There has been a lot of talk about minimum wage increases – at the federal, state, and local level. Just this month, Los Angeles, the second largest city in the US, approved an increase to $15 per hour by 2020. Employers in LA are required to increase their wages in stages – $10.50 by 2016, $12 by 2017, $13.25 by 2018, $14.25 by 2019, and $15 by 2020.
Statewide, lawmakers in Connecticut, Delaware, Hawaii, Maryland, Massachusetts, Michigan, Minnesota, Rhode Island, Vermont, West Virginia and D.C. enacted increases during the 2014 session, while voters in Alaska, Arkansas, Nebraska and South Dakota approved minimum wage increases through ballot measures. Currently, 29 states and D.C. have minimum wages above the federal minimum wage, while five states have not adopted a state minimum wage: Alabama, Louisiana, Mississippi, South Carolina and Tennessee.
How these increases will impact the economy is up for debate. The United States Department of Labor addressed some of the myths, including:
- Increasing the minimum wage will cause people to lose their jobs: A review of 64 studies on minimum wage increases found no discernible effect on employment. Additionally, more than 600 economists have signed onto a letter in support of raising the minimum wage to $10.10 by 2016.
- The federal minimum wage is higher today, when adjusted for inflation, than it was in the 80’s: While the federal minimum wage was only $3.35 per hour in 1981 and is currently $7.25 per hour, when adjusted for inflation, the current federal minimum wage would need to be more than $8 per hour to equal its buying power of the early 1980s and more nearly $11 per hour to equal its buying power of the late 1960s.
One impact is certain: the minimum wage increase is getting people talking. And in some cases, it’s causing action. For example, CEO of Gravity Payments, a credit card processing firm, recently surprised his 120-person staff with a pay raise, bringing every salary to $70,000 per year over the next three years. While his employees were making above minimum wage, he knew how a wage increase would positively affect his employees’ job satisfaction and quality of life. He also noted that it would help motivate and retain employees, which in itself will have long term cost savings and benefits.
Those backing the minimum wage increase have similar hopes for a positive economic impact – while others are unconvinced. Only time will tell.
To learn more about the minimum wage laws in your state, visit the Department of Labor.