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Minimum wage: News of an increase in the employee minimum wage was announced at the beginning of the new year.
Workers in more than half of the states have been calling for higher pay for years, mainly because the federal minimum wage has stayed at $7.25 per hour since 2009.
Although a few states and cities have set their own rates, several are currently planning to increase the wage in 2023.
The news
This year, minimum wage increases were announced in 26 states.
According to US payroll analysts at Wolters Kluwer Legal & Regulatory, one more state will join the revision in July.
The Economics Policy Institute stated that 23 states, including Washington, DC, would begin implementing the higher compensation on January 1.
As a result, 8 million employees will be affected.
There will be price increases ranging from 23 cents to $1.50.
States implementing the minimum wage increase
- Delaware: $10.50 – $11.75
- Illinois: $12 – $13
- Maryland: $12.50 – $13.25
- Massachusetts: $14.25 – $15
- Michigan: $9.87 – $10.10
- Missouri: $11.15 – $12
- Nebraska: $9 – $10.50
- New Jersey: $13 – $14.13 (includes inflation adjustment)
- New York: $13.20 – $15 (in and around the city), $14.20 (upstate New York)
- Rhode Island: $12.25 – $13
- Virginia: $11 – $12
States that will implement the increase later this year
- Connecticut: $14 – $15 (July 1 implementation)
- Florida: $11 – $12 (September)
- Nevada: $9.50 – $10.25 (firms with benefits), $10.50 – $11.25 (firms without benefits)
- Oregon: $13.50 (July 1 implementation)
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Catalysts
The critical decision was made last summer when inflation hit a 40-year high and families struggled to keep up with rising costs.
Sebastian Martinez Hickey, an EPI research assistant, said:
“The fact that there’s high inflation really just underscores how necessary these minimum wage increases are for workers.”
“Even before the pandemic, there was no country in the United States where you could affordably live as a single adult at $15 an hour.”
The pandemic and the following economic recovery made the wealth divide in America glaringly obvious.
Over the past two years, labor movements and efforts by major companies to raise the minimum wage have been triggered by working conditions and poor compensation.
The pandemic also brought on a lasting imbalance between the supply and demand for labor.
Labor
Due to a staffing crisis, employers struggled to attract and retain workers for most of the year, increasing the average annual hourly wage.
Even when workers in competitive industries found their new earnings higher than inflation, most compensation was overtaken by rising prices.
The economics professor at the University of California, Michael Reich, stated:
“The story is different because wages have been increasing at the low-end, much faster than inflation and much faster than in middle- or high-wage jobs.”
“And that means that many workers, even in the $7.25 states, are already getting paid above the minimum wage.”
“Even though the minimum wage might go up by 7% in many states and cities, labor costs aren’t going to go up anywhere as much as they have in the past,” Reich added.
“Because they have already gone up. That also means that prices aren’t going to go up at [places like] restaurants.”
Impact
Campaigns were launched by US President Joe Biden to raise the minimum wage to $15 per hour.
In 2022, he signed an executive order raising the wages of federal workers and contractors to that amount.
However, Congress would need to approve any significant changes to the country.
Although an attempt was made to increase the rate, the law for the 2021 Covid-19 relief did not include it.
Kevin Werner, a research associate at the Income and Benefits Policy Center at the Urban Institute, said:
“As the gap between that and the federal minimum wage increases, it will be interesting to see if that can kind of spur more momentum for more states to increase their wages or try to get more momentum on the federal level.”
According to a September report from the Urban Institute, the $15 per hour pay adjustment would impact 56 million workers.
The study simulated two scenarios in which there were no job losses and two in which there were more job losses due to the new minimum wage.
“Even in our highest job loss scenario, we still found that on average, the average worker was better off, and that poverty declined overall,” said Werner.
“Even though some individual people who lost their jobs may have been worse off, the net effect was still positive.”
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Workers
According to Kevin Werner, the bulk of workers affected by a $15 minimum wage are older than 25.
The likelihood of relying on the minimum wage is higher for people of color and those in poverty.
Werner noted that struggling individuals would gain from raising the minimum wage nationally.
The CEO of Business for a Fair Minimum Wage, Holly Sklar, claims that raising the minimum wage can also increase consumer demand.
As a result, the local economy will be able to recover.
“Putting needed raises in minimum wage workers’ pockets [is] really the most efficient way you can boost the economy,” said Sklar.
“Those are the people who have to go right back around and spend it.”
References:
New Year’s pay boost: these states are raising their minimum wage
