When the clock strikes midnight tonight, 3.1 million workers in 20 states and the District of Columbia will get a raise. These raises will go to workers who currently earn a wage lower than the new minimum wage which will go into effect in their state on New Year’s Day. In New York, the raise went into effect today.
These increases in the minimum wage will lift the hourly wages of 2.4 million workers by up to $1 to an average of $8 and a high of $9.15, according to the Economic Policy Institute (EPI). In addition, an additional 700,000 people will benefit indirectly, as employers adjust the rest of their pay scales upward. In other words, if the minimum wage rises from $8 to $9, EPI assumes everyone currently earning $9 to $10 will get a raise so they continue to make more than the workers getting the new increase. A rising tide raises all boats.
The size of the pay hikes range from a low of 12 cents in Florida to $1.25 in South Dakota. Washington State’s increase will be highest going to $9.47. Oregon’s is next at $9.25, followed by Vermont and Connecticut at $9.15. Massachusetts and Rhode Island will now have $9 minimum wages. Several cities have already increased their minimum wage to $15 an hour.
The do-nothing Congress had nothing to do with these raises. In four of the states — Alaska, Arkansas, Nebraska and South Dakota — voters approved ballot initiatives in November to increase the minimum wage as they did earlier this year in several cities including Tacoma, Washington D.C., Seattle, Oakland and San Francisco. Los Angeles and Chicago are considering local increases as well.
In eight states and the District of Columbia— Connecticut, Delaware, Hawaii, Maryland, Massachusetts, Michigan, Minnesota, New York, Rhode Island, Vermont and West Virginia — the state legislature passed legislation in the 2014 session according to the National Conference of State Legislatures (NCSL), largely because strikes and protests by fast-food workers brought attention to the issue. Voters have not rejected a single ballot measure anywhere to raise the minimum wage in decades.
Of the states where voters or the legislatures raised the minimum wage, five—Alaska, Michigan, Minnesota, South Dakota, Vermont and D.C. — added provisions that will automatically adjust the wage annually based on inflation. In 9 other states, automatic cost-of-living increases enacted by voters or the legislature previously, will result in a pay raise. Fifteen states now increase the minimum wage automatically due to inflation. Colorado voters approved annual increases in 2006 so the minimum wage will increase 23 cents to $8.23, lower than what other states have enacted.
Data from payroll processor ADP shows that recently enacted minimum wage hikes have already resulted in faster earnings growth for low-end workers than higher-paid employees this year. This breaks a decades-long trend of incomes going up for higher paid workers faster than those at the bottom. With the new states coming on board, this trend may continue to improve the income gap between rich and poor.
About $1.5 billion will be pumped into the U.S. economy starting immediately because low-wage workers tend to spend most of their paychecks, the Economic Policy Institute estimates.
One argument against raising minimum wages that opponents always raise is that it will drive costs up for all consumers. That may not be true. A Wal-Mart spokeswoman, Brooke Buchanan, said Wal-Mart won’t raise prices because it “can absorb these costs.” This demonstrates that many businesses can absorb the wage increase because they will have more customers with more money to spend.
Republicans in Congress blocked President Obama’s efforts to increase the minimum wage last year. Voters and/or local elected officials across the nation stepped up and passed local legislation. The problem a state by state approach is that it results in a patchwork of pay rates, making it more difficult on employers and employees. But, there is zero chance that the new Republican Congress will do anything, so it will be left up to the people and states to deal with this important issue.
Nevertheless, millions of hard working families will have a better life this year because states acted. Now it is up to other states to step up and do the right thing.
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