Personal Finance

As states and cities raise minimum wage rates, some experts say a higher federal rate is long overdue

Key Points
  • The federal minimum wage has been $7.25 per hour since 2009.
  • Starting this month, workers in Connecticut, Nevada, Oregon and Washington, D.C., are seeing higher minimum pay rates.
  • Some experts say a higher federal standard for hourly pay is needed.
A restaurant worker at a May 26, 2021 “Wage Strike" demonstration organized by One Fair Wage in Washington, D.C.
Anna Moneymaker | Getty Images News | Getty Images

Workers earning minimum wage are getting an income boost in some parts of the U.S., thanks to higher pay rates that went into effect this month.

Connecticut, Nevada, Oregon and Washington, D.C., all had new higher minimum wages as of July 1. Those increases come as the federal minimum wage stands at $7.25 per hour, unchanged since 2009.

President Joe Biden has advocated for raising the federal minimum wage to $15 per hour for all workers. In January, an executive order he signed that raised the minimum wage to $15 per hour for federal workers and contractors went into effect.

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But efforts to raise the federal pay rate more broadly were deemed ineligible for inclusion in budget reconciliation legislation last year.

"Right now, it seems somewhat stalled," said Pamela Loprest, senior fellow at the Income and Benefits Policy Center at the Urban Institute, of the push to raise the federal minimum wage.

Meanwhile, some states and localities have taken up the issue, with Florida and Delaware moving to a $15 per hour minimum wage. Companies, such as Amazon, Target and Walmart, have also stepped up and established higher minimum pay rates for employees.

HERE'S WHERE THE MINIMUM WAGE IS RISING

Connecticut:

  • Minimum wage increased to $14 per hour from $13. It is set to increase again to $15 per hour starting next June.

Nevada:

  • Employees without health benefits: Minimum wage is now $10.50 per hour, up from $9.75, and will gradually increase to $12 per hour in 2024.
  • Employees with health benefits: Minimum wage is $9.50, up from $8.75, and will gradually go up to $11 in 2024.

Oregon:

  • The standard minimum wage is $13.50 per hour, up from $12.75.
  • The Portland metropolitan rate is $14.75 per hour, up from $14.
  • Nonurban counties minimum wage is now $12.50 per hour, up from $12.

Washington, D.C.:

  • Minimum wage is now $16.10 per hour, up from $15.20.

The states' moves and the private sector increases seem "like an alternative in the stalemate of federal changes," Loprest said. "It certainly is the next best way to have change come about."

How higher wages may help businesses

While some argue higher minimum wages could place a burden on small businesses, the opposite is actually true, argues Holly Sklar, CEO of Business for a Fair Minimum Wage.

"If you've got a worker at one business, they're customers at many other businesses," Sklar said.

"It's a really, really great way to spur consumer demand, to put money in the pockets for local customers for local businesses," she said.

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Paul Saginaw, co-owner of Saginaw's Delicatessen in Las Vegas, said he is glad to see the minimum wage in Nevada go up, though he is already paying employees a higher rate of at least $14 per hour.

"I don't think I've ever paid anybody minimum wage in my entire life," said Saginaw, who also co-owns businesses in Ann Arbor, Michigan.

"If our employees have less financial stress, they're going to stay in the job longer, they're going to be more loyal," Saginaw said. "Our turnover figures are much less than the industry."

Job openings and voluntary departures are still at record highs, according to the latest government data, pointing to a persistent quitting trend among workers that's been dubbed the Great Resignation.

Persistent inflation may complicate raising pay

Prices at Chipotle Mexican Grill are up roughly 4% to cover the cost of raising the chain's minimum wage to $15 an hour. Pictured, Chipotle employees in Houston.
Brandon Bell | Getty Images News | Getty Images

Admittedly, high inflation has made it more difficult to give pay raises, Saginaw said, and also presented challenges for his business to find ways to cut extraneous costs to avoid raising prices.

Some economists have expressed concerns that a higher federal minimum wage could fuel inflation, an idea Biden has rejected amid calls for a $15 per hour rate.

That argument makes sense to David Cooper, director of the Economic Analysis and Research Network at the Economic Policy Institute, because low-wage jobs are not concentrated in industries that are behind rising prices.

The federal minimum wage has lost about 26% of its value since it was last changed in 2009, and about 40% since 1968, Cooper said.

While state and city efforts to raise minimum pay rates help, there are still roughly 20 states that base their minimum wages on the federal rates.

"It would be much better if we just raised the federal minimum wage" and did what a lot these states and cities are doing already, which is building in an automatic adjustment for inflation or changes in wages, Cooper said.