New year to bring minimum wage hikes in 27 states

The minimum wage will rise in more than half the states next year as an increasing gap opens between blue states where the lowest paid workers get regular raises and red states where those workers are stuck with a federal wage that hasn’t risen since 2009.

Wage floors will rise in 27 states next year, mostly states where Democratic lawmakers have approved increases or voters have done so at the ballot box. 

But the $7.25 hourly federal minimum wage, which hasn’t risen since 2009, will still apply in 20 mostly Republican-controlled states. 

“There’s almost like two countries when it comes to minimum wage policy,” said Ben Zipperer, an economist at the Economic Policy Institute, a left-leaning Washington think tank. “About half of the states don’t have plans — or their legislatures have roundly rejected plans — to increase the minimum wage.”

The divide will likely get wider. Many advocates for low-wage workers now say that, given the rising cost of living, wages need to rise even higher. A 2022 Hawaii law will raise the minimum wage to $18 an hour by 2028. And a 2024 California ballot measure would raise the minimum wage to $18 an hour by 2026. 

Almost every state has announced its 2023 minimum wage. The exception is Oregon, where the minimum wage will rise July 1 along with inflation.

More than a decade after low-wage workers began campaigning for a minimum wage of $15 per hour, workers in California, Connecticut, Massachusetts, Washington and the New York City area will hit that mark next year. The minimum wage is already higher in some cities and counties.

“Only a few years ago, $15 wasn’t viewed as a realistic target for minimum wage policy. And that has changed dramatically,” Zipperer said. He estimates that about 40% of U.S. residents live in a place that has a $15 minimum wage or is scheduled to have one in the next few years.

Relatively few workers earn minimum wages, policy experts say, particularly right now. Labor shortages and inflation have in recent years driven up pay for restaurant servers, retail clerks and other low-wage jobs. 

Still, advocates for raising minimum wages say doing so helps low-income people. And opponents say doing so hurts businesses that can’t cope with higher labor costs. 

The minimum wage will rise by an average of about 8.15% next year in states where workers get a raise and the rates have been announced, according to Pluribus News’ calculations. That partly reflects high inflation. Thirteen states and Washington, D.C. will index their minimum wage to inflation in 2023.

The biggest jump will occur in Nebraska, where voters in November approved a ballot measure increasing the wage floor from $9 an hour this year to $10.50 an hour on January 1. The measure will raise the minimum wage each year until it hits $15 an hour in 2026. After that, the wage floor will increase along with inflation.   

A large jump could also occur in Michigan if courts affirm a July Court of Claims ruling. Under the ruling, the state’s minimum wage would rise from $9.87 an hour this year to over $12 an hour in February, an over 20% increase. The minimum wage earned by tipped workers would rise from $3.75 an hour this year to 90% of the regular minimum wage, or over $10.80 an hour, in February.

At issue is the Michigan legislature’s 2018 decision to adopt a proposed minimum wage ballot measure, rather than let it go before voters, and then soon after significantly change the law to water down the proposed wage increases. Judge Douglas Shapiro ruled that doing so was unconstitutional. Under his ruling, the minimum wages outlined by the ballot measure must be reinstated.

Shapiro’s ruling has been appealed and the case could eventually reach the state Supreme Court.

Michigan business groups are protesting the potentially rapid rise in the wage floor and asking lawmakers to slow things down.

Restaurants and other businesses that employ tipped workers are particularly worried about the rise in the tipped minimum, which would dramatically increase their costs, said Justin Winslow, president and CEO of the Michigan Restaurant and Lodging Association, a trade group. 

“That’s where the real rub is, that’s where the most damage would be caused,” he said. Winslow said tipped workers in Michigan earn about $25 an hour, including tips.

Gov. Gretchen Whitmer (D) has said she’d be open to slowing the wage increase. A GOP-sponsored bill would allow the minimum wage to rise to $12 in 2023 but would not index it to inflation until 2024. The bill would also set the tipped minimum wage to 40% of the statewide minimum wage starting in 2024.

It’s not clear if the bill has a chance during the lame-duck session, however. Republicans currently control the legislature but Democrats will take over in January.

Winslow said the bill still has a chance. “We’ve been surprised by how much willingness and interest there is on both sides of the aisle to get this done now,” he said.