In his State of the Union address earlier this year, President Obama called for Congress to raise the federal minimum wage to $9 an hour by 2015, with automatic adjustments upward to reflect increasing costs of living going forward. But with the current level of $7.25 an hour, the increase would amount to an almost 25% jump in the costs that minimum-wage employers have to pay, raising concerns about potential impacts on businesses and on employment among lower-paid workers. Although proponents argue that boosting the minimum wage stimulates overall economic growth by putting more money in the hands of workers, opponents respond that minimum-wage increases result in reduced hours for workers because of the cost pressures they put on employers.
One interesting fact in the minimum-wage debate is that many states already pay more than the federal minimum wage. Let’s look at the six states that pay the highest minimum wage, according to figures as of the beginning of 2013 from the Department of Labor and more recent updates from various legislative sources.
Illinois pays workers a minimum of $8.25 an hour, but with several exceptions. Employers can pay workers under 18 as little as $7.75, while tipped employees are subject to an even lower potential minimum wage of $4.95, representing the allowed 40% credit that employers are allowed to claim on tip income. Proposals to lift the minimum wage to $10 an hour over the next four years have raised controversy, especially in light of disparities already between Illinois and surrounding states that opponents say put the state at a competitive disadvantage with its neighbors.
Connecticut’s minimum wage is also $8.25 an hour, but it treats its tipped employees slightly better than Illinois, giving them a minimum of $5.69. Last week, though, the Connecticut Senate passed a measure to increase the wage to $8.70 next January and to $9 by 2015, which was a compromise from a more aggressive earlier bill that would have sent the minimum wage to $9.75 within two years. The bill goes to the state House for debate.
The $8.25 minimum wage that Nevada pays comes with an interesting twist: Companies that offer health insurance benefits to their employees are allowed to pay $1 less in hourly wages. Although a referendum in 2006 required the state to index its base wage to inflation, the wage has stayed the same since 2010. Another perk: Tipped employees have to receive the same minimum wage as other workers. That’s a big cost for Las Vegas Sands Corp. (NYSE:LVS), Wynn Resorts, Limited (NASDAQ:WYNN), and other companies with casinos in the state that might otherwise be able to pay many of their tip-earning workers less.
In Vermont, minimum-wage workers receive $8.60 an hour, with amounts rising for inflation each year. Tipped employees, however, take a big haircut, with minimums as low as $4.10 applying to occupations where tips are paid. Vermont’s unemployment rate recently fell to 4%, the lowest since before the 2008 recession, which wage-increase proponents argue is evidence against the idea that high minimum wages automatically mean higher unemployment.
In Oregon, the minimum wage is $8.95 an hour, with wages having increased along with the rate of inflation for a decade. Oregon’s high minimum wage was specifically cited in testimony before Congress recently, as a National Restaurant Association representative noted that the average number of workers per restaurant in the state has decreased steadily since the minimum wage started rising at a faster rate than the federal minimum wage.