Ten States Raising the Minimum Wage

Job dissatsifactionTen states ushered in the New Year with an increase to their minimum wages. The federal minimum wage has not increased since it was raised to $7.25 an hour in July 2009. At the same time, the cost of living has gone up and the value of that minimum wage has gone down.

According to the National Employment Law Project (NELP), the increases in these 10 states will result in a positive GDP impact of more than $180 million, and will directly or indirectly result in wage increases for nearly a million workers. Based on NELP's report, 24/7 Wall St. reviewed the 10 states that have raised minimum wages this year.

The minimum wage increases were not uniform across all states. Missouri's minimum wage rose from the federal minimum of $7.25 an hour by just 10 cents to $7.35 an hour. In most states, the increase was 14 or 15 cents. Rhode Island's minimum wage rose by 35 cents, more than double any other increase.

While some may believe that the minimum wage primarily affects the earnings of high school students taking summer jobs, in reality the majority of minimum wage positions are held by adults. In Florida, for example, nearly 90% of those workers affected by the state's 12 cent increase are 20-years of age and older. Of those workers, more than 85% work 20 hours or more per week.

In an interview with 24/7 Wall St., NELP policy analyst Jack Temple explained that in this post-recession era, the status of the minimum wage is more important than it has been in some time. "Growing numbers of adults are relying on minimum wage jobs to make ends meet," Temple said. "Service sector jobs, restaurant jobs, and retail jobs account for the bulk of job growth, and middle-wage, more unionized jobs are declining as a total share of the U.S. economy."

Because the recovery has resulted in more Americans relying on lower wages, and since the federal level has not increased in years, Temple explains that some states are looking at the minimum wage as a method of recovery. New York, for example, which is currently tied to the federal level of $7.25 an hour has legislation in play that would see the rate rise to $8.50 an hour. Temple also mentioned that campaigns to increase the minimum wage appear imminent in states like Maryland and Connecticut.

Based on NELP's release, "10 States to Increase Minimum Wage on New Years Day," 24/7 Wall St. reviewed each state that raised its minimum wage on January 1, 2013. NELP provided information on the states' minimum wage increases as well as on the demographics of workers affected by these increases. 24/7 Wall St. also reviewed unemployment and earnings data provided by the Bureau of Labor Statistics (BLS), as well as the Council for Community and Economic Research's (C2ER) Cost of Living Index.

10. Missouri
> Minimum wage increase: 10 cents
> New minimum wage: $7.35
> Directly affected workers: 72,000
> Average annual increase for directly affected workers: $190

At the start of 2013, Missouri's minimum wage was raised by 10 cents, to $7.35 an hour to adjust for the cost of living. Employees who rely on tips for much of their income also received a boost since their employers must now pay them at least half the minimum wage or more "if it is necessary to bring the employee's total compensation up to $7.35 per hour." With this increase, Missouri became one of 19 states with a minimum wage exceeding the federal minimum wage. And of those states, Missouri had the lowest cost of living as of the third quarter of 2012.

9. Florida
> Minimum wage increase: 12 cents
> New minimum wage: $7.79
> Directly affected workers: 195,000
> Average annual increase for directly affected workers: $370

A total of 210,000 workers are to benefit from Florida's minimum wage increase for 2013. Of those, 195,000 directly benefit from the increase in their hourly pay and 15,000 benefit indirectly as employers revise their pay scales to account for the new minimum wage. For the average directly affected worker, the 12 cent increase in hourly wages is projected to increase annual pay by $370. Florida's minimum wage hike primarily benefits adult workers. Nearly 90% of workers affected are 20-years of age and older, while 85.1% of those impacted work 20 hours or more. The state's minimum wage increase comes as its labor market is improving. Florida's unemployment rate fell from 10.1% in November 2011 to 8.1%

8. Colorado
> Minimum wage increase: 14 cents (tied-7th highest)
> New minimum wage: $7.78
> Directly affected workers: 57,000
> Average annual increase for directly affected workers: $300

In each of the last three years Colorado has raised its minimum wage. Over that time, the state's minimum wage has risen from $7.24 an hour in 2010 to $7.78 an hour in 2013, while the minimum tipped employee wage has risen from $4.22 to $4.76 an hour. Although the state's unemployment rate was identical to the national rate as of November 2012, at 7.7%, the job market remains stronger in Colorado than in many other states. Coloradans working in the private sector averaged $861 in weekly earnings, among the top in the U.S. The state's outlook for the future remains strong as well; the University of Colorado projected the state will experience strong, broad job growth in 2013.

7. Vermont
> Minimum wage increase: 14 cents (tied-7th highest)
> New minimum wage: $8.60
> Directly affected workers: 10,000
> Average annual increase for directly affected workers: $240

Following a 14 cent increase to $8.60 an hour, Vermont's minimum wage is one of the nation's highest. But as one of the nation's least populous states, Vermont's minimum wage increase is expected to impact, directly and indirectly, a total of just 11,000 workers. Also, only 65.1% of the workers who will see salaries rise work more than 20 hours per week, less than any other state raising its minimum wage. On average, minimum wage workers will have a $240 increase in annual pay - less than all states raising wages except Missouri.

6. Arizona
> Minimum wage increase: 15 cents (tied-2nd highest)
> New minimum wage: $7.80
> Directly affected workers: 64,000
> Average annual increase for directly affected workers: $320

Less than 3% of workers in Arizona are affected by the state's minimum wage increase. The majority of these are adult workers. Of the employees benefiting from the increase, 78% are over the age of 20, while 85.5% work over 20 hours per week. In September, Aruna Murthy, director of economic analysis for the state's Department of Administration, told the Arizona Daily Star that the majority of job growth in the state for the remainder of the decade would come from low-wage jobs. But because Arizona, like 9 of the 10 states raising minimum wages, adjusts its minimum wage rate for the cost of living, residents are likely to avoid the erosion of purchasing power expected for those relying on the minimum wage over the next decade.

5. Montana
> Minimum wage increase: 15 cents (tied-2nd highest)
> New minimum wage: $7.80
> Directly affected workers: 20,000
> Average annual increase for directly affected workers: $310

Montana's 15 cents cost of living adjustment to its minimum wage raised it to $7.80 in 2013.  There are few exceptions allowing businesses to avoid paying the minimum wage, which applies to all businesses with over $110,000 in gross annual sales. Additionally, according to the Montana Department of Labor & Industry, "no tip credit, meal credit or training wage is allowed in the state of Montana." But just 22,000 workers, or 5.7% of all workers, will see wages rise, directly or indirectly, as a result of the new minimum wage rate. Meanwhile, many Montanans continue to struggle. Private sector workers in the state earned the second lowest average weekly earnings, after Arkansas, at just $669 as of November.

4. Ohio
> Minimum wage increase: 15 cents (tied-2nd highest)
> New minimum wage: $7.85
> Directly affected workers: 199,000
> Average annual increase for directly affected workers: $340

In Ohio, an estimated 215,000 workers benefit from increasing minimum wage rates, more than in any other state. Among these workers, nearly 200,000 minimum wage workers will have their pay increase. Although less so than in most other states raising the minimum wage, the majority of employees affected by the minimum wage increase in Ohio work over 20 hours a week. Similarly, many of these workers are working adults, with 73.5% over 20-years of age and older. Raising wages by 15 cents per hour for such workers is projected to raise the state's GDP by over $43 million - the second largest increase after Florida.

3. Oregon
> Minimum wage increase: 15 cents (tied-2nd highest)
> New minimum wage: $8.95
> Directly affected workers: 83,000
> Average annual increase for directly affected workers: $410

At $8.95 an hour for 2013 Oregon has the second-highest minimum wage rate in the nation, trailing only Washington. The 15 cent increase is intended to offset an increasing cost of living. In announcing the 2013 rate, Oregon's Bureau of Labor and Industries Commissioner Brad Avakin stated, "our strong minimum wage law is essential insurance that Oregon workers and their families can maintain their purchasing power and continue to contribute to our local economies." No state's labor force is more affected by such an increase as it is in Oregon, where 8.3% of all workers will have their pay increase as a result of the minimum wage hike. Additionally, an estimated 86.1% of those affected are adults over the age of 20, more than any state but Florida. Because of the higher rate, minimum-wage workers are slated to earn an average of $410 more in 2013.

2. Washington
> Minimum wage increase: 15 cents (tied-2nd highest)
> New minimum wage: $9.19
> Directly affected workers: 144,000
> Average annual increase for directly affected workers: $310

Washington's minimum wage rate for 2013 is $9.19, higher than any other state in the U.S. The new 2013 rate is a 15 cent hike over 2012, when the state's became the first to require employers to pay a minimum wage of more than $9 per hour. The state's high minimum wage, which affects almost 6% of workers directly or indirectly, potentially helps to keep average weekly earnings high. According to the BLS, the average weekly earnings for employees in Washington was over $935 in November 2012, higher than any other state but Connecticut. A high inflation-adjusted minimum wage rate increase also helps protect the livelihood of working adults, as more than 80% of those affected by the increase are 20-years of age and older and another 80% work more than 20 hours a week.

1. Rhode Island
> Minimum wage increase: 35 cents
> New minimum wage: $7.75
> Directly affected workers: 11,000
> Average annual increase for directly affected workers: $510

Rhode Island is the only state that did not raise its minimum wage because of a legal requirement to make cost of living adjustments. Instead, the state legislature voted last year to raise its minimum wage for the first time in five years. At an increase of 35 cents, Rhode Island also raised its minimum wage by more than twice as much as any other state in the U.S. It is one of just three states where less than 70% of workers impacted by a minimum wage increase work at least 20 hours per week. Despite this, the average directly affected worker will earn an extra $510 in 2013 - largely due to the size of the wage increase. Additionally, much of the benefit of the new minimum wage is indirect. An estimated 18,000 workers will indirectly benefit – as minimum wage increases will indirectly benefit due to a higher minimum wage.


Filed under: 24/7 Wall St. Wire, Jobs, Labor Tagged: featured

Learn about investing from the comfort of your own home.

Portfolio Basics

Take the first steps to building your portfolio.

View Course »

Investment Strategies

Learn the strategies you need to build a winning portfolio

View Course »

Add a Comment

*0 / 3000 Character Maximum