Exploring EPI’s Minimum Wage Tracker

The federal minimum wage has languished at $7.25 since 2009. As inflation erodes the real value of the federal minimum, twenty nine states (and D.C.) have taken it upon themselves to raise their state minimum wages. Some states have made small changes (such as Arkansas, which raised its minimum wage to $7.50), while others have moved forward more boldly (such as Massachusetts, where the state minimum wage will reach $11.00 by 2017.) Some passed incremental increases which will take place over two or three years, while others have automatic increases every year to account for inflation. Several enacted changes to their laws back in 2006, while others have jumped on the new wave of action that has taken place in the past few years. There is tremendous variation in minimum wage policy across the states, and EPI’s minimum wage tracker provides a simple and intuitive way to understand the breadth of state, local, and federal minimum wage policy.

Here are some interesting trends and data points worth noting:

Five states do not have a minimum wage. Alabama, Louisiana, Mississippi, South Carolina, and Tennessee all defer to the federal minimum wage of $7.25 in the absence of any state laws. Wyoming and Georgia both have a state minimum wage lower than the federal minimum. The minimum wage in both of these states is $5.15, but the federal minimum wage applies.

Indexing the minimum wage to inflation lets states preserve the value of the minimum wage without relying on the legislative process. (For more detail, see David Cooper’s analysis on the hundreds of thousands of workers whose paychecks were protected by automatically indexed increases just this past year.)

  • Nine states currently use indexing: Arizona, Colorado, Florida, Missouri, Montana, New Jersey, Ohio, Oregon, and Washington have all increased their minimum wage automatically in the past year. These automatic increases are usually small (an average of 15 cents this year across these states), but they ensure that workers can still afford the same level of goods year after year.
    • Six states and D.C. will use indexing in the future: Alaska, Nevada, Michigan Minnesota, South Dakota, and Vermont all have significant increases in the minimum wage set to occur over the next several years. The minimum wage in these states will then be protected from erosion through indexing, bringing the total number of states with indexing to 15, plus D.C., by 2019.
    • Seven localities currently use indexing, and 13 will do so in the future. These 20 cities and counties are ahead of the game in terms of understanding the importance of preserving the value of the minimum wage. 87 percent of localities that have their own minimum wage laws use indexing—only Berkeley, California and two counties in Maryland, Montgomery County and Prince George’s do not.
    • Washington was the first state to index its minimum wage to inflation, beginning in 2001.

Millions of workers actually make less than the minimum wage. A1966 amendment to the Fair Labor Standards Act established a new, permanent subminimum wage (or “tipped minimum wage”) for workers who customarily receive tips, such as restaurant servers, hair stylists, and nail salon workers. This lower subminimum wage effective passed the responsibility of paying wages from the employer on to the consumer.

  • The federal tipped minimum wage of $2.13 applies in 18 states. This means that in 18 states, employers are only required to pay tipped workers $2.13 an hour—an amount that has not been raised since 1991. If a tipped worker’s tips plus the $2.13 an hour does not add up to at least the regular minimum wage, the employer is supposed to make up the difference. But this requirement is difficult to enforce and abuse is common. Consequently, the poverty rate among tipped workers is nearly double the poverty rate of non-tipped workers.
  • Eight states pay tipped workers the full minimum wage. There is no lower tipped minimum wage in these eight states, meaning that tipped employees receive the same regular, predictable paychecks as non-tipped workers. All eight of these states also have minimum wages higher than the federal minimum, which means that tipped workers in these states earn significantly more than their peers in other states. A tipped worker in Washington makes $9.47 an hour before tips—4.4 times the base wage that tipped workers receive under the federal tipped minimum wage. As a consequence, poverty rates among tipped workers are dramatically lower in these states.

There are 23 sub-state localities with their own minimum wages, but they are clustered in eight states.

  • California hosts ten of the localities. California has one of the highest minimum wages in the country at $9.00 an hour (and scheduled to rise to $10 in 2016), but many cities, from San Francisco and Berkeley, to Los Angeles have raised their minimum wages even higher.
  • Several populous counties and cities in New Mexico have raised their minimum wages. In fact, 44 percent of the population of New Mexico lives in a county or city with a higher minimum wage than the $7.50 state law. Santa Fe was actually one of the first sub-state localities in the country to adopt a minimum wage above its state minimum, passing its own minimum wage ordinance in 2003.

Twenty-seven states have both higher minimum wages and higher tipped minimum wages than under federal law, but there are a handful of states that have raised one and not the other.

  • Three states have regular minimum wages above the federal minimum, but still use the federal tipped minimum wage. In Nebraska, New Jersey, and New Mexico, tipped workers still only receive $2.13 an hour, even though the regular state minimum wage is above the federal $7.25. This means that in these three states, employers of tipped workers are being given an even bigger break on their wage obligations than other state employers without tipped staff, and employers of tipped workers elsewhere in the US.
  • Five states have tipped minimum wages above the federal tipped minimum, but use the federal $7.25 for their regular minimum wage: Iowa, New Hampshire, North Dakota, Pennsylvania, and Wisconsin.
  • Washington, D.C. demonstrates both the best and [nearly] the worst of minimum wage laws. The District’s regular minimum wage is higher than any state in the country right now at $10.50, but the D.C. tipped minimum is only $2.77, and has not been changed since 1993. Unfortunately, as was the case in D.C., tipped workers frequently get left behind when lawmakers enact a minimum wage increase.

States have taken a variety of approaches to increasing their minimum wage laws. In the recent wave of increases, twenty states have changed their laws by legislation, ten by ballot initiative, and four through constitutional amendments.

Action at the state level on minimum wage seems to ebb and flow—and is usually tied to federal policies (or the lack of them). A host of states raised their minimum wages in 2006 and 2007, in the midst of the debate over whether to raise the federal minimum wage from $5.15 to $7.25. The same process occurred during the wage debates of the 1990s—state lawmakers and voters got fed up with the lack of federal action, so they started raising state minimums. In both cases, action at the state level ultimately encouraged federal lawmakers to finally raise the federal minimum.

Twenty four states and D.C. have upcoming minimum wage increases. These are all states that already had higher minimum wages than the federal rate. Some are in the middle of legislated multi-year increases, while others are simply maintaining their value through indexing.

Minimum wage laws are changing rapidly, so stay tuned: EPI’s Minimum Wage Tracker will be updated regularly to show the current information.