Minimum Wages to Rise in 31 States

Minimum-wage earners in 31 states and the District of Columbia can soon expect slightly bigger paychecks thanks to the third and final installment of a federal rate hike that raises the wage floor from $6.55 an hour to $7.25 an hour effective Friday (July 24).

The latest federal bump will enlarge roughly 4.5 million workers’ paychecks by about four cents an hour in some states to almost $1 an hour in others, according to the Economic Policy Institute , a nonpartisan research group in Washington, D.C. that supported the increase.

Although states recently have led the charge to raise the minimum wage, the federal government historically mandates a national wage floor — an hourly rate that states must meet or exceed. The three-part hike Congress authorized two years ago – from $5.15 an hour to $5.85 in July 2007, to $6.55 last July 24, to $7.25 this year – was the first federal increase in about 11 years.

Despite the scheduled hike, a number of states boosted their own minimum wages in the interim. Illinois lawmakers in 2007 approved three 25-cent pay raises over three years, bringing the state minimum to $8.25 an hour effective July 1, 2010. Maine lawmakers lifted the state’s wage floor in 2008 by 25 cents – raising it to $7.25 an hour months before the federal government did – and approved an additional 25-cent increase for October 2009.

The Connecticut House and Senate last year even went so far as to override Governor M. Jodi Rell’s veto to boost the state’s minimum wage by 35 cents – from $7.65 to $8 an hour. Similar proposals are pending in states like Michigan, where Democrats hope to introduce a whopping $2.60 an hour increase – from $7.40 to $10 – as a ballot initiative next year.

Other states have automated their pay raises. Ten states – Arizona, Colorado, Florida, Missouri, Montana, Nevada, Ohio, Oregon, Vermont and Washington – adjust the minimum wage based on inflation data. The District of Columbia, meanwhile, mandates that its minimum wage be at least $1 more than the federal rate. Nevada offers an extra dollar to minimum-wage workers whose employers do not provide health benefits.

After Friday, 13 states will have a wage floor above the new federal minimum. Atop that list is Washington, which currently requires its workers to be paid at least $8.55 an hour. The state is trumped only by Santa Fe, N.M. – one of four cities that regulate their own wages – which sets its threshold at $9.85 an hour.

Yet economists and lawmakers disagree whether this flurry of wage increases will help both workers and their states’ economies. On one hand, policymakers insist periodic wage bumps help low-income families and generate more consumer spending – two crucial tools to combat the effects of the recession.

Fiscal conservatives, however, oppose the hikes. They argue that wage increases force companies to staff fewer workers, which disproportionally affects young or low-skilled employees on the bottom of the hiring chain.

“There’s a jobless factor to raising the minimum wage,” said Kristen Eastlick, a senior economic analyst at the Employment Policies Institute, a nonprofit research group in Washington, D.C. that opposed the hike. “It does increase unemployment, and the hardest hit are low-skilled workers and families struggling to make ends meet. And you have businesses forced to adjust and make new decisions as a result of low revenue streams.”

Those arguments have not stopped federal lawmakers from pondering additional increases. A pending House bill would take a nod from states and tie the minimum wage to living costs. Under the proposal, the wage floor would automatically adjust every four years to be 15 percent higher than the federal poverty threshold for a family of two – or about $8.05 an hour in 2009, using this year’s poverty guidelines.

The bill, however, was previously introduced under the same name – the Living American Wage Act — in 2007. It never emerged from a committee.