Economic Snapshot | Wages, Incomes, and Wealth

When it comes to the minimum wage, we cannot just ‘leave it to the states’

On Election Day, majorities of voters in Arizona, Colorado, Maine, and Washington all voted through ballot measures to raise their state minimum wages. By 2020, the minimum wage will be $12 in Arizona, Colorado, and Maine, and $13.50 in Washington. These increases come on the heels of legislative increases passed earlier this year in California, New York, Oregon, the District of Columbia, and roughly a dozen cities and counties—all of which set minimum wages of $12 or higher by 2020. As shown in EPI’s minimum wage tracker, 17 states and the District of Columbia enacted some increase in the last three years.

With so much activity at the state level, some lawmakers and business groups have argued that there is no need to raise the federal minimum wage and that minimum wage policy should be “left to the states.” Unfortunately, this attitude has left roughly 40 percent of the U.S. workforce subject to minimum wages that are woefully inadequate, and as shown in the figure, the gap between those in low-minimum-wage states and higher-minimum-wage states will only grow unless the federal minimum wage is raised.

Economic Snapshot

When it comes to the minimum wage, we cannot just ‘leave it to the states’: Effective state minimum wages today and projected for 2020

Federal minimum wage (effective in 21 states) Average of all states (employment weighted) Average in states above $7.25 (employment weighted)
November, 2016 $7.25 $8.25 $8.90
November, 2020 $7.25 $9.30 $10.63
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Notes: States with automatic inflation adjustment are projected using the CBO's projections for the CPI. Averages in both periods are weighted by September 2016 state nonfarm employment. Estimates do not account for city or county minimum wages.

Source: EPI analysis of state minimum wage laws, total nonfarm employment from the BLS, and CBO projections for inflation

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There are 21 states that use the federal minimum wage of $7.25. Workers in these states comprise 39.2 percent of total nonfarm employment; the other 60.8 percent of the workforce is in states with minimum wages above the federal $7.25. The first set of bars shows that, accounting for the higher minimum wages currently in effect in 29 states and D.C., the average prevailing state minimum wage across the United States is $8.25. This means that minimum wage workers in the 21 states at $7.25 are being paid 12 percent less than the average U.S. minimum wage worker. Similarly, the average minimum wage among just those states that are above $7.25 is $8.90— meaning that minimum wage workers in the $7.25 states are being paid, on average, 18.5 percent less than their counterparts in states that have adopted minimum wages above $7.25.

The second set of bars shows that this gap is likely to widen dramatically if the 21 low-minimum wage states do not act, or if the federal minimum wage remains unchanged. This is because of increases already scheduled by current legislation and because some states increase their minimum wage each year to keep up with inflation. By November of 2020, the average minimum wage faced by workers across the United States will be $9.30 and the average in states above $7.25 will be $10.63. Without any change in either the federal or their state minimum wages, minimum-wage workers in the 21 states at $7.25 will be paid 22 percent less than the national average and 31.7 percent less than workers in states with higher minimum wages.

Note: These estimates under state the true gap because they do not account for city and county minimum wages, which are almost exclusively higher than state minimum wages and exist solely in states with minimum wages above the federal $7.25.

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