July 2, 2022

DS Duke

Global Business In World

Twenty-one states raised their minimum wages on New Year’s Day: Federal action is still needed

5 min read
On January 1, minimum wages went up in 21 states. The increases range from a...

On January 1, minimum wages went up in 21 states. The increases range from a $0.22 inflation adjustment in Michigan to a $1.50 per hour raise in Virginia, the equivalent of an annual increase ranging from $458 to $3,120 for a full-time, full-year minimum wage worker. The updates can be viewed in EPI’s interactive Minimum Wage Tracker and in Figure A and Table 1 below.

In prior years, we have estimated the number of workers who would directly benefit from these increases, as well as the total dollar amount and average wage increase for affected workers in each state. Unfortunately, ongoing data challenges resulting from the COVID-19 pandemic make it difficult to accurately produce estimates of this year’s increases. The pandemic devastated labor markets throughout the country, with a large share of the job losses occurring in low-wage sectors, such as leisure and hospitality, where minimum wage hikes typically affect large shares of workers. Job levels in those sectors have rebounded somewhat over the past year, but that job growth has also been accompanied by stronger than usual wage growth, which—all else equal—will reduce the number of workers affected by minimum wage hikes, since would-be affected workers were already receiving wages at or above the new minimum. Because conditions in these industries are so different from what they were in the period reflected in our model’s underlying (pre-pandemic) data, we cannot use it to make estimations about effects happening right at this moment.

Even so, we know that minimum wage increases are as crucial as ever in the current context—to protect low-wage workers from exploitation and continue toward the goal of a living wage for all workers. From a macroeconomic perspective, it’s smart policy: Low-wage households—who disproportionately benefit from increases to the minimum wage—are highly likely to quickly spend the extra dollars they receive, bolstering consumer demand as the economy continues to recover.

Figure A

State minimum wage increases

The January 1 increases in 11 states—California, Delaware, Illinois, Maryland, Massachusetts, Michigan, New Jersey, New Mexico, Rhode Island, Vermont, and Virginia—are the result of legislation passed by state lawmakers to raise their state’s wage floors.

In Missouri, the January 1 raise results from a ballot measure passed by the state’s voters.

In nine states, the changes are the result of automatic annual inflation adjustments. Arizona, Colorado, Maine, Minnesota, Montana, New York, Ohio, South Dakota, and Washington all have provisions in their state minimum wage laws that require the wage be adjusted annually to reflect changes in prices over the preceding year. Doing so ensures that the minimum wage never declines in purchasing power, and workers paid the minimum wage can afford the same amount of goods and services year after year. The District of Columbia also has such a provision, updating its minimum wage each July. Eight other states have enacted similar automatic adjustment provisions in their minimum wage laws that will begin after their minimum wages reach a higher statutory level in the coming years.

Table 1

Table 1

In addition to the increases that took effect in 21 states on January 1, four other states (Connecticut, Florida, Nevada, and Oregon) and the District of Columbia have minimum wage increases scheduled to occur later in 2022.

Local minimum wage increases

Currently, 39 localities—cities and counties—have minimum wages that are higher than their state minimum wage. These range from $12.32 in Santa Fe, New Mexico, to $17.54 in SeaTac, Washington.

Of these, 26 raised their minimum wages on January 1.i Table 2 shows these New Year’s Day increases.

Table 2

Table 2

Thirteen more of these 39 cities and counties are slated to raise their minimum wages later in 2022: Berkeley, Emeryville, Fremont, Milpitas, and San Francisco, California; Chicago and Cook County, Illinois; Montgomery County, Maryland; Minneapolis and St. Paul, Minnesota; Portland Urban Growth Boundary, Oregon; and Santa Fe City and Santa Fe County, New Mexico.iiCurrent minimum wages and information about upcoming wage increases for all states and localities can be viewed in EPI’s Minimum Wage Tracker.

The federal minimum wage and the Raise the Wage Act

The federal minimum wage has been stuck at $7.25 for more than a decade. Since it was last raised in July 2009, the minimum wage’s purchasing power has declined by more than 21%, leaving millions of workers and their families with paychecks that may no longer afford the things they need.

In response to federal inaction, an increasing number of states have raised their own minimum wages above the federal level. So far, 30 states have a minimum wage that is higher than the federal minimum wage. These range from $8.75 in West Virginia to $15 in California. The District of Columbia has a $15.20 minimum wage. These measures have helped millions of low-wage workers see larger paychecks, as research shows that wage growth for low-wage workers has been markedly faster in states that have raised their minimums.

In the 20 remaining states, the federal minimum wage applies. Half of these states are in the South. Only four out of 14 Southern states have a state minimum wage higher than $7.25—Arkansas ($11), Florida ($10), Virginia ($11), and West Virginia ($8.75).

Eleven states—California, Connecticut, Delaware, Florida, Illinois, Maryland, Massachusetts, New Jersey, New York, Rhode Island, and Virginia—have passed legislation or ballot measures to gradually raise their state minimum wages to $15 an hour. California was the first of these states to reach $15, on January 1, 2022. The District of Columbia’s minimum wage now exceeds $15 an hour. In addition, Washington State’s minimum wage is expected to rise above $15 an hour in the next two years via inflation adjustments.

With consumer prices rising substantially over the past year, the need for a higher federal minimum wage is more acute than ever—and the longer Congress waits to enact an increase, the larger that increase will need to be to establish an adequate wage floor. The Raise the Wage Act of 2021—a bill that would raise the federal minimum wage to $15 by 2025—would finally set the country’s minimum wage on the path to livable wage, achieving a policy goal that economic and racial justice advocates have been demanding for over 50 years. As economic research continues to show that higher minimum wages work precisely as they’re intended—lifting pay for low-wage workers with little, if any, impact on their job prospects—there is no excuse for lawmakers to let the federal minimum wage continue to languish.

Notes

i. This includes Nassau, Suffolk, and Westchester Counties in New York, grouped together as one locality in Table 2. These counties have minimum wages higher than upstate as a result of state law, not individual county-level ordinances.

ii. Five additional localities (all in California) have a minimum wage that is currently the same as the state minimum wage, but local ordinances specify inflation adjustments later in the year that are expected to raise these above the California state minimum wage. When that happens, the total number of localities with minimum wages higher than their state minimum wage will be 44.

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