Workers in 20 states will receive a pay rise on Jan. 1 when the minimum wage rises, thanks to cost-of-living adjustments and other scheduled increases. Later in the year, four other states and Washington, DC will raise their benchmark wage, meaning low-wage workers in nearly half the nation could see a higher wage next year.
Wage increases are occurring as the federal minimum wage, which has not risen for more than 11 years, remains at $ 7.25 per hour: the longest period of the reference wage has risen without increasing since began in 1938. At the same time, workers across the country are struggling amid an economic recession caused by the coronavirus pandemic, which continues to spread non-stop.
A higher minimum wage could help workers regain their financial level, especially so-called essential workers, such as grocery employees and domestic health care workers, whose jobs have helped keep the economy afloat during the crisis, but whose incomes are the lowest. Critics claim that higher minimum wages can hurt the labor market by causing a depression in job creation, although recent economic research has found no support for this claim. Proponents, on the other hand, say a higher minimum wage helps the economy by putting more money in the pockets of workers who tend to spend it on local businesses and services.
Wage hikes in 2021 “are an indication that people understand the extent to which the $ 7.25 federal minimum wage keeps people in poverty,” said Holly Sklar, chief business officer for a fair minimum wage. , a network of business owners and organizations advocating for a higher minimum wage.
Sklar added: “Consumer spending is boosting our economy and raising the minimum wage is a powerful way to boost the economy.”
Some companies claim that higher wages pay in the long run by reducing turnover and creating greater job satisfaction.
“The direct costs of billing are obvious: hiring, interviews, training,” Kelly Vlahakis-Hanks, CEO of ECOS, which manufactures eco-friendly cleaning products, told CBS MoneyWatch. “Indirect costs are less obvious, but they are significant, and I think very underestimated.”
After his company increased the starting salary to $ 17 per hour in 2014, his voluntary turnover decreased from 50% from 3% to 1.5%, he noted. “We have employees who have been in our company for 20, even 30 years,” Vlahakis-Hanks added.
Lost purchasing power
Since the last federal minimum wage hike (up to $ 7.25 per hour, as of July 24, 2009), the cost of living has risen more than 20%, while the price of products basic needs such as housing and health care have increased even faster. This has caused financial pain for many poorly paid workers, who are increasingly paying a larger share of their housing and other expenses.
About half of all tenants have a “charged cost,” meaning they pay more than 30 percent of their income for housing, according to the Harvard Joint Center for Housing Studies. After paying their rent, people who earn less than $ 15,000 a year have about $ 410 left each month for food, transportation, health care and other essentials, according to the study.
The minimum wage “arose to help us recover from the Great Depression,” Sklar noted. “It has a dual purpose: to alleviate worker poverty and increase consumer spending.”
Which states increase the minimum wage in 2021?
Michigan is expected to keep its minimum wage at $ 9.65 on Jan. 1, according to the National Federation of Independent Businesses, a trading group. This is due to a law banning wage increases if the state’s annual unemployment rate for the previous calendar year is above 8.5%.
As of October, the unemployment rate in the state has averaged 10.2%, meaning it is unlikely to fall below 8.5% before the end of the year, the group noted. commercial. Otherwise, Michigan would have raised its minimum wage to $ 9.87.
The following are the names and new wage rates of states that increase their minimum wage in 2021:
- Alaska, at $ 10.34 per hour on January 1st
- Arizona, at $ 12.15 per hour on January 1st
- Arkansas, at $ 11 per hour on January 1st
- California, at $ 14 on January 1st
- Colorado, at $ 12.32 on Jan. 1
- Connecticut, at $ 13 on August 1st
- Florida, at $ 8.65 on Jan. 1
- Illinois, at $ 11 on January 1st
- Maine, up to $ 12.15
- Maryland, at $ 11.75 on Jan. 1
- Massachusetts, at $ 13.50 on Jan. 1
- Minnesota, at $ 10.08 for employers with annual gross income of at least $ 500,000 and $ 8.21 for employers with less than $ 500,000, Jan. 1
- Missouri, at $ 10.30 on Jan. 1
- Montana, at $ 8.75 on Jan. 1
- Nevada, up $ 8.75 or $ 9.75 on July 1, with the highest effective rate for employers who do not provide health insurance to workers
- New Jersey, at $ 12 on January 1st
- New Mexico, at $ 10.50 on Jan. 1
- New York State, to $ 12.50 on December 31, 2020, while Long Island and Westchester will increase to $ 14 on December 31, 2020
- Ohio, at $ 8.80 on Jan. 1
- Oregon, at $ 12 on July 1, although it will increase to $ 13.25 for the Portland region and $ 11.50 in non-urban counties
- South Dakota, at $ 9.45 on Jan. 1
- Vermont, at $ 11.75 on Jan. 1
- Virginia, at $ 9.50 on May 1st
- Washington State, at $ 13.69 on January 1st
- Washington, DC to raise its minimum wage by $ 15 an hour in July to adjust to the change in the cost of living of the previous twelve months