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Minimum Wage Raise Coming To Eight States After New Year

Dollarbill

Posted: 12/28/11 05:33 PM ET

WASHINGTON -- Eight states will be raising their minimum wage next week, boosting the pay of more than a million workers across the country.

Most of the raises will be modest, on the order of 28 to 37 cents per hour, but the new rates will translate into hundreds of additional dollars annually for many people who are working yet remain in poverty.

Setting a new benchmark, Washington will become the first state to crack the $9 ceiling, raising its minimum wage from $8.67 to $9.04, which translates for full-time minimum-wage workers into an extra $15 or so in pretax pay each week. The other states raising their rates are Arizona, Colorado, Florida, Montana, Ohio, Oregon and Vermont.

Workers in all of these states owe their raises to the cost-of-living adjustments written into their state laws. Such laws require that the minimum wage be tweaked every year to account for the rising cost of basic necessities, usually pegged to the consumer price index. Ten states, including the eight above, have such laws on the books. Nevada raises its rate during the summer, and although Missouri has a cost-of-living adjustment, this year it will not push the state rate above the prevailing federal minimum wage of $7.25.

In recent years, advocates for low-wage workers have tended to lobby hard for cost-of-living adjustments on the state level, arguing that such laws protect against the erosion of workers' purchasing power. The federal minimum wage is not automatically adjusted for inflation and requires new legislation each time it increases. Thirty-two states currently have minimum wages no higher than the federal rate.

Paul Sonn, legal co-director of the National Employment Law Project, called the cost-of-living adjustment "the most important sort of protection" keeping the minimum wage from losing its purchasing power over time.

"Workers in those states are enjoying substantially stronger wages than in others," said Sonn, who argues that such adjustments also offer the business community some predictability. "From our perspective, in the states that have adopted indexing, the minimum wage is preserving its real value."

But even in Washington state, with the highest rate in the country, today's minimum wage does not match its historical highs when adjusted for inflation, Sonn noted. Had the minimum wage kept pace with the rising cost of living since the 1970s, it would currently stand around $10 an hour.

Not satisfied with the rates set by their state governments, some cities have passed local ordinances establishing their own minimum wages. Among them is San Francisco, which next week will become the first major city with a minimum wage higher than $10.

Business owners and trade groups in San Francisco and elsewhere have argued that a relatively high minimum wage forces businesses -- restaurants in particular -- to cut back on staff and displaces jobs to other communities. Although the body of research is conflicting, recent some studies have concluded that raising the minimum wage has no significant impact on local job markets.

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