More than half of states set to have a minimum wage higher than the federal minimum
In his 2014 State of the Union address, President Obama called for an increase in the federal minimum wage, from $7.25 to $10.10 an hour. Although Congress did not pass minimum wage legislation in 2014, a number of states have taken action and others likely will address this issue in 2015. The Council of Economic Advisers estimates that from 2013 to 2017, about 7 million workers will benefit from minimum wage increases enacted by state and local governments.1
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Raising the minimum wage remains a significant concern for both state and federal legislators, but the issue remains controversial.
- 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. This leaves those earning 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 it intends to help by forcing employers to cut jobs or hours at the low end of the pay scale.
Millions of workers across the country earn the minimum wage or less.2
- Someone earning the federal minimum wage of $7.25 per hour for 40 hours a week for 52 weeks a year earns $15,080, just below the poverty level for a two-person household.
- An estimated 3.6 million people—or 4.7 percent of all hourly paid workers—made at or below the federal minimum wage in 2012.
- About 2 million people earned below the minimum wage in 2012. That could be due to Fair Labor Standards Act violations or permitted exemptions to the minimum wage law.
- Idaho (7.7 percent), Texas (7.5 percent) and Oklahoma (7.2 percent) have the highest proportion of hourly paid workers earning at or below the federal minimum wage.
- On the other end of the scale, 1 percent of workers in Alaska earn at or below the minimum wage—the smallest percentage of any state—followed by Oregon (1.1 percent) and California (1.4 percent).
The young and the undereducated are more likely to earn the minimum wage, although those older than 25 make up a significant portion of the people earning at or below the minimum wage.3
- In 2012, half of those earning at or below the minimum wage were ages 16-24. About 24 percent of those earning minimum wage were 16-19, which means 76 percent of those earning minimum wage were older than 20.
- Those without a high school diploma were more than twice as likely to be in a minimum wage job than high school graduates in 2012. About 10 percent of hourly paid workers without a high school diploma earned the federal minimum wage or less last year, compared to about 4 percent of those who had a high school diploma with no college and about 2 percent of college graduates.
- Women made up 64 percent of minimum wage earners in 2012.
Wage floors vary throughout the country, as some states set their rate higher than the federal minimum.4
- Although most states establish their own minimum wages legislatively, federal minimum wage law supersedes state law. That means if the minimum wage established by a state is higher than the federal rate, the state rate applies. If a state’s minimum rate is lower than the federal rate, the federal rate applies.
- Five states—Alabama, Louisiana, Mississippi, South Carolina and Tennessee—don’t have an established minimum wage requirement.
- Only three states—Arkansas, Georgia and Wyoming—have a minimum wage set below the federal rate.
- Nineteen states have a minimum wage that is the same as the federal rate.
- Twenty-three states5 have a minimum wage set higher than the federal rate of $7.25, ranging from $7.50 in Maine, Missouri and New Mexico, to $9 in California, $9.10 in Oregon and $9.32 in Washington.
Ten states link their minimum wage to some measure of inflation and at least five states will start doing so in the future.
- Ten states—Arizona, Colorado, Florida, Missouri, Montana, Nevada, Ohio, Oregon, Vermont and Washington—link their minimum wages to a consumer price index. For these states, the minimum wage usually is increased each year, generally around the first of the year.6
- Each of these states, except for Nevada, increased their wages on Jan. 1, 2014.
- New Jersey will join this list in 2015. In 2013, voters approved a ballot question that raised the minimum wage and tied future increases to inflation, with those increases taking effect Jan. 1, 2015. Alaska will begin the practice in 2017, Michigan in 2019, Minnesota in 2018 and South Dakota in 2016.
As of Jan. 1, 2014, the minimum wage increased over 2013 rates in 13 states—Arizona, Colorado, Connecticut, Florida, Missouri, Montana, New Jersey, New York, Ohio, Oregon, Rhode Island, Vermont and Washington.7
- Increases ranged from 10 cents an hour in Arizona, Montana and Ohio, to $1 an hour in California and New Jersey.
- For nine states, the minimum wage increased because the rate was linked to inflation. In four states—Connecticut, New Jersey, New York and Rhode Island—the increase was due to legislative action.
- Since Jan. 1, 2014, the minimum wage has increased in four states—California (from $8 to $9), Delaware (from $7.25 to $7.75), Michigan (from $7.40 to $8.15), and Minnesota (from $7.25 to $8). New York will raise its wage from $8 to $8.75 on Dec. 31, 2014.
Ten states enacted minimum wage increases during the 2014 legislative session: Connecticut, Delaware, Hawaii, Maryland, Massachusetts, Michigan, Minnesota, Rhode Island, Vermont and West Virginia.
- Connecticut—Raises the state’s minimum wage in three increments from $8.70 to $10.10 by 2017. Under previous law, Connecticut’s minimum wage was scheduled to increase from $8.70 to $9 on Jan. 1, 2015. Under legislation passed in 2014, the wage instead will increase to $9.15 on Jan. 1, 2015, then to $9.60 on Jan. 1, 2016, and $10.10 on Jan. 1, 2017.
- Delaware—Raises the state’s minimum wage from $7.25 to $8.25 in two increments by 2015—to $7.75 on June 1, 2014, then to $8.25 on June 1, 2015.
- Hawaii—Raises the state’s minimum wage from $7.25 to $10.10 in four increments by 2018: to $7.75 on Jan. 1, 201;, $8.50 on Jan. 1, 2016; $9.25 on Jan. 1, 2017, and $10.10 on Jan. 1, 2018.
- Maryland—Raises the state’s minimum wage in five increments from $7.25 to $10.10 by 2018: to $8 on Jan. 1, 2015; $8.25 on July 1, 2015; $8.75 on July 1, 2016; $9.25 on July 1, 2017, and $10.10 on July 1, 2018.
- Massachusetts—Raises the state’s minimum wage from $8 to $11 in three increments by 2017: to $9 on Jan. 1, 2015; $10 on Jan. 1, 2016, and $11 on Jan. 1, 2017.
- Michigan—Raises the state’s minimum wage from $7.40 to $9.25 in four increments by 2018: to $8.15 on Sept. 1, 2014; $8.50 on Jan. 1, 2016; $8.90 on Jan. 1, 2017, and $9.25 on Jan. 1, 2018. Starting in 2019, the state’s minimum wage will be adjusted for inflation—increasing annually by up to 3.5 percent, unless state unemployment is 8.5 percent or more in the previous year.
- Minnesota—Raises the state’s effective minimum wage for large employers (annual sales of more than $625,000) from $7.25 to $9.50 in three increments by 2016: to $8 on Aug. 1, 2014; $9 on Aug. 1, 2015, and $9.50 on Aug. 1, 2016. In addition, the state’s minimum wage will be indexed to inflation beginning in 2018.
- Rhode Island—Raises the state’s minimum wage from $8 to $9 on Jan. 1, 2015.
- Vermont—Raises the state’s minimum wage from $8.73 to $10.50 in four increments by 2018: $9.15 on Jan. 1, 2015; $9.60 on Jan. 1, 2016; $10 on Jan. 1, 2017, and $10.50 on Jan. 1, 2018. After 2018, the state’s minimum wage will be indexed to inflation and adjusted annually.
- West Virginia—Raises the state’s minimum wage from $7.25 to $8 on Jan. 1, 2015, and to $8.75 on Jan. 1, 2016.
On Jan. 1, 2015, minimum wage workers in 20 states will get a raise and more than half of states—29 —will have a higher minimum wage than the federal wage. In addition, minimum wage workers in at least three more states are scheduled to see a wage increase throughout the rest of 2015.
- On Jan. 1, 2015, seven states8 - Connecticut, Hawaii, Maryland, Massachusetts, Rhode Island, Vermont and West Virginia—are scheduled to raise their minimum wages due to legislative activity.
- Maryland will raise its wage a second time in 2015, on Sept. 1, 2015. Three additional states are scheduled to raise their wages throughout the year: Delaware (June 2015), Minnesota (August 2015) and New York (December 2015).
- Nine states—Arizona, Colorado, Florida, Missouri, Montana, New Jersey, Ohio, Oregon and Washington—are scheduled to increase wages on Jan. 1, 2015, due to inflation adjustments.9
- Four states—Alaska, Arkansas, Nebraska and South Dakota—will raise their wages on Jan. 1, 2014, due to ballot measures that passed in November 2014.
On Nov. 4, 2014, voters in four states—Alaska, Arkansas, Nebraska and South Dakota—decided to give minimum wage workers in their state a raise.10
- Alaska: Increases the state’s minimum wage from $7.75 to $8.75 on Jan. 1, 2015, and to $9.75 on Jan. 1, 2016. In addition, the state’s wage will be adjusted for inflation every year after 2016 or remain at least $1 per hour higher than the prevailing federal minimum wage—whichever is higher.
- Arkansas: Increases the state’s minimum wage from $6.25 to $8.50 by 2017 in three increments: to $7.50 on Jan. 1, 2015; $8 on Jan. 1, 2016, and $8.50 on Jan. 1, 2017.
- Nebraska: Increases the state’s minimum wage from $7.25 to $9 in two increments by 2016: to $8 on Jan. 1, 2015 and to $9 on Jan. 1, 2016.
- South Dakota: Increases the state’s minimum wage from $7.25 to $8.50 on Jan. 1, 2015, and adjusts the wage for inflation every year thereafter.
 Executive Office of the President, “A Year of Action: Progress Report on Raising the Minimum Wage,” August 2014, http://www.whitehouse.gov/sites/default/files/docs/minimum_wage_report2.pdf
 Minnesota, Missouri, Montana, Ohio and Oklahoma differentiate the minimum wage for employers (beyond any federal exemptions) that don’t meet certain thresholds or other criteria (minimum sales volume, number of employees, etc.). In Nevada, the minimum wage is $7.25 if health insurance benefits are provided by the employer and $8.25 if no benefits are provided.
 Nevada generally makes adjustments in July, but did not make an inflation adjustment to its minimum wage in 2014.
 U.S. Department of Labor
 New York’s increase goes into effect on Dec. 31, 2014.
 Vermont will resume annual inflation adjustments after 2018, following a series of raises from legislative activity that will increase the state’s minimum wage from $8.73 to $10.50 by 2018 in four increments.
 In addition to these four states, an advisory question on the ballot in Illinois asked if voters supported raising the minimum wage in their state to $10 per hour, which passed. The advisory question is a nonbinding referendum.