The minimum wage is a New Deal era policy established initially through the Fair Labor Standards Act of 1938. Since its inception, Congress has enacted many changes to the law.
Some of these include a delayed schedule of rate increases for small employers, a training wage and an adjusted subminimum for tipped workers. These changes can have a significant impact on worker wages.
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As the economy opens up after the COVID-19 pandemic, companies are offering higher wages for workers who have been hurt by falling purchasing power. Some of these raises are being implemented at a state level, while others are being pushed by activists who want to push the federal government into action.
New York City’s minimum wage has more than doubled since 2013, but it still lags behind the national average. A bill being considered in Albany would index the current rate to inflation, with off-ramps and pauses depending on economic conditions.
A bill that has been passed in Maryland would also increase the state’s minimum wage to $15 by 2024, with a separate schedule for small employers. The bill would also set a training wage for high school students and establish a higher tipped minimum. In Connecticut, the minimum wage is indexed to the employment cost index and will reach $15 by 2023. The state’s tipped minimum wage is currently $4.00 an hour.
Unions are fighting for a higher minimum wage
Since a group of fast-food workers first went on strike in New York City in 2012, the Fight for $15 has spread to cities and states, with 150 million Americans now benefiting from wage increases. These raises are 94 times more than the impact of the last federal minimum wage increase, which took effect in 2009.
While it may seem counterintuitive that labor unions support higher wages, it makes sense in terms of increased earnings for their members and reduced costs for employers. A minimum-wage increase can also boost the purchasing power of low-income communities, and reduce racial disparities caused by structural racism and sexism in the workplace.
In 2021, California became the first state to require all employers with 26 or more employees to pay a minimum wage of $15 per hour. Other states, including Arkansas and Florida, are raising their rates based on cost-of-living indexes. The state of Vermont began indexing in 2007. A bill to speed up the Maryland minimum-wage increase and tie future increases to inflation has stalled, with Republicans joining Democrats on concerns that it would take too much power away from lawmakers.
Unions are fighting for a fair minimum wage
The Fight for $15 has helped raise wages for millions of workers across the country. These gains are real, material, and directly affect the ability of low-wage workers to buy groceries, pay their rent, care for their families, and go to school.
While federal legislation to increase the minimum wage remains stalled in Congress, many states and cities are raising their minimum wages. Connecticut, Nevada, Oregon and Washington, D.C. increased their rates this summer, while California, Colorado, Hawaii, Illinois and New York will do so next year.
Keep up with the latest minimum wage changes to ensure your business is in compliance. Paycor has created a helpful map and chart that details 2023 minimum wage changes by state. This makes it easy for businesses to stay up-to-date and avoid unexpected compliance changes. Moreover, the map includes information about minimum wage laws for tipped employees and young workers. Both of these groups are historically underpaid.
Minimum wage increases don’t hurt job growth
Since 1921, states have been able to set a minimum wage above the federal rate. Eighteen states plus the District of Columbia began the year with higher wages. The remaining 20 states will raise them over time.
In theory, higher minimum wages should help the economy by stimulating spending and encouraging businesses to hire. Economists call this the “income effect,” and it’s a fundamental principle of capitalism: People spend everything they earn, so raising wages boosts demand and creates jobs.
But what if this weren’t the case? What if, instead, a minimum wage increase hurts job growth? This would undermine the argument that a high minimum wage is a key tool in the fight against poverty. But the evidence suggests that this is not the case. Moreover, it is possible to design the minimum wage so that it doesn’t hurt jobs news. For example, in Oregon, the minimum wage is automatically increased each year based on the smaller of 5% or the percentage change in the cost-of-living index.