20 States with Highest Minimum Wage and Low Cost of Living

In this article, we look at 20 states with the highest minimum wage and low cost of living to see the extent to which wages cover the cost of living in these states. We will also discuss companies that are raising their wage levels and its impact on employment and business. You can skip our detailed analysis on the subject and head over directly to 5 States with Highest Minimum Wage and Low Cost of Living.

Hundreds of fast-food workers from restaurant chains including McDonald’s Corporation (NYSE:MCD), Domino’s, KFC and other food companies went on strike in New York City on November 29, 2012, to demand higher wages and better working conditions. These workers were earning the minimum wage at that time, but due to burgeoning cost of living, this amount was well below the living wage declared by economists then – the wage that is sufficient to meet all necessary expenses.

The federal minimum wage in the US is just $7.25 per hour and has remained unchanged since it was set in 2009. The protests in New York sparked a national political movement that has come to be known as the Fight for $15, and it is not just limited to the restaurant industry. The movement has involved strikes by workers at airports, gas stations, convenience stores, and even affected the childcare and healthcare sector.

The movement has had its successes, with many state governments announcing to gradually raise the minimum wage year-by-year to $15. At the local level, cities such as New York City, Seattle, and San Francisco, where the cost of living is significantly higher, have already increased their minimum wage to $15. That being said, workers continue to regularly mobilize across the US, especially in states that have no minimum wage and where wages are set to equal the federal wage level.

The demand for higher minimum wages has received both support and criticism. Ed Rensi, the former CEO of McDonald’s Corporation (NYSE:MCD), in 2016 cited the movement for higher wages as the reason for the fast-food giant installing automatic kiosks at restaurants nationwide. Rensi argued that increased wages are directly linked with unemployment. The McDonald’s Corporation (NYSE:MCD)’s ex-CEO also fears that small businesses that cannot afford automation and can also not pay high labor costs will be at the risk of being driven out of business altogether, or be forced to move their operations to states that have lower wages.

In contrast, Amazon.com, Inc. (NASDAQ:AMZN), in 2018, announced to pay all its employees in the US, wherever they may be, a minimum wage of $15, which is double the federal wage level. In addition to this, Amazon.com, Inc. (NASDAQ:AMZN) also stated that it would urge policymakers of Washington, D.C. to enforce a higher federal wage to enable workers to meet their necessary needs amid rising cost of living.

More companies followed Amazon.com, Inc. (NASDAQ:AMZN) in the years to come. Retail giant Target Corporation (NYSE:TGT), in 2020, announced to raise the minimum wage of its employees to $15 and to give a one-time bonus of $200 to all hourly employees. In March 2022, Target Corporation (NYSE:TGT) made headlines by declaring that it was raising the minimum wage to as much as $24, depending on the nature of the job and the local market.

The company also shared its plan to make healthcare more accessible for its employees. Workers who worked more than 25 hours a week would be eligible for Target Corporation (NYSE:TGT)’s medical plan. The health benefits and pay increases will cost the company $300 million and are part of the strategy to retain employees.

In January this year, despite the economic slowdown, America’s largest employer, Walmart Inc. (NYSE:WMT) gave a 17% raise in minimum wage to workers who cater to customers and stock shelves. Store employees now earn anywhere between $14-19, depending on the state they are based in. The move by Walmart Inc. (NYSE:WMT) will benefit more than 340,000 workers, who make up roughly 21% of the total employees in the company.

Moreover, as the cost of living crisis worsens, companies such as Walmart Inc. (NYSE:WMT) and Target Corporation (NYSE:TGT) have taken it upon themselves to limit the level of inflation burden they pass on to the already-burdened final consumer. According to a report in CNBC, both have clashed with investors over keeping prices down despite inflation over the last couple of years. This has helped both Walmart and Target in keeping their market share, albeit at the expense of their own profitability.

20 States with Highest Minimum Wage and Low Cost of Living

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We have ranked the states with the highest minimum wage and low cost of living by dividing minimum wages by the cost of living index for each state to get a score which shows the degree to which minimum wages help cover the cost of living. States are ranked in ascending of these scores.

Data for minimum wage levels has been sourced from the US Department of Labor and websites of state governments. The Missouri Economic Research and Information Center (MERIC) was consulted for cost of living index scores for each state.

Let’s now head over to the list of states with the highest minimum wage and cost of living in the United States.

Top 20 States with Highest Minimum Wage and Low Cost of Living:

20. Minnesota

Minimum Wage: $10.59

Cost of Living Index: 94.4

Score: 0.1122

The minimum wage rate in Minnesota is set to be raised to $10.85 per hour from January 1, 2024 for large employers. This will be applicable to all large employers operating in the state. On the other hand, small employers whose gross annual revenue is under $500,000, are currently required to pay a minimum of $8.63 per hour, which will be revised to $8.85 from next year.

19. New York

Minimum Wage: $14.2

Cost of Living Index: 126.5

Score: 0.1123

New York’s cost of living is nearly 30% higher than the national average, but it currently has the fourth highest hourly minimum wage rate in the country of $14.2, which is set to increase to $15 from next year. The minimum wage in New York City, Long Island, and Westchester are already $15 and will be raised to $16 from January 1.

18. California

Minimum Wage: $15.5

Cost of Living Index: 136.4

Score: 0.1136

California has one of the highest costs of living in the US, but that is offset by significantly higher minimum wage rates compared to the rest of the country. All employers by state law are required to pay $15.50 as a minimum wage, and the rate is set to increase by $0.50 from January 1, 2024. The minimum wage for fast food workers will be raised to $20, effective from April 1, 2024.

17. Vermont

Minimum Wage: $13.18

Cost of Living Index: 114.9

Score: 0.1147

The legislature in Vermont passed a law in 2020 that required the state to calculate and increase the wage rate each year in proportion to the Consumer Price Index. Vermont’s minimum wage is at par with most other states in the North East. According to the state government, the minimum wage will rise by 49 cents starting 2024.

16. Nebraska

Minimum Wage: $10.5

Cost of Living Index: 91

Score: 0.1154

Nebraska’s minimum wage is 45% higher and its cost of living is 9% lower than the national average prevalent in the United States. The cost of living index for housing in Nebraska was recorded at 78.1 at the end of the third quarter this year, which is well below the levels in other states of the country. The state’s minimum wage rose from $9 in 2022 to $10.5 in 2023, and it is planned to be raised to $15 by 2026.

15. Rhode Island

Minimum Wage: $13

Cost of Living Index: 112

Score: 0.1161

According to the Rhode Island Department of Labor and Training, minimum wage in the state is set to be increased by $1 per year to reach $15 by the start of 2025. Exceptions will apply to full-time students who are under the age of 19 and are working in any nonprofit or community services organizations and those aged 14-15 who do not work for more than 24 hours a week.

14. Delaware

Minimum Wage: $11.75

Cost of Living Index: 100.8

Score: 0.1166

The minimum wage in Delaware in 2023 is more than $4 above the federal minimum wage in the US. This wage is projected to rise by about 30% over the next couple of years to total $15 by 2025. This is an encouraging trend for locals considering that the cost of living is relatively at par with the national average.

13. South Dakota

Minimum Wage: $10.8

Cost of Living Index: 91.8

Score: 0.1176

South Dakota is among the states with the highest minimum wage and low cost of living, with housing and utilities costing an estimated 15% less than the national average in the US. The minimum wage in the state is set to increase 40 cents from January 1, 2024.

12. Virginia

Minimum Wage: $12

Cost of Living Index: 101.4

Score: 0.1183

Virginia has one of the highest minimum wage rates in the United States, and what sets it apart from its counterparts is that it does not exempt tipped workers from receiving the same minimum wage as other employees. In most other states, tipped workers usually receive 50% of the state’s minimum wage. Virginia has come a long way when it comes to increasing minimum wages. In 2021, the wage rate was $9.50 per hour; it is projected to touch $15 by 2026.

11. Oregon

Minimum Wage: $14.2

Cost of Living Index: 114.7

Score: 0.1238

Oregon has the joint fourth highest wage rate, along with New York, in the US. Wages were increased by 70 cents this year in July based on inflation between March 2022 and 2023. By law, workers in Portland receive $1.25 more than the baseline wage rate of the state, while employees in the rural areas earn $1 less per hour. Therefore, wages vary between $13.20 and $15.45 per hour in Oregon depending on where you work.

10. Arkansas

Minimum Wage: $11

Cost of Living Index: 88.5

Score: 0.1243

Arkansas’ minimum wage is well over the federal minimum wage of $7.25. Cost of living in the state is also low, about 11% less than the national average. Housing is particularly cheap with an index score of 73.1. 

9. Maine

Minimum Wage: $13.8

Cost of Living Index: 110.7

Score: 0.1247

All businesses operating in the state of Maine, even if they have one employee, are subject to coverage under state law for minimum wage and are required to pay their employees at least $13.8 per hour. Starting 2024, the wage rate is set to rise to $14.15, driven by a 2.4% rise in cost of living index between August 2022 and 2023.

8. Arizona

Minimum Wage: $13.85

Cost of Living Index: 110

Score: 0.1259

Arizona has one of the highest minimum wages in the US, which is planned for a further increase to $14.35, effective from January 1, 2024. The cost of living in the state is 10% higher than the national average. According to CNBC, the annual living wage for a single person in Arizona is $60,026. 

7. Colorado

Minimum Wage: $13.65

Cost of Living Index: 106.9

Score: 0.1277

The government in Colorado is set to raise the minimum wage in 2024 to $14.42, a 5.6% increase compared to this year. Minimum wage in the city and county of Denver will rise to $18.29 per hour from $17.29, starting January 1, to keep up with the high cost of living in the state capital.

6. New Mexico

Minimum Wage: $12

Cost of Living Index: 93.9

Score: 0.1278

Next on our list of states with the highest minimum wage and low cost of living is New Mexico, where minimum wage levels cover up the cost of living far more than in other states due the prevailing wage rate of $12 and a cost of living index that is more than six points below the national average.

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Disclosure: None. 20 States with Highest Minimum Wage and Low Cost of Living is originally published on Insider Monkey.