation after generation. And let’s not forget that for the last 14 years, Texas has been run by Governor Rick Perry, who doesn’t believe in a federal minimum wage, let alone a higher one for his state. Though Texas will get a new governor next year, the candidate who’s voiced support for a $10.10 minimum wage, Democratic Wendy Davis, is trailing opponent Greg Abbott, a staunch conservative. Meanwhile, a bill to boost the current $7.25 federal rate is, for now, nothing more than a pipe dream. The numbers may make a good case for a minimum wage hike in Texas, but that’s not likely enough. Editor’s note: A previous version of this story incorrectly stated the percentage of Americans who have an associate’s degree or higher. The correct figure is 39.9%.