Minimum Wage

Jennifer Burnett, CSG Program Manager, Fiscal and Economic Development Policy, outlines the top five issues for 2014 related to fiscal and economic development policy, including pervasive federal instability, a sluggish recovery, soaring health care costs, a stagnant labor market and new demands on state resources for economic development.

In President Obama’s recent State of the Union address, economic equality and opportunity were prevalent themes, particularly the financial woes of those earning the minimum wage. “Even with the tax relief we’ve put in place, a family with two kids that earns the minimum wage still lives below the poverty line. That’s wrong,” the president said. “Let’s declare that in the wealthiest nation on earth, no one who works full time should have to live in poverty.” He then called on Congress to raise the federal minimum wage to $9/hour by the end of 2015 and tie it to inflation, a move the White House estimates would bump up the wages of about 15 million low-income workers.

A number of states are considering raising their minimum wages this year and/or tying those wages to an inflationary measure. Proponents of raising state minimum wages argue that while the federal rate has remained stagnant (it hasn’t increased since 2009), the costs for housing, food, utilities and health care have continued to climb, leaving those earning the minimum wage with less money to afford the basics, which in turn puts downward pressure on the demand for goods and services. Opponents warn that raising the wage now would have a negative impact on businesses – especially during anemic economic times – and that a minimum wage hike actually hurts those that it intends to help by forcing employers to cut jobs at the low end of the pay scale.

Colorado, Montana, Ohio, Washington and Oregon have each announced increases to their 2012 minimum wages, according to CNN. The triggered increases range from 28 cents to 37 cents per hour. These four states and six others (AZ, FL, MO, NV, OR, and VT) have minimum wages that are linked to inflation (the consumer price index), which means the minimum wage is normally increased each year according to the Department of Labor.  In January 2011, seven of the ten trigger states increased their wages - the three exceptions being Florida, Missouri and Nevada.