These 6 States Have the Highest Minimum Wages

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.

President Obama at his State of the Union address. Source: White House.

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.

6. Illinois
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.

5. Connecticut
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.

4. Nevada
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 (NYSE: LVS  ) , Wynn Resorts (NASDAQ: WYNN  ) , and other companies with casinos in the state that might otherwise be able to pay many of their tip-earning workers less.

3. Vermont
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.

2. Oregon
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.

1. Washington
Finally, Washington currently tops the nation with a $9.19-per-hour minimum wage. The wage is indexed to the federal Consumer Price Index. Employers can pay workers who are 14 or 15 years old just 85% of the prevailing minimum wage. Even with the top figure in the country, however, a report from the Alliance for a Just Society found that a single adult would need to earn $16.13 an hour in the state to support basic household needs.

What the minimum wage means for investors
The minimum-wage debate often leads investors to focus on McDonald's (NYSE: MCD  ) and its fast-food peers, Wal-Mart (NYSE: WMT  ) and similar retailers, and other businesses where relatively low wages are an integral part of the viability of their business models. Yet many workers at those businesses earn more than the minimum wage, making increases largely moot. Moreover, the fact that McDonald's, Wal-Mart, and similar businesses maintain profitable operations in Washington, Oregon, and other higher minimum-wage-rate states suggests that companies can make adjustments to remain successful -- albeit perhaps at some cost to investor profits.

With the House of Representatives having rejected in March a Democratic push to raise the minimum wage to $10.10, the idea of a higher minimum wage is likely to be on hold for the foreseeable future. Meanwhile, these states will act as case studies to give evidence of the impact of higher wages on state economies.

Of course, some employers have expanded overseas, benefiting from lower labor costs. For instance, Las Vegas Sands has successfully capitalized on a booming Chinese economy, with its big bet on Macau gaming about a decade ago that's paid off in spades. The company is now looking to spread its empire further, but will it be able to replicate its prior successes? Learn about all these opportunities, and the risks they pose, in our premium report on Las Vegas Sands. Be sure to claim your copy today by clicking here.


Read/Post Comments (27) | Recommend This Article (4)

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  • Report this Comment On May 26, 2013, at 11:16 AM, boxertdog1 wrote:

    So move away from those states, basically. Everything is more expensive and your extra buck or 2 is more than eaten up by cost of living.

  • Report this Comment On May 26, 2013, at 11:39 AM, cchamb2 wrote:

    And this is why we all need to go to school:

    "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."

    Assuming that labor is 15 percent of gross, and assuming that ALL employees - without exception - are paid minimum wage, this is a decrease of less than 4 percent in gross revenue.

    If your business can't survive such a decrease in gross revenue, then you're just not very profitable.

    OTOH, a 4 percent decrease in gross is as good a reason as any to raise your prices by 25 percent, right?

  • Report this Comment On May 26, 2013, at 12:11 PM, Hjin wrote:

    @cchamb2, obviously you've never run a business before. The vast majority of companies operate in single digit net profit margins. Hence, unless your business runs on pure variable cost, a 4% decrease in gross revenue will mean definite decrease in net profit margins as well. For small businesses with high fixed expenses, a 4% drop in revenue can push them to bankruptcy. For large public companies, 4% drop in revenue will hammer their stock prices and wipe out millions of dollars in wealth. For large private companies, it means substantial restructuring the their business to become less dependent on labor while squeeze productivity out of capital and existing work force.

  • Report this Comment On May 26, 2013, at 12:13 PM, Hjin wrote:

    @cchamb2, as for your price hike comment, it's simply idiotic.

  • Report this Comment On May 26, 2013, at 12:29 PM, ibuildthings wrote:

    If we weren't importing and subsidizing so-called "undocumented" competition for the unskilled jobs that can't be exported, while also paying unemployment and/or welfare to unemployed citizens, the problem would correct itself. Taxpayers are partially supporting two groups with millions of people in each group. The corner restaurant won't close if it can't hire a cook for $6/hr under the table. They will pay whatever it takes. The restauranteur will pay less in taxes to support non-working people, so her overall costs won't rise even if the wages do.

  • Report this Comment On May 26, 2013, at 12:47 PM, prv8eye wrote:

    In a FREE society in a FREE country the government should not be DICTATING to PRIVATE business owners what they must pay for work.

    If I open a rubber chicken factory and want to pay 50 cents an hour for the no-brainer job of stuffing four chickens to a box that should be MY business.

    If you don't want to work for the pay offered then don't take the job. Nobody is FORCING you to work there.

    Better yet, start your OWN business and pay yourself whatever you want.

  • Report this Comment On May 26, 2013, at 1:26 PM, scarybrat22 wrote:

    'If I open a rubber chicken factory and want to pay 50 cents an hour for the no-brainer job of stuffing four chickens to a box that should be MY business"

    See this is why we have min wage laws so people like you can't take advantage. Yes, stuffing chickens in a box is a no-brainer job, but even no-brainer jobs deserve at LEAST min wage to compensate for the taxing labor of standing and working all day. And yes, standing all day in one place doing repetitive movements is taxing on the mind and body. Since you want to pay 50 cents an hour, i assume your factory would be similar to those in Bangladesh where they are literally crumbling beneath the worker's feet. It was the advent of labor law's after the NYC Triangle Shirt Waist Factory fire that prevented us from going down a similar road. A lot of what government does is bad, Obama Care for one, but doing away with min wages? Never. And no, I don't think it should be $15 an hour because that isn't fair to those making those wages that at least got some kind of education to get to that level.

  • Report this Comment On May 26, 2013, at 1:45 PM, jjjbbbbarn wrote:

    Prices go up everywhere and everything after a minimum wage increase.No one wins except the state and fed goverments.They will be taking more money from you and me.It's a no- brainer!!!

  • Report this Comment On May 26, 2013, at 1:46 PM, dogbreath421 wrote:

    If they raise the minimum wage to $20/hour it will still be the minimum wage. The only difference will be it will create more poor minmum wage workers. Do you really believe that those making above the present minimum wage and the new level will get wage increases to make up the difference. More likely those making over minimum up to the level will be moved to the new minimum level. Example: if 1 million people are making minimum wage, and 3 million are making above minimum but not over the new level, you will now have 4 milion making minimum wage. Minimum wage jobs are not designed to support families. These are supplimental income jobs. Anyone trying to support a family on minimum wage will suggle no matter what the rate is $8/hr or $20/hr. Raising minimum wage only increases the number of poor low income workers.

  • Report this Comment On May 26, 2013, at 2:52 PM, justpicky01 wrote:

    Don't see how a person can support there families on minimum wage . Just came back from the grocery store chicken cost$12.00 for 3 pieces , looked for whole chicken it wasn't available .

  • Report this Comment On May 26, 2013, at 2:58 PM, JimmyFlow wrote:

    Artificial wages create less jobs and inflate consumer goods beyond what they should have been.

    Small business owners are hurt the most by this because they have to tie into a decreasing income pool to pay a small number of employees more, making the hard choice to fire people to keep up with law.

    Employment is hurt big time because less people are hired as it becomes more expensive to hire people.

    Now wonder why the price of milk is a couple hundred times what it used to be.... Yup, you've guessed it, minimum wage hikes...

  • Report this Comment On May 26, 2013, at 6:00 PM, SassyFrassy wrote:

    It doesn't take a rocket scientist to figure out that along with a hike in minimum wage comes price hikes. It happens every time!

    In the late 60's it was $.90 gal., bread .09, eggs .19, and minimum wage was $1.60 hr. Minimum wage went up and so did everything else!

    Chances are those who make above minimum wage now won't see a raise, unless it's to match the new minimum wage. I know, because I was one of those making above minimum wage at the time minimum wage went up to $5.15 hr. and did not get a raise. And there will be more people considered to be at poverty level again. It's a never ending cycle.

    If our small town grocery store manages to survive Obamacare, the hike in minimum wage will most likely close the store. And that's a real shame, because many of us here prefer to shop here rather than drive 20 miles to a larger store.

  • Report this Comment On May 26, 2013, at 6:09 PM, fredotacoma wrote:

    Increasing wage rates leads to increasing use of robotics. Don't believe me? Video stores used to employ tens of thousands of employees. Now they've been replaced by tens of thousands of vending machine redboxes. Show me an entry level job and I'll show you a way that an entreprenuer can fashion a robotic replacement "worker."

  • Report this Comment On May 26, 2013, at 6:46 PM, rudy2013 wrote:

    Dogbreath421...how can you say a worker will struggle supporting a family the same at $20/hr vs. $8 ?? And how can raising minimum wage result in poorer workers?

  • Report this Comment On May 26, 2013, at 7:57 PM, tomtev wrote:

    you have to look at the positives the increase means more tax revinue, and that helps the deficit

  • Report this Comment On May 26, 2013, at 8:03 PM, MUDFLAP514 wrote:

    Has anyone introduced a bill to raise the MW to $10/hr??? If not why not???

  • Report this Comment On May 26, 2013, at 8:42 PM, Damonlee22 wrote:

    Hmm, no mention of the cost of living in these six states. The fact is, raising the minimum wage sounds great, but in fact harms worker wages at large. Raise the minimum wage and the price of everything goes up with it... Yes the cost of living goes up for those making minimum wage and for those whom make wages above the minimum... So where is the benefit?

  • Report this Comment On May 26, 2013, at 9:12 PM, devoish wrote:

    Dogbreath421...how can you say a worker will struggle supporting a family the same at $20/hr vs. $8 ?? And how can raising minimum wage result in poorer workers?

    rudy2013,

    It is less about "free markets" or "supply and demand" than it is about investors. Under our current laws we allow hedge funds, and anyone else with money to get between producers and consumers and drive up costs for doing absolutely nothing of value.

    The additional $110 that a 40 hour minimum wage employee would get if his paycheck went from $7.25 up to $10. would mostly only benefit his SSI check in the future. The other 93% of that raise would become available to hedge fund investors who are legally allowed to, and would, bid up the price of corn or oil in a "no lose" game until the entire wage gain was consumed and redistributed among investors. It might be a few different investors as some lose and others win along the way, but ultimately the gain would trickle back up to where it is now.

    In the end, the employee would be worse off because there would be a bigger impact on his cost of living when he retires, than any gain in SSI.

    If, however, that minimum wage increase was taxed in excess of 50%, say 55%, to fund the employees SSI than investors would only be able to bid up the costs of living 45%, or less than the amount the employees retirement benefit would gain. Then in retirement, when the employees wage is reduced by being unable to work his SSi benefit would be closer to his cost of living than it is today.

    Best wishes,

    Steven

  • Report this Comment On May 26, 2013, at 9:39 PM, Bobz74 wrote:

    Can't speak for the other states but I live in Illinois and we are bankrupt, crime ridden, millions on welfare, industry is gone and millions of jobs have left the state and we are considered the second most corrupt state in the country. Our state is a train wreck and guess what, our president was brought up in this environment. You should read how many of our politicians are in jail.

  • Report this Comment On May 27, 2013, at 2:31 AM, VegasJerry wrote:

    The people pushing to raise the minimum wage have NO clue HOW the economy and business operate. Short lesson....IF you raise ANY cost of business such as labor costs then the business MUST raise the cost of it's products or services to offset that expense so the NET result to the business is ZERO. The increase is wages to a worker WILL result in higher GROSS income which means HIGHER state and federal taxs withheld so the worker only nets part of the wage increase. the worker then must pay a higher amount for most of the products and services they purchase because ALL business will be increasing thier costs to offset thier higher labor costs so in the end the worker is netting the EXACT same "standard of living" just at a higher price tag.

    The ONLY entity that has higher income and a flat expense is......state and federal goverments that collect taxs based on GROSS income.

    Bottomline is workers and business will net the same and taxs go up. This is an excersise in raising the cost of living but NOT an excersise in letting worker's keep more of thier paycheck.

  • Report this Comment On May 27, 2013, at 3:38 AM, Levi598 wrote:

    I live in San Jose California and our minimum wage went to $10/hr March 1, 2013.

    The EDD wages for us unemployed has not gone up since around 2005 I believe. So I think there needs to be adjustments made to bring it up to a more current period and wages.

    Of course having a job is much better but not found one yet.

    If you are going to be a hater, forget it you are wasting your time.

  • Report this Comment On May 27, 2013, at 4:41 AM, pepelay wrote:

    Minimum wages here in San Francisco is $10.55, the highest in the nation.

  • Report this Comment On May 27, 2013, at 9:27 AM, stevetimeshare wrote:

    For decades those who oppose minimum wages have insisted that any increase will destroy jobs and will not help the economy.

    But if you look at the statistics from the Dept. of Labor, the exact opposite has happened in every increase going back to the 60's. After each increase in the minimum wage, there has been a growth of jobs and an increase in the GDP. This has happened with the one exception of the drop following 9/11, which was later followed by an increase once the effects of 9/11 began to be absorbed by the economy.

    You simply can not find any facts to support the argument against the minimum wage. All you have is talking heads making assertions, that have no evidence behind them to support the assertions.

    Think about it. People who are making enough to live, are not going to increase spending when they minimum wage increases. But minimum wage earners will increase their spending. And so many of these posts act like 100% of a companies expenses is from labor. The exact opposite is true. On average, labor is only a quarter or less of what a company pays in expenses each year.

    Take a look at McDonald's sighted above. Sure they spend a lot on labor, but think of the food and consumables they pay for each day. When you order you meal, there is the burger, bun, lettuce, tomato, condiments, fries, soda, cups, fry carton, wrapper for your burger, bag, cup carrier, straw. What percentage of your $8.00 meal do you think went to the labor, and what went to goods? This is true of most fast food outlets, and will also be true of companies like Walmart. Think of the dollars that go thru a Walmart each day. Massive compared to the wages being paid to the employee.

  • Report this Comment On May 27, 2013, at 9:37 AM, karlpopperfan wrote:

    why stop at $10 or $12/hr? If we had a MW of $50/hr, NO ONE would be poor, right?

    The fact is that the vast majority of workers in the US make over if not well over MW.

    This disproves the lefitsts complaint that the MW is needed to keep everyone from making 50 cents an hour.

    Let people freely negotiate wages and benefits.

  • Report this Comment On May 27, 2013, at 12:29 PM, wgcross2 wrote:

    You know, I've listened to the end-of-the world talk for decades, every time the minimum wage was increased. Guess what? It never happened. Prices have gone up? Prices would go up regardless of minimum wage increases. Prices would adjust at a minimum to offset inflation (not the CPI which always understates the true increases). However, the way Wall Street ruthlessly drives businesses, you can bet there are going to be price increases, regardless. Labor is only one cost of doing business. There are many more in the equation. And you're right, minimum wage jobs were never intended to support a family. But our kids can't get these jobs temporarily, because all the Mexicans are taking them. Now Congress wants to legalize all the illegals and allow even more into the country. Then our kids graduating college have to compete with the high unemployment rate and now Visas, especially if this new bill is passed. College continues its exponential rise in cost and is going to price most kids out of reach soon. And you're worried about minimum wage increases? Look at the Dow, it's setting record highs but the rest of the economy stinks. Who is benefiting from the Dow and who really stands to lose with increased minimum wages? Wall Street. What's next? People don't get raises (cost of living or merit)? I don't think anybody has ever gone into business asking what they could do for Wall Street. Any business would be empty walls with no revenue without employees, It's a symbiotic relationship. American workers cannot compete with workers in China or Bangladesh and they shouldn't have to. The cost of living in the US is far too high.

  • Report this Comment On May 28, 2013, at 5:04 AM, The1MAGE wrote:

    There are 3 times I worked up from the minimum wage, then it was increase to what I was making. The result, I was suddenly making the same as the people I was training.

    The last 2 times it was actually a base income, with additional income on top of that.

    But I also knew what the employer was making, and an increase of $1 per employee was easily a quarter of their profits. But that is only with an oversimplified math.

    Throw in FICA (which includes socialist security,) and their pushed up to 27%. Then there is the additional Federal and State unemployment insurance costs.

    We are so worried about the people making minimum wage, but these are primarily teens, and college students. The poor are not poor because they are working minimum wage jobs, it is because they are not working. (I paraphrased that last line.)

    If we remember the start of the "Great Recession" as it is being called, we want to blame the banks, and the bursting of the real estate bubble. But before that there was an economic slowdown, and an increase in unemployment. Does anyone remember the minimum wage increased in 2007, then again 2 months before the crash, and again in 2009. Is there any coincidence?

    Well looking back at the 4 annual increases in the minimum wage from 78 - 81, we actually had a short recession in 1980, then a longer one (16 months) from 81 to 82.

    90 we had an increase, and a recession a couple months later that ran into 91, when we had another.

    It does look like we avoided a recession from the 96 & 97 increases.

    Increasing the minimum wage is not the only reason for a recession. But it can push a weak economy into a recession. The reason is simple. The increase really hits the small business owner. The one with the narrow margins. They have a few choices, to cut the staff, their hours, increase prices if they can, or simply go out of business.

    If you study people's incomes, you find out that very few poor actually stay poor. This is called income mobility, and is not very well represented in most statistics. The poor in one year is not the poor in another, especially with new unskilled workers entering the workforce, and older, higher skilled and earning workers retiring.

    The ones who are unlikely to move up are the least skilled workers, and they are the ones who are let go, or not hired as a result of higher minimum wages. This is well represented in statistics. Employees with college degrees have the much more stable employment then the unskilled workers, who take the brunt of all recessions, and government actions that are supposed to help them.

  • Report this Comment On June 17, 2013, at 1:12 PM, looloo68 wrote:

    Love it."the poor are poor because they are not working." Wowzers. Thats amazing insight you have there The1MAGE. Did you learn that in college? Or did you earn that brainy conclusion on your own while you worked two or thrree jobs? Hmmm I know it is pointless to point out the obvious but I will try... you need to jump off your soapbox and get in the tub. Wash the sweat and dirt from your hard life out of your eyes and realize that but for opportunity, luck, or Grace you could be scrubbing body fluids away in a public restroom at the tender age of 75. Or you could be that one person who has no hope or motivation beyond feeding the child waiting at home. The government has good programs which help good people, unfortunately like all things big, those programs become corrupted. But is that a reason to condemn every person within the program? No. It is not. And poor people are poor because life doesnt make us all rich; opportunities are like weather... its not exactly predictible.

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