The year 2023 will usher in sweeping minimum wage increases across the country. Twenty-seven states are increasing their minimums, many on the first day of the new year.
Inflation is one of the main reasons for the increases. According to the consumer price index, issued monthly by the Bureau of Labor Statistics, national inflation rose to 8.3% between August 2021 and August 2022. Eleven states have statutory requirements for raising minimum wages in line with an inflation measure such as the index. In Arizona, for example, the hourly minimum wage will increase $1.05 to $13.85 from $12.80, or about 8.2%. Other states raising wages due to inflation include Alaska, Colorado, Maine, Minnesota, Montana, New Jersey, Ohio, South Dakota, Vermont and Washington. The nation’s capital, Washington, D.C., will also raise its minimum wage in accordance with inflation.
Legislative action or voter-approved measures in recent years are leading other states to increase their minimum wages. Nine states have statutory requirements to raise hourly wages to $15 over time; another three have requirements to reach $12. States raising minimum wages according to previous requirements include Connecticut, Delaware, Florida, Illinois, Maryland, Massachusetts, Rhode Island and Virginia.
In California, 2017 legislation increased the minimum wage for all workers to $15 by 2023. Currently, the minimum wage in California is $14 for employers with 25 or fewer employees and $15 for those with 26 or more employees. The state can raise the minimum wage by up to 3.5% if inflation, as measured by the CPI, is over 7% year to year. The small employer increase and inflation increase are happening in tandem.
Hawaii recently set its minimum wage at $18, the highest in the United States. The gradual increase will start this year and reach the full amount by 2028. Michigan is in a legal battle to determine whether a $12 minimum wage will go into effect in February. Oregon and New York will also raise their minimums but have different systems than some other states.
Oregon’s standard minimum wage rises based on increases in the CPI, but rural and urban areas have different wages in relation to the standard minimum. The Portland metro area is set at $1.25 above the standard wage, and nonurban counties are set $1 below the standard wage.
New York passed a $15 minimum wage in 2016. Like Oregon, the legislation divided New York into regions with different wage rates. New York City, Long Island, and Westchester County are currently at $15. The rest of the state is at $13.20, with increases required until it reaches $15. The increases are decided by the director of the Division of the Budget. New York also has different minimum wages based on industry.
Federal Minimum Wage
The current federal minimum wage is $7.25, where it has remained since the last increase in 2009. Twenty states use the federal standard as their minimum wage. There have been many arguments for and against raising wages at the federal level. Proponents say raising wages will bring millions out of poverty, while opponents worry about widespread job loss and the impact on inflation. The House of Representatives passed legislation in 2019 to raise the minimum wage, but the bill died in the Senate. Similar legislation has been introduced since but hasn’t moved passed preliminary stages.
In addition to increasing the federal minimum wage, there are ideas to create regional minimums instead. A measure introduced in the House in 2019 would split the country into five regions based on “regional price parity,” also understood as cost of living. The goal of the bill would be to account for price discrepancies between rural, urban and suburban communities on the federal level.
Upcoming Ballot Initiatives
There are three ballot initiatives this year directly addressing minimum wage. Nebraska will vote on raising its minimum wage to $15 from $9 by 2026. After 2026, future increases would be tied to data from the consumer price index. Nevada voters will decide if they want to standardize their minimum wage to $12 regardless of benefits provided to employees, as well as remove provisions for adjusting the minimum wage to cost-of-living increases. Washington, D.C., residents will decide if they want to phase out the tipped minimum wage by 2027.