Did you get a raise for the New Year? For low-wage workers in any of the 22 states that increased its minimum wage last week, the answer is yes. In fact, the Economic Policy Institute estimates that almost seven million employees will see their pay increase as a result of 2020 increases in state and local minimum wage rates.
How Minimum Wage Laws Work
Many laws that regulate the workplace are intended to protect employees. These include minimum wage laws, overtime rules, laws providing time off work, and prohibitions against discrimination and harassment. Under these laws, employees are entitled to the most protections available under federal, state, or local law. So, even though the federal minimum wage has been stuck at $7.25 for more than a decade, employees in more than half of the states are entitled to a higher state or local minimum wage.
In some places, employees are entitled to be paid more than double the federal minimum wage. USA Today reports that 32 cities and counties will require employers to pay at least $15 an hour in 2020. No state yet requires employers to pay a $15 minimum wage; the current highest rate is $13.50 for employees in the state of Washington.
States structure their minimum wage laws in different ways. Some provide for an annual increase based on inflation. Others provide for a one-time increase in the minimum wage. Still others provide a schedule of increases over several years. In the next few years, the minimum wage in a handful of these states—including California, Massachusetts, and Connecticut—will hit $15 an hour.
Effects of Raising the Minimum Wage
Critics of increasing the minimum wage argue that higher wages will ultimately result in lost jobs. If the law forces employers to pay more, they may hire fewer workers, reduce work hours, or even lay off employees to make ends meet. The Congressional Budget Office issued a report last year attempting to gauge the effect of increasing the federal minimum wage, and estimated that an increase to $15 an hour would result in 1.3 million lost jobs. (The report also found that an increase to $10 an hour would result in virtually no job loss.)
However, that same report found that increasing the minimum wage would significantly boost workers’ household income. In fact, the New York Times reports that, because of increases in state and local minimum wages that offset the low federal minimum, the effective minimum wage rate in the United States is about $12 an hour. This is one reason why wages have been growing fastest (as a percentage of earnings) for the lowest-paid workers in the last couple of years.
Beyond the hard numbers, increasing the minimum wage may have other beneficial effects. There have been a number of scientific studies in recent years linking increases in the minimum wage to better health outcomes, including lower suicide rates.