Update on the Minimum Wage around the Nation
By Carolyn Burstein
April 13, 2015
Senator Patty Murray (D-WA) and Congressman Bobby Scott (D-VA) are prepared to introduce a federal minimum wage (MW) bill in both the Senate and House that would attempt to raise the current MW in five steps to $12 per hour, gradually eliminate the subminimum wage for tipped workers, and index those wages to the median wage (not the rate of inflation).
This plan follows a flurry of activity over the past several months, including numerous state-level and municipal-level jurisdictions passing MW laws in the latter part of 2014, several states increasing their MW as a result of referenda submitted to voters in the November general election, as well as several well-known national retail chains – The Gap, Ikea, Walmart, Target, and McDonald’s – raising their MW rates. We thought that this might be an appropriate time to share an update with our NETWORK members about these momentous events.
The spate of state and local MW laws can also be attributed to congressional gridlock that buried any chance of passing an earlier White House-approved and Democratic-sponsored bill in Congress; to an improving national economy that no longer had excess workers who would agree to work for minimum wage; and to widespread union-backed (especially the Service Employees International Union – S.E.I.U.) protests, often featuring MW employees themselves. State and local jurisdictions have frequently been impelled by their own citizens to tackle the problem through laws – at the state level, and ordinances – at the city level, to substantially raise the wage floor for low-paid workers in their states and communities.
The first thing to note about all MW changes is that they are complex laws. Some result in a single increase, others in multiple increases over a number of years; some are indexed to the rate of inflation, others are not; most affect a substantial number of employees, but exempt others (of course, all employee affected by the Federal Labor Standards Act – FLSA — are exempt); some issue changes for certain types of businesses before others; some take health benefits into account, others do not, and so on. Our discussion will not try to parse out each of these changes, so the complexity of these laws must be borne in mind in the information that follows.
State-level Changes in the MW
Let’s start with state-level MW changes. Currently, some 29 states and the District of Columbia have minimum wage rates above the federal minimum of $7.25 per hour, and 10 of them enacted their increases in 2014, the “Year of the Minimum Wage,” as Littler Publications dubbed it in its briefing paper of November 13, 2014. However, because of major MW changes at large retail chains in 2015, that appellation may no longer be appropriate.
Here are the 29 in early 2015, thanks to Littler Publications and an online job search article, Minimum Wage Rates for 2015:
- Alaska: $8.75 effective February 24, 2015 ($9.75 effective January 1, 2016)
- Arizona: $8.05 (tipped workers $5.05)
- Arkansas: $7.50 ($8.00 effective January 1, 2016; $8.50 effective January 1, 2017)
- California: $9.00 ($10.00 on January 1, 2016)
- Colorado: $8.23 (tipped workers $5.21)
- Connecticut: $9.15 ($9.60 on January 1, 2016; $10.10 on January 1, 2017)
- Delaware: $8.25
- District of Columbia: $10.50 on July 1, 2015 ($11.50 in 2016)
- Florida: $8.05 (tipped workers $5.03)
- Hawaii: $7.75 ($8.50 in 2016; $9.25 in 2017; 10.10 in 2018
- Illinois: $8.25
- Maine: $7.50
- Maryland: $8.00 ($8.25 on July 1, 2015; $8.75 July1, 2016; $9.25 July 1, 2017; $10.10 July 1, 2018)
- Massachusetts: $9.00 ( $10.10 on January 1, 2016; $11.00 on January 1, 2017)
- Michigan: $8.15 ($8.50 in January 2016, then annual increases to $9.25 per hour by 2018)
- Minnesota: $8.00 (effective August 1, 2015, large employers are required to pay workers $9.00 per hour and small employers $7.25 with $9.50 by August 2016, but exceptions based on worker age and company size)
- Missouri: $7.65
- Montana: $8.05
- Nebraska: $8.00 ($9.00 on January 1, 2016)
- New Jersey: $8.38
- New Mexico: $7.50
- Nevada: $7.25 for employees who receive qualifying health benefits; $8.25 for those who do not
- New York: $8.75 ($9.00 on December 31, 2015; tipped workers $7.50 on December 31, 2015)
- Ohio: $8.10
- Oregon: $9.25
- Rhode Island: $9.00
- South Dakota: $8.50
- Vermont: $9.15 ($9.60 in 2016; $10.00 in 2017; $10.50 in 2018)
- Washington: $9.47
- West Virginia: $8.00 ($8.75 in 2016)
A recent article by the National Employment Law Project (NELP) provides clear evidence, if any were still needed, that raising pay and improving job quality does not reduce employment or encourage businesses to leave urban areas. Raising local minimum wages is now considered a mainstream policy tool for fighting income inequality at the local level.
The NELP article summarizes the most rigorous research – most completed by universities, but a major study done by the Center for Economic and Policy Research (CEPR) is also included – to demonstrate that job growth is not slowed nor does business relocate outside municipal boundaries. And these findings are consistent with the bulk of research on higher state minimum wages.
Municipal-level Changes in the MW
Boosting local minimum wages gives urban areas distinct advantages, which cannot be overlooked, such as allowing higher-cost cities to set a MW to better correspond to living costs, and giving localities the power to address the problem if their state legislature refuses or is slow to address the issue.
In addition to its presentation on the economic evidence of raising local minimum wages, the NELP article also lists the affected municipalities that have passed MW ordinances since 2012, although most of the activity has been in the last year or two. The non-state areas that have (or intend to) raised their MW are:
Albuquerque, NM $8.60
Berkeley, CA $12.53 (by 2016)
Bernalillo County, NM $8.50
Chicago, IL $13.00 (by 2019)
Las Cruces, NM $10.10
Los Angeles, CA $13.25 (by 2017 – mayor)
$15.25 (by 2019 – city council)
Louisville, KY $10.10 (by 2017)
Montgomery County, MD $11.50 (BY 2017)
Mountain View, CA $10.30 (in 2015)
New York, NY $13.13 (by 2016)
Oakland, CA $12.25 (in 2015)
Portland, ME $10.68 (by 2017)
Prince Georges County, MD $11.50 (by 2017)
Richmond, CA $13.00 (by 2018)
San Diego, CA $11.50 (by 2017 – will be reviewed by voters in 2016)
San Francisco, CA $15.00 (by 2018)
Santa Fe County, NM $10.66
San Jose, CA $10.15
Seattle, WA $15.00 (by 2018 – 21, depending on type of business)
Sunnyvale, CA $10.30 (in 2015)
Since Seattle’s MW – on-the-way-to-$15.00 per hour (the highest in the nation) – is such groundbreaking legislation and it just went into effect, we should consider what they have accomplished, especially since their MW is more than double the federal MW and nearly double that of Washington State.
Seattle’s MW is initially $11.00 per hour (as of April 1), and this will be followed by incremental increases over the next two-and-a-half years (for most large businesses and depending on healthcare benefits involved – remember it is complicated) and over the next four-and-a-half years for smaller ones, after which the MW is tied to the cost of living in the area.
Seattle’s changes have been followed closely by other cities, especially as labor groups and workers bring pressure on retailers and fast-food companies to pay a “living wage,” which in their literature, at this point in time, is about $15.00 per hour. Interestingly, Seattle’s new ordinance was passed unanimously by its nine-member City Council and immediately endorsed by Seattle’s mayor.
MW Changes in Nationwide Retail Establishments
While the decision of The Gap and IKEA are significant, three of the largest retailers and fast-food businesses have introduced pay hikes within the last few months and the first few in 2015 – Walmart, Target and McDonald’s. There is little doubt that the impact of these companies moving on the MW issue has influenced Capitol Hill and has moved the MW debate to a different level in our thinking. After all, Walmart is considered a trend-setter in the retail industry and its move alone affects the lives of an estimated 500,000 workers, according to the Huffington Post.
Starting this month, annual MW rates at Walmart will be raised to $9.00 per hour and next February 1, pay will go up to at least $10.00 per hour. In addition, employees have been promised greater control over their schedules, a problematic issue that finally has management’s attention. McMillon, the CEO of Walmart, has suggested that an improving economy – unemployment has fallen from a peak of 10% to 5.6% recently – has pressured Walmart to raise wages.
However, OUR Walmart, the union-backed group organizing protests at Walmart, took credit for the company’s announcement. “We are so proud that by standing together we won raises for 500,000 Walmart workers, whose families desperately need better pay and regular hours from the company,” claimed Emily Wells, a leader of the group. But she said that the improved wage package still fell short of what was needed. “With $16 billion in profits, Walmart can afford to provide the good jobs that America needs – and that means $15 an hour, full-time, consistent hours and respect for our hard work,” quoted CNN’s Money.
Even with a $10 hourly wage, workers and their families would still fall below the poverty line, but it’s far better than the current federal MW of $7.25, which numerous states still consider the norm.
The Wall Street Journal reported that without explicitly announcing an increase, Target plans to ensure that all employees will see at least $9 per hour in their first April paycheck. Of course, this follows their retail rival Walmart (as well as TJX, owner of T. J. Maxx, Marshalls and Home Goods), which made its announcement in February. With 347,000 employees in the U.S., along with hundreds of thousands of others at Walmart and TJX stores, the major retail hold-out was McDonald’s and similar nationwide fast-food chains.
At last, on April 1, McDonald’s joined the preceding group of retail outlets in raising their MW, but the world’s largest restaurant group agreed only to pay $1 more than the local MW beginning July 1, 2015 and only at the 1,500 stores the company owns, not at the approximately 13,000 stores owned by its franchisees. This increase will be followed by another of the same size by the end of 2016 and will allow employees starting July 1, 2015 to accrue paid time-off.
The April 2edition of the Financial Times notes that the franchisee employees would be eligible for a new education financial aid program starting July 1, 2015. Critics, of course, are angry that so many thousands of employees are ignored in the pay raise as well as the fact that McDonald’s has insufficiently responded to the national campaign that advocates for a $15 hourly MW and union rights for all employees.
According to the March 30 online issue of the New York Times, the SEIU has been increasing pressure on McDonald’s. It was the SEIU that helped persuade the National Labor Relations Board (NLRB) to accuse McDonald’s of being a joint employer with its franchisees, a move fraught with many repercussions for the chain, not the least of which is the wage issue. The president of the SEIU said, “This movement is changing our political debate [and what] employers think they can get away with… This movement is way beyond fast food. We aren’t going to stop until the service sector in the U.S. becomes the foundation for the next American middle class.”
There is a wave of actions planned for McDonald’s stores for April 15, including strikes, walk-outs and protests in more than 200 cities nationwide. These and similar but smaller protests have been occurring for more than two years and while not wholly successful at McDonald’s, has prompted a national debate about economic inequality with low-wage workers at its core. And surely, it has influenced many of the cities and states listed above to raise their MW.
The Economic Policy Institute (EPI), in a report issued on April 1, indicated the key reason why raising the MW is such a significant issue. Their research data demonstrates that in the late 1960s the MW was equal to about 53% of the average middle-class wage. Yet by 2014, after infrequent and inadequate increases, the MW now is equal to only 35% of the average production worker’s wage. (Perhaps this accounts for that aspect of the current Murray/Scott bill referred to above). That gap has been particularly demeaning to and difficult for women workers, who constitute a larger percentage of MW workers than their male counterparts.
NETWORK has consistently supported raising the MW to the level of a “living wage,” which should provide for a life of human dignity, will lift families out of poverty, will meet basic human needs in a sustainable way, and will place those needs before accumulation of profits. A “living wage” should allow wage earners to provide adequate housing, quality healthcare, child care, education and transportation for their families.
The recent activity described above, in the form of cities and states as well as major retail corporations agreeing to raise their MW could provide the impetus for another federal push, which we applaud. We will continue to promote upgrading the MW to a living wage.