New York's tipped wage (a lower hourly rate earned by waiters and bartenders) goes up to $7.50/hour at the year's end, and California's full minimum will shoot up to $10. By mid-2016, Washington, DC's minimum will rise to $11.50, making it among the country's highest. Yet many other states are doing nothing — a problem as real wages stagnate and as many workers, particularly those in the restaurant industry, continue to work long hours for very little pay. So here's what you need to know about the state of state minimum wages.
A Bunch of Things You Should Know About the Full Minimum
Minimum Wage and the Food Service Industry: According to U.S. Census data, most employees earning the minimum or less in 2014 worked in the food service industry. Specifically, of the seven million hourly paid workers in the hospitality industry, 5.3 percent reported earning the minimum, while 15.8 percent reported earning less than that. Put differently: The food-service industry made up 30 percent of U.S. hourly workers earning the lowest legal wage, and 65 percent of workers earning less than that.
The Federal Minimum Glass Ceiling: While more than half the states have minimum wages higher than the federal rate, 21 states, many of them in the South, also set their minimum at $7.25/hour. Not one of those states has concrete plans to to raise that wage.
The States with Most Minimum Wage Workers: The states with the highest percentage of hourly workers who earn the federal minimum wage or less, as of 2014, are Arkansas (6.4 percent), Louisiana (6.3 percent), Mississippi (6.2 percent), Tennessee (6.8 percent), Indiana (6.1 percent), Texas (5.7 percent), and West Virginia (5.9 percent). But just because states have a high proportion of individuals at the minimum doesn't necessarily mean they are the regions most in need of worker pay hikes, as a living wage analysis below will show. Note: Arkansas and West Virginia have increased their minimums above the federal level since 2014.
The Minimum Wage vs. the Living Wage: The MIT living wage is an annually updated series of statistics that calculates the actual cost of living in a geographic area — taking into account not just food but local costs for child care, health care, housing, transportation, clothing, and personal care items. And among the 25 states with the biggest gaps between the minimum wage and the local living wage for a single, childless adult, 16 of them pay the federal minimum. So if you believe that the minimum wage should more closely reflect the living wage, the states that pay $7.25 are among those most in need of a hike. Virginia comes in as the worst of the bunch; its minimum, set at the federal level, comes it at just 59 percent of the $12.36 local living wage.
Are the Mid-Atlantic States Most in Need of Minimum Wage Hikes? In addition to Virginia, five of the 10 states with the biggest shortfalls between the minimum wage and the living wage are in the Mid-Atlantic (and boast minimums well above the federal level). Those states are New Jersey, Maryland, Delaware, and New York (whose $9 minimum in early 2016 is just 63 percent of the living wage). If one extends that list to the larger Northeast, New Hampshire, at $7.25, also makes the top 10. Of those six states, only Maryland is slated for a large wage hike in the coming years; it will move from $8.25 to $10.10 by 2018.
Life Is (Getting) Better in Hawaii: After Virginia, Hawaii currently has the largest living wage gap, with the local $8.50 minimum making up just 62 percent of the $13.74 living wage. That gap will close by 2018, however, when the state minimum rises to $10.10.
The States Least in Need of Minimum Wage Hikes? The states with the smallest gaps between the living wage and the minimum wage are Nebraska, Washington, South Dakota, West Virginia, and Alaska. In Nebraska, the $9 minimum (the same minimum as New York) represents 95 percent of the state's $9.48 living wage.
Fight for Fifteen: Who's Getting There: Seattle, Los Angeles, San Francisco, and Berkeley, California are all on track to reach a $15 minimum over the next half decade or thereabouts, but New York is currently the only state that has approved a $15 minimum — albeit for just a portion of its labor force. That wage will only apply to government workers, and more importantly, fast-food workers, the latter of which rank among the lowest paid workers in New York, earning $15,954/year on average. NYC fast-food workers will reach $15 at the end of 2018; state workers will reach that level in mid-2021.
Fight for Fifteen: Who's on Deck: New York Governor Andrew Cuomo has proposed the $15 minimum for everyone in the state; he'll need the support of the Republican-controlled state senate to get that approved. Massachusetts is considering a proposal for a $15 minimum applying to large companies, including fast-food chains. Washington, DC voters, in turn, are expected to vote on a $15 minimum in 2016.
Pop Quiz: How many states have minimums at or above their state's respective living wage for a single adult? Zero.
The Highest State Minimums in 2016: As of early 2016, the states or territories with the highest minimum wages will be the District of Columbia ($10.50), California and Massachusetts ($10), New York's fast-food and government workers ($9.75), Alaska ($9.75), Washington ($9.47), and Oregon ($9.25). That list will change, albeit slightly, by 2018, the graph above shows.
The Highest State Minimums in 2018 Aren't Terribly High: By 2018, only six states plus Washington, DC will have minimums at or above $10. Those states are California ($10), Connecticut ($10.10), Hawaii ($10.10), Maryland ($10.10), Massachusetts ($11), and Vermont ($10). If a planned 2016 ballot initiative passes in Ohio, that state could be next, potentially hitting $10.50 by 2018. And Maine might get there too, if a referendum on a $12 minimum goes before voters next year.
Indexing Wage Hikes to Consumer Prices: Seven states regularly increase their annual minimums automatically to keep pace with the consumer price index (aka inflation). Those seven states are Oregon, Colorado, South Dakota, Florida, Arizona, Ohio, and Montana. That number will increase to eight after Washington, DC hits $11.50/hour later in 2016. Of the seven states that increase their minimums automatically, only two are seeing increases this year: Colorado (up eight cents to $8.31) and South Dakota (up five cents to $8.55). Such increases keep pace with the rising price of goods; but they do little to bridge the gap between the living wage and the minimum wage.
The G.W. Outliers: Although Georgia and Wyoming set their minimums at $5.15, the Federal Labor Standards Act requires most businesses in those states to pay the full federal minimum of $7.25. Not irrelevant fact: The bottom 10 percent of food service workers in Georgia barely earn more than the federal minimum.
Vermont vs. New Hampshire: Increasing the minimum isn't just about improving the plight of the lowest-paid workers, it's about raising incomes for those who are already earning more than the minimum (this happens as employers adjust other wages to avoid overlapping salaries with more experienced workers). Case in point: Vermont's minimum wage is $9.60/hour (it will eventually rise to $10.50), while New Hampshire's minimum remains at $7.25, with no scheduled increases. Alas, the median wage for cooks is a hint higher in New Hampshire, at $12.62, 10 cents more than in Vermont. But when you look at the most poorly paid cooks in the adjoining states, those in New Hampshire earn $9.73 (the bottom 33rd percentile), almost a full dollar less than those in Vermont, who make $10.70 (the bottom 25th percentile). It's a sign that the higher Vermont minimum has likely helped the state's most poorly-paid workers secure a better livelihood.
A Bunch of Stuff You Should Know About the Tipped Minimum
The Declining Value of the Tipped Minimum: As the federal minimum has risen 70 percent since 1991 from $4.25 to $7.25, the tipped minimum has remained frozen at $2.13 for over two decades; its value has dropped from 50 percent of the full minimum, to 29 percent. The sub-minimum used to rise in proportion with the full minimum until it was decoupled in 1996.
The Stagnant Sub-Minimum: Of the 19 states with the federal tipped minimum of $2.13, not a single one has definite plans to raise that minimum by 2018.
The Enforcement Issue: If a waiter's combined cash wage plus tips do not bring her salary up to the full minimum, an employer is required to make up that difference. That regulation, however, is widely viewed as difficult to enforce, as it can require precise bookkeeping on the part of both the waiter and the employer. According to a White House report, 10 percent of tipped workers reported earning wages below the full minimum, versus four percent of all workers. This all informs the following rule of thumb: The higher the gap between the full minimum and the tipped minimum, the less a waiter makes — and the greater the risk of that waiter not earning the full minimum.
The Tip Credit: Seven states require that servers earn the full minimum wage: Alaska, Montana, Minnesota, Oregon, California, Nevada, and Washington. Of the remaining 43 states that allow restaurants to pay servers, bussers, and bartenders the lower tipped minimum, New York (as of 2016) and Hawaii (as of now) have the highest base wages for those workers, at 83 percent and 91 percent of the full minimum, respectively.
Captain Obvious Fact Worth Mentioning: Waiters generally make more money in states with no tip credit or a low tip credit. Of the 10 U.S. metropolitan areas with the highest paid waiters, seven are located in states that pay waiters at least the full minimum (or very close to the minimum, to account for Honolulu, Hawaii) as opposed to a generally lower tipped minimum, according to Bureau of Labor Statistics data.
The Capital Tip Problem: Washington, DC, which has the highest "state" minimum at $10.50 (going up to $11.50 next year), also has the largest gap between the full minimum and the tipped minimum; the latter remains at $2.77. Washington's waiters earn a mean hourly wage of $12.24/hour — not too shabby, except that's just 82 percent of the District's $14.84 living wage. Compare that with New York City: The hourly tipped minimum is over two dollars more at $5, and waiters earn $14.44 on average, or 101 percent of the city's $14.30 living wage. Those Big Apple numbers will rise even further when the city's tipped minimum rises to $7.50 at the year's end.
The Frozen Tipped Minimum: Washington, DC, along with Maryland, Arkansas, and Nebraska, is one of four states or territories whose tipped minimum is staying put despite the fact that the full minimum is rising. Translation: Servers, bartenders, and other service employees won't be getting the same raises as other workers in those local economies. Along with D.C., neighboring Maryland has one of the largest gaps between those two wages, with a full minimum of $10.10 by 2018, and a tipped minimum of $3.63.
Illustrations: Stephen Finn/Shutterstock
Interactive map: Vince Dixon/Eater