Economic Snapshot | Retirement

State minimum wages on the move

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Snapshot for December 1, 2004.

State minimum wages on the move

The president and Congress are poised to beat a disgraceful record currently held by their predecessors of the 1980s—eight years without raising the minimum wage. Each year the federal government fails to act, workers pay the price, as the rising cost of living erodes the value of their paycheck.

In response, states are stepping in to make sure that workers in their states don’t suffer from federal neglect. Since 1997, when the federal minimum was raised to $5.15, the number of states with higher rates than the federal has gone from five to 13.1 On November 2nd, voters in Florida and Nevada overwhelmingly (71% in Florida and 68% in Nevada) approved ballot measures to join these states in setting minimum wages above the federal level. They also joined two states—Washington and Oregon—in requiring moderate annual adjustments to the state minimum wage to account for changes in the cost of living.

The last time the federal government failed so badly to meet its responsibility to low-wage workers was in the 1980s, and states stepped in then as well. Between 1979 and 1989, the value of the federal minimum wage fell 29.5% (in inflation-adjusted dollars). In 1979 only Alaska had a higher minimum wage than the federal level. However, by 1989, 15 states had responded to this federal inaction by raising their minimum wages.

The New York legislature is soon expected to override Governor Pataki’s veto of a state minimum wage increase, and Governor Doyle is expected to raise the Wisconsin minimum wage by 2006. The Nevada process requires another vote in 2006 before the change in enacted. If it passes again, as is anticipated, one-third of the states will have minimum wages above the federal rate by 2007 (see figure below). Other states, including Minnesota and New Jersey, are considering action as well. In the absence of a federal minimum wage increase, states are leading the way in providing a fair minimum wage for workers.

Real value of federal minimum wage and number of states with minimum wages above the federal rate, 1979-2007

1. The District of Columbia is counted here as a state. In some years, Connecticut had a minimum wage set at two to three cents above the federal rate. This is not included here as a higher rate.

This Snapshot was written by EPI economist Jeff Chapman and Deputy Director of Policy Amy Chasanov.

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