The labor market recovery from the pandemic recession has been tremendous and low-wage workers have been key recipients of those gains, with dramatically fast real wage growth between 2019 and 2023 as we found in our recent report. These gains were due in part to several large spending bills passed during the pandemic—including the vital American Rescue Plan—which provided relief to workers and their families to help them weather the recession and fed the surge in employment. After losing their jobs in record numbers during the initial shock of the pandemic, low-wage workers found better job opportunities and experienced unusually strong leverage to see fast wage growth as employers scrambled to hire workers in the recovery.

At the same time, 29 states and the District of Columbia raised their minimum wages between 2019 and 2023—either through legislation, ballot referendums, or indexing to inflation. We found that these state minimum wage increases also boosted low-end wage growth: 10th-percentile wages grew about 50% faster in states with minimum wage increases compared with states without any change in their minimum wage (see Figure A). It is also the case that low-wage workers experienced relatively fast wage growth in all states, regardless of changes to their minimum wage.

States and localities have raised their minimum wages in response to federal inaction

The federal minimum wage has been stuck at $7.25 an hour since 2009 and is now worth less than at any point since February 1956, more than 67 years ago. A worker paid the federal minimum wage earns 29% less in inflation-adjusted terms than a minimum wage worker in July 2009 and 39% less than a minimum wage worker in February 1968, the historical high point of the minimum wage’s value as shown in Figure B.

Given the inadequacy of this wage to enable workers and their families to make ends meet, even with full-time hours, it’s not surprising that state policymakers and voters have enacted higher minimum wages than the federal minimum. Figure C shows the 29 states and DC that increased their minimum wage between 2019 and 2023. Thirteen states index their minimum wage to inflation, meaning they make automatic annual increases to the minimum wage based on the change in that year’s cost of living. This has been extremely valuable to low-wage workers in these states during recent years with high levels of inflation. It has meant the value of the minimum wage has roughly kept up with prices of goods and services that low-wage workers need for their livelihoods.

Already this year, ballot measures to raise the minimum wage have been proposed in Alaska, Missouri, Ohio, and Oklahoma. Those initiatives will get decided in the November election. On the legislative side, the Virginia legislature passed a measure to continue the set of increases that started in 2020 to raise the state’s minimum wage to $15 per hour by 2026, but Republican Governor Glenn Youngkin vetoed the measure.

The minimum wage is a crucial labor standard that serves as a valuable wage floor, bolsters the bargaining power of low-wage workers, and narrows wage gaps between workers by gender, race, and ethnicity. Strong labor standards—such as the minimum wage—work hand in hand with tight labor markets to provide faster wage growth for lower-wage workers.

The minimum wage can protect equity gains created by the recovery

An important function of the minimum wage is to create a more equitable wage distribution where the lowest-paid jobs are not too far from middle-income jobs. From 1979 to 2017, the wage gap between the median worker and workers at the 10th percentile grew entirely because of the stagnating value of the federal minimum wage. Since 2019, the wages of low-wage workers have grown more quickly than the median worker, creating a more equitable wage distribution.

Because of occupational segregation and historical discrimination, low-wage workers are disproportionately Black and Hispanic. The rapid wage growth of recent years—as a result of a tight labor market and state minimum wage increases—has narrowed wage gaps between white, Black, and Hispanic workers.

To protect the equity gains created by the recovery, even states that have been raising their minimum wages can do more. States with ballot measures or legislative increases helped their low-wage workers, but inflation cut into the economic security these policies were meant to achieve. Some states are already reacting to this effect. In 2023, New York and Maryland passed new increases in recognition that they needed to either accelerate the scheduled increases or set higher targets in order to protect low-wage workers’ economic security. Without proactive action, when labor market conditions change to be less favorable to workers, the gap between low-wage and middle-income workers will likely grow again.

Even in a period of remarkable wage growth for low-wage workers overall, the minimum wage has still provided powerful support for workers. As the federal minimum wage continues to stagnate, states continue to be the standard bearers of progress on the minimum wage. States have a unique opportunity to protect the gains that low-wage workers achieved during the pandemic recovery by increasing their minimum wages before a change in economic conditions.