STATE MINIMUM WAGE
WHAT IS A STATE MINIMUM WAGE AND WHY IS IT IMPORTANT?
A minimum wage establishes a floor for workers’ hourly wages to prevent exploitation by employers and ensure a minimum level of compensation. The current federal minimum wage stands at $7.25, but states can establish higher thresholds.1 Currently, 31 states have a minimum wage that is higher than the federal level, with the District of Columbia, California, and a number of large cities already at $15.00 or greater.2
A state’s subminimum wage refers to the floor set for tipped workers, workers with disabilities, or teenage workers early in their employment, who may be exempt from the federal minimum set by the Fair Labor Standards Act (FLSA).3,4 The FLSA defines tipped workers as those who regularly receive more than $30.00 per month in tips.5 States can increase their subminimum wage for tipped workers above the federal floor (currently at $2.13 per hour). A tiered system with a subminimum wage for tipped workers has been shown to contribute to poverty6 and unpredictable earnings.7
States Vary Significantly in Their Cost of Living and the Purchasing Power of Their Minimum Wage
The cost of living (i.e., the amount of money required to maintain a standard of living) varies significantly across the country because of regional differences in consumer prices. This variation means that a nominal wage (wage not adjusted for inflation) of $10.00 in two different states may buy a family more in one state than another. A nominal wage can be converted into a real wage by accounting for inflation or a cost-of-living adjusted (COLA) wage, which incorporates state price differences. A COLA wage offers a way to compare purchasing power more consistently across states. For example, Hawaii’s prices are 12.0% higher than the national average, whereas Mississippi’s prices are 12.2% lower than the national average.8 It can therefore be beneficial to compare Hawaii’s minimum wage in terms of real purchasing power, $10.71 (nominal minimum wage of $12.00 in 2022), to Mississippi’s minimum wage in terms of real purchasing power, $8.26 (nominal minimum wage of $7.25 in 2022). Examining both a state’s nominal minimum wage and COLA minimum wage is therefore critical when making policy.
Higher State Minimum Wages Can Improve Child and Family Outcomes Through Greater Access to Resources
Higher state minimum wages can result in higher incomes, which can help families more easily access essential resources such as housing, food, health care, and transportation.9 Greater access to basic needs can reduce parental stress, which may improve a child’s caregiving environment and reduce the likelihood that an infant or toddler will experience abuse, neglect, or other adverse experiences at home.10
The Current Federal Minimum Wage Does Not Lift a Full-Time Worker Supporting a Family Out of Poverty
With the current federal minimum wage of $7.25 per hour and a 40-hour work week for 52 weeks per year, an individual working full-time earns $15,080 annually, which is below the federal poverty level (FPL) for two-, three-, and four-person households.11 A $10.00 per hour wage also keeps a worker below the poverty level if the worker is the sole earner supporting a three-person or larger household. A $10.00 wage should therefore be considered a floor in 2022. The $10.00 threshold is based on comprehensive reviews of rigorously causal studies.
The preponderance of the research on state minimum wages has been on states that have increased their wages to $10.00; and state minimum wage increases above that level in future years may yield better child and family outcomes, which should be studied rigorously. Ten states are expected to reach $15.00 over the next several years, based on scheduled increases in state legislation, but currently the District of Columbia and California are the only states already at that level.12,13
Women and Workers of Color Make Up a Disproportionate Share of Low-Income Workers, and Income Disparities Contribute to Wealth Gaps
Women and workers of color are disproportionately represented among those who earn less than $15.00 per hour, and wage disparities can contribute to income and wealth gaps.14 White workers earn, on average, 25% more in annual income than Black workers,15 and the median net wealth of White families is estimated at 10 times that of families of color.16 Of the 10 states with the highest share of Black children ages 0 to 4, six have not raised their minimum wages above the federal level (Alabama, Georgia, Louisiana, Mississippi, North Carolina, and South Carolina).17,18
Increasing the Minimum Wage Can Impact Millions of Families and Substantially Reduce Poverty
The Congressional Budget Office estimated that if all states raised their minimum wages to at least $10.00 per hour by 2025, 1.5 million workers would see their wages increase, and among families with the lowest income, income would increase by $400 million overall.19 According to the Economic Policy Institute (EPI), if all states implemented a $15.00 minimum wage by 2025, 32 million workers, or 21% of the US workforce, would benefit from higher earnings, either directly or indirectly.20 A $15.00 wage floor would lift 3.7 million people, including 1.3 million children, above the federal poverty level. One in three Black workers and one in four Hispanic workers would benefit. Implementing at least a $10.00 state minimum wage in 2022, with gradual increases to $15.00 over time, could therefore have a substantial impact on reducing poverty and promoting equity.
Higher State Minimum Wages Would Yield Positive Economic Ripple Effects
Increasing state minimum wages may save taxpayer costs by increasing earned income and reducing the amount of support workers with lower wages may need from public assistance programs. The EPI estimated that for workers with the lowest incomes,21 each $1.00 increase in hourly wages would reduce the share of workers receiving public assistance by 3.1 percentage points (a reduction of 850,000 individuals receiving public assistance).22 A study estimating the effects of a federal minimum wage increase from $7.25 to $9.80 per hour predicted an increase in gross domestic product of $25 billion and a net increase in jobs of 100,000 during the 2-year phase-in of the higher wage.23
WHAT IMPACT DO STATE MINIMUM WAGE INCREASES HAVE?
Increasing the minimum wage to $10.00 or greater increases household earnings and reduces child poverty, particularly in families of color. A minimum wage of $10.00 or greater also improves birth outcomes and children’s health and development.
Higher State Minimum Wages Reduce Racial and Ethnic Disparities in Family Outcomes
Research suggests that increases in a state’s minimum wage can significantly reduce poverty and infant mortality, with the greatest effects for Black and Hispanic families.24,25,26 The interaction of a higher minimum wage and a state earned income tax credit has also been shown to benefit Black and Hispanic mothers’ earnings to a greater degree than for White mothers, which may contribute to reducing disparities in poverty by race.27
In addition, women of color benefited most from increases in the tipped minimum wage in a recent study that examined expectant mothers’ mental health.28 Given that approximately 70% of tipped workers are women29 and 45% of restaurant workers are people of color,30 the level of the subminimum wage is a critical equity issue.
Finally, increasing the minimum wage to $15.00 by 2025 would have a significant positive impact for child care workers, over a third of whom are Black or Hispanic. Such an increase would raise pay for 44% of child care workers, with an average increase of $2,900 in annual earnings overall, and with higher average increases in annual earnings for Black and Hispanic child care workers (over $3,100).31
WHAT PROGRESS HAVE STATES MADE IN THE LAST YEAR TO ADOPT AND FULLY IMPLEMENT A STATE MINIMUM WAGE OF $10.00 OR GREATER?
Currently, 25 states have adopted and implemented a state minimum wage of $10.00 or greater, which includes three states (Delaware, Nevada, and Virginia) that previously enacted a minimum wage of at least $10.00, but are newly implementing it this year. Over the last year, 12 states without a minimum wage of $10.00 or greater took steps to enact one, though none did. Over half of the states that already have a minimum wage of $10.00 or greater considered expanding their minimum wage, and four states—Alaska, Colorado, Hawaii, and Rhode Island—did so.
Tracking State Policy Progress
Policy adoption does not typically happen quickly. States may introduce legislation several times before adopting a policy and take even more time to fully implement it. Every year we track states’ efforts toward adopting and fully implementing each of the five effective policies in this State Policy Roadmap. The figure below summarizes the legislative activity and progress states made toward adopting a minimum wage of $10.00 or greater in the year since the 2021 Roadmap.
In subsequent sections, we describe how states vary in the generosity and implementation of their state minimum wages. We also highlight how a state’s minimum wage combines with other policy choices including child care subsidies, tax credits, and nutrition benefits to impact the level of resources available to a single parent with an infant and toddler in our Same Family, Different Resources simulation.
25 States Have a Minimum Wage of $10.00 or Greater, Including 3 New States This Year
As of October 1, 2022, 25 states have enacted and fully implemented a minimum wage of at least $10.00 for most workers, including three new states this year: Delaware, Nevada, and Virginia. All three states previously enacted a state minimum wage of $10.00 or greater and are newly implementing it this year. No states newly enacted a state minimum wage of $10.00 or greater in the year since the 2021 Roadmap.
Delaware passed legislation in 2021 to raise the state minimum age incrementally until it reaches $15.00 in 2025, and the minimum wage increased from $9.25 to $10.50 on January 1, 2022. Nevada enacted legislation in 2019 to raise the state minimum wage incrementally until it reaches $12.00 in 2024 (for employees without qualifying health insurance; $11.00 for employees with qualifying health insurance). This year, effective July 1, 2022, the state minimum wage in Nevada increased from $9.75 to $10.50 for employees without qualifying health insurance. The state minimum wage for employees with qualifying health insurance increased to $9.50. Virginia enacted legislation in 2020 to increase the state minimum wage incrementally until it reaches $15.00 in 2026. The state minimum wage in Virginia increased from $9.50 to $11.00 on January 1, 2022.
Voters Will Decide to Increase the Minimum Wage in Two States on the November 2022 Ballot
Two states, Nebraska and Nevada, are letting voters decide whether to increase the minimum wage on the November 2022 ballot. Nebraska did not introduce any legislation to increase the minimum wage during the 2022 legislative session, but a petition campaign successfully put a measure on the ballot in November 2022 to incrementally increase the state minimum wage to $15.00 by 2026. In Nevada, where the state minimum wage is scheduled to eventually increase to $12.00 for employees without qualifying health insurance and to $11.00 for employees with qualifying health insurance, legislation was passed in 2021 to allow voters to decide to increase the minimum wage to $12.00 for all employees and remove existing annual cost of living adjustments, effective July 2024.
At Least 3 Additional States Will Have a $10.00 Minimum Wage in 2023
Michigan’s minimum wage is currently $9.87, and it is scheduled to increase to $12.05 in 2031. Next year, effective January 1, 2023, Michigan’s minimum wage will increase to $10.10. Two other states, Ohio and South Dakota, each have a minimum wage greater than $9.00 and adjust annually for inflation. South Dakota’s minimum wage is currently $9.95, and it will increase to $10.80, effective January 1, 2023, based on an 8.5% cost of living adjustment. Ohio’s current minimum wage is $9.30, and it will increase to $10.10 on January 1, 2023, but in Ohio, these higher minimum wages do not apply to employers with limited revenue, which may exclude many workers.
States Took Steps Toward Making the Minimum Wage Inclusive of All Workers
Federal law allows states to set lower minimum wages for workers who primarily rely on tips and for workers with disabilities. Most states (35) have a tipped minimum wage that is higher than the federal tipped minimum wage of $2.13 per hour, and currently, eight states (Alaska, California, Hawaii, Minnesota, Montana, Nevada, Oregon, and Washington) have eliminated the subminimum wage for tipped workers.
Eight states (Alaska, Hawaii, Maine, Maryland, Nevada, New Hampshire, Rhode Island, and Tennessee) have fully eliminated the subminimum wage for workers with a disability, with Alaska, Rhode Island, and Tennessee enacting legislation in 2022 to do so. Several states have previously enacted legislation to phase out and fully eliminate the subminimum wage for workers with a disability over the next few years. By July 2025, California, Colorado, Delaware, Oregon, and Washington will all have eliminated their subminimum wage for workers with disabilities.
HOW DO STATES COMPARE TO ONE ANOTHER IN MAKING PROGRESS TOWARD FULL AND EQUITABLE IMPLEMENTATION OF A STATE MINIMUM WAGE OF $10.00 OR GREATER?
Of the 25 states that have a minimum wage that meets the $10.00 threshold, seven of these states have taken the additional step to eliminate the subminimum wage for tipped workers.
Four states have scheduled increases in place to raise their minimum wage to at least $10.00. In Michigan, Ohio, and South Dakota, these changes will happen next year (though, in Ohio, the minimum wage does not apply for small employers). Montana’s minimum wage is currently greater than $9.00, and they adjust annually for inflation, which will eventually increase their minimum wage to at least $10.00.
Twenty states have minimum wages that remain at the federal minimum and the majority of these states have laws known as preemption laws in place that limit the ability of localities within the state to set higher minimum wages.
The figures below show how states compare to one another in adopting and fully implementing a minimum wage that is at least $10.00.
HOW DOES THE STATE MINIMUM WAGE VARY ACROSS STATES?
States Vary in the Level of Minimum, Cost-of-Living Adjusted, and Subminimum Wages
States vary in the value of their minimum wage, as well as in how they set their minimum wages. A total of 25 states have a minimum wage of at least $10.00, but the value of states’ minimum wages varies across states from $7.25, in the 20 states that have the federal minimum wage, to $16.10 in the District of Columbia.
Five states (Alabama, Louisiana, Mississippi, South Carolina, and Tennessee) have no state minimum wage specified in their statutory language, which means they default to the federal minimum wage. Two states (Georgia and Wyoming) have their state minimum wage set at levels below the federal minimum wage, so the federal level overrides state law.
The nominal value of a state’s minimum wage may not reflect the real purchasing power of that wage, which is why it is important to look at states’ cost-of-living adjusted wages when comparing minimum wages across states. For example, the District of Columbia has a nominal minimum wage of $16.10 per hour, but the with the cost-of-living adjustment, the wage is only worth $14.44 per hour which is still the highest value in the country, however.
As an example, Washington state has a nominal minimum wage of $14.49 per hour, which is $3.00 more per hour than New Mexico’s $11.50 minimum wage. After the wages are adjusted for the higher cost of living in Washington compared to New Mexico, the real value of Washington’s minimum wage is $13.50, which is less than $1.00 more than New Mexico’s cost-of-living adjusted minimum age of $12.56.
Subminimum wage levels for tipped workers vary from a low of $2.13, in states in which it is set to the federal minimum, to a high of $15.00 in California.
Over Half of States Have Scheduled Increases to the Minimum Wage
The minimum wage is scheduled to increase in coming years in 28 states because of a statutory increase to a specific wage or an increase based on inflation. Michigan, Ohio, and South Dakota will pass the $10.00 threshold in 2023, although Ohio’s higher minimum wage does not apply for small employers. Currently, California and the District of Columbia are the only two states that have a minimum wage at or above $15.00 per hour, but 10 states have scheduled annual increases up to $15.00 or greater over the next several years, beginning with Connecticut and Massachusetts next year. This year, Hawaii enacted legislation to incrementally increase their state minimum wage to $18.00 per hour, which will be effective in 2028.
Half of States Have a Minimum Wage Preemption Law
Several large cities including Chicago, San Francisco, Oakland, San Jose, New York City, and Seattle have implemented local minimum wages that exceed the current state levels or that are being implemented on a faster phase-in schedule than approved state increases.32 Half of states, however, have laws known as preemption laws that prohibit localities from setting minimum wages that are higher than the state minimum wage. Among the 25 states who currently have a minimum wage preemption law in place, seven states introduced legislation to remove the law, although the bills did not pass in any of the states.
An Increase in the Minimum Wage Would Affect a Significant Number of Families
Many workers remain poor despite working full-time. The percentage of workers who remain poor varies considerably across states and is influenced by the state’s minimum wage. The percentage of children under age 3 with at least one parent working full-time living near poverty (defined as 150% of the FPL) ranges from 9.2% in the District of Columbia to 33.2% in Arkansas. In 11 states, more than 25% of children under age 3 live in working families who remain near poverty.
