We hear a constant clamor in the press for raising the Federal Minimum Wage (FMW) from the preset $7.25 per hour to a proposed $17.00 (over five years), with the FMW having been pegged at the $7.25 level since 2009. The federal proposal (Raise the Wage Act of 2023) elicits spirited commentary from those who support and those who oppose. The issue is not a simple one and has many labyrinthine twists and turns, with impacts both positive and negative for worker and employer alike.
Citing Federal Department of Labor statistics1 for the fifty (50) states, there are thirty (30) that have a Minimum Wage (MW) greater than the federal mandate. Another thirteen (13) states match the FMW. The remaining seven (7) states have no state MW, or their MW is less than the federal mandate. Of the fifty states, twenty-two (22) increased their minimum wage effective January 1, 2024.2
“Federal minimum wage law supersedes state minimum wage laws where the federal minimum wage is greater than the state minimum wage. In those states where the state minimum wage is greater than the federal minimum wage, the state minimum wage prevails.”1
We can see the tremendous variability that exists in minimum wage law for just the 50 states. On top of this simplified version, other jurisdictions such as the District of Columbia and American Territories as well as local jurisdictions in various states, counties, and cities all have their own laws!
An analysis by the Congressional Budget Office3 of the benefits and costs of the $15 FMW proposed by the Raise the Wage Act of 2021, shows an increase of the FMW to $15 by 2025 results in about seventeen (17) million workers benefiting. On the downside, CBO estimates that employment will be reduced by about 1.4 million. The already high federal budget deficit would also increase.
An interesting aspect of this issue is the consideration of actual purchasing power versus minimum wage in red versus blue states. In a 2016 article4 in indeed for employers: “The Great Divide? How the Minimum Wage Impacts Red and Blue States,” indeed demonstrates graphically that while blue states have generally higher MW than red states in nominal terms, MW rates are comparable when adjusted for cost of living. An even more interesting graphic illustrates that if a uniform FMW were to be adopted, red-state purchasing power would surpass that of blue-states. It is well worth your while to view these graphics; visit the link in the citation for the details!
We can certainly see from this cursory examination of minimum wage laws that there are many pitfalls! It is incumbent upon us to be aware and alert to proposed legislation and to be careful to follow the dictates of the specific jurisdiction in which we work to stay compliant, especially since Minimum Wage Law is not as simple as it seems!
1 US Department of Labor (https://www.dol.gov/agencies/whd/mw-consolidated)
3 Congressional Budget Office, “The Budgetary Effects of the Raise the Wage Act of 2021.”