States Consider Minimum Wage Hikes

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.

Minimum Wage Basics

The federal minimum wage currently sits at $7.25/hour. Someone working at that rate for 40 hours a week for 52 weeks a year earns $15,080. In 2011, 59.1 percent of all wage and salary workers (age 16+) were paid at hourly rates. Of those paid by the hour, 3.8 million workers earned wages at or below[1] the minimum, equal to 5.2 percent of all hourly-paid workers.

Georgia (9.6 percent), Mississippi (8.5 percent) and Texas (8 percent) are the states with the highest proportions of hourly-paid workers earning at or below the federal minimum wage while workers in Oregon (1.2 percent), California (1.6 percent) and Washington (1.8 percent) are more likely to earn more than the federal minimum.


Federal Minimum Wage, Nominal and Real, 1978-2012

Author's calculations using U.S. Department of Labor historical federal minimum wage and the Consumer Prices Index to adjust for inflation. Real wages are inflation-adjusted to 2012 wages. 


Although most states establish their own minimum wages legislatively (5 states – Alabama, Louisiana, Mississippi, South Carolina and Tennessee – don’t have an established minimum wage requirement), federal minimum wage law supersedes state law. That means if the minimum wage established by the state is higher than the federal rate, the state rate applies. If the state’s minimum rate is lower than the federal rate, the federal rate applies.

According to the Bureau of Labor Statistics[2], there are only 4 states – Arkansas, Georgia, Minnesota and Wyoming – that have a minimum wage set below the federal rate. In those states, federal requirements supersede state requirements and the federal rate of $7.25/hour applies. Twenty-three states have a minimum wage that is the same as the federal rate.


Current State Minimum Wages

Source: U.S. Department of Labor, Bureau of Labor Statistics, http://www.dol.gov/

 


Eighteen states plus D.C. have rates higher than the federal rate, ranging from a low of $7.40/hour in Michigan and Rhode Island to a high of $9.04/hour in Washington.

In 10 states (Arizona, Colorado, Florida, Missouri, Montana, Nevada, Ohio, Oregon, Vermont, and Washington) minimum wages are linked to a consumer price index.  For these states, the minimum wage is usually increased each year, generally around the first of the year. For example, on January 1, 2012, eight of these states increased their wages: the two holdouts were Missouri and Nevada.


State Minimum Wage in the News

California: A bill now in committee would tie the state’s rate to inflation. The minimum wage in California currently sits at $8 an hour – 75 cents an hour higher than the federal rate. Read More: Miami Herald

Connecticut: Members of Connecticut’s General Assembly’s appropriations committee recently approved a bill to raise Connecticut’s minimum wage by $1 an hour over the next two years (currently $8.25). Read More: CT Post

Illinois: This week, the Illinois General Assembly will hear a bill from Sen. Kimberly Lightford to raise the state minimum wage to just more than $10 an hour. Less noticed but far more significant is a provision in the bill that would more than the double the present hourly wage for tipped employees. Read More: Chicago Tribune

Massachusetts: A Massachusetts legislative committee passed a bill to increase the state’s minimum wage to $10 an hour, which would make it the highest minimum wage in the country, just above Washington’s rate of $9.04 an hour. Read More: Patriot Ledger

Missouri: In Missouri, voters may get a chance in November to vote on a ballot initiative that would raise the state’s minimum wage to $8.25 an hour in January 2013 and keep the rate moving up in future years by being tied to inflation.  Read More: Columbia Daily Tribune 

New Jersey: If signed into law, a bill adopted by the state Senate last month would raise New Jersey’s minimum wage from $7.25 to $8.50 an hour – the first increase for the state in seven years. Read More: NJ.com

New York: Senator Jeffrey D. Klein is currently sponsoring legislation with Assemblyman Keith Wright and Assembly Speaker Sheldon Silver to raise the minimum wage to $8.50/ hour and then link the rate to inflation beginning in January 2014 – a practice that 10 states currently have in statute. Read More: WNYC.org

 


[1] 2.2 million people earned below the minimum wage in 2011, which could be due to Fair Labor Standards Act violations or due to permitted exemptions to the minimum wage law.

[2] As of January 1, 2012