Minimum Wage

States in 2014 will be addressing increasingly difficult labor issues, including concerns over raising the minimum wage. President Obama and some members of Congress have called for an increase in the federal minimum wage, but some states already have taken action. Legislators and voters in five states decided to raise the minimum wage in 2013 and more states are likely to consider the issue in 2014.

The minimum wage reached its peak—when adjusted for inflation—in 1968 when it was raised from $1.40 to $1.60. That’s equal to $10.74 in 2013 dollars, or $3.49 per hour more than the current federal rate of $7.25. For comparison, someone working full time and earning the current federal minimum wage has an annual salary of $15,080. If the minimum wage had kept pace with inflation since 1968, that same person would be earning an annual salary of $22,339—a 48 percent raise. Although 21 states currently have a minimum wage set higher than the federal rate, the state with the highest rate—Washington—still falls more than a dollar shy of hitting the inflation-adjusted high of 1968. 

According to a national review by The Associated Press, state legislators are pushing minimum wage increases in at least 30 states. In addition, the president is expected to highlight the need for a wage hike in his State of the Union address tomorrow. Currently, 21 states have a minimum wage set higher than the federal rate, ranging from a low of $7.40 per hour in Michigan and $7.50 in Maine, Missouri and New Mexico to a high of $9.32 per hour in Washington state.

Last week, a group of economists, through the Economic Policy Institute, released a letter urging the president and congressional leadership to raise the minimum wage. The federal minimum wage is currently $7.25 and hasn't been revised since 2009. The letter states: “July will mark five years since the federal minimum wage was last raised. We urge you to act now and enact a three-step raise of 95 cents a year for three years—which would mean a minimum wage of $10.10 by 2016—and then index it to protect against inflation.”

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Ohio’s minimum wage increased at the start of 2014, the result of an automatic inflationary increase that has been part of the state’s Constitution since voters approved the measure in 2006. This built-in cost-of-living increase is the only minimum-wage law of its kind in the 11-state Midwest. A similar proposal will be decided by South Dakota voters in November. It calls for an increase from $7.25 an hour to $8.50 with annual cost-of-living increases. The minimum wage for tipped employees would be half that for...