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Indexing Minimum Wage to Inflation Critical for Low-Income Working Families

Minimum Wage PicWashington State minimum wage workers got a raise January 1st to $8.55 per hour -- now the highest minimum wage in the country.   Like nine other states, Washington automatically increases its minimum wage each year at the rate of inflation to make sure families don't face a de facto pay cut as rising costs eat into family budgets.  Because the federal minimum wage is not indexed to inflation in this way, we have seen a decline in its value from $9.34 in inflation-adjusted dollars down to just $6.55 per hour this past year.  This trend highlights why state efforts to index the minimum wage to keep up with inflation are so critical.

While minimum wage workers in a couple of states, notably Connecticut and New Mexico, had raises this January based on recent legislative action, that still means minimum wage workers in those states may see these gains eaten up by inflation if legislative attention drifts away from the issue for a couple of years, as has too often been the pattern at the federal level and in states without indexing. 

Arizona, Colorado, Florida, Missouri, Montana, Nevada, Ohio, Oregon, Vermont and Washington all index their state minimum wage to the federal consumer price index (CPI). Additionally, the cities of Santa Fe, NM and San Francisco, CA have indexed their minimum wages to inflation, with raises for minimum wage workers to $9.92 and $9.79 respectively on January 1st, providing the strongest support for low-wage workers in the country.

The reality is that even in Washington State with its $8.55/hour minimum wage rate, that translates only to an annual full-time salary of $17,784 -- barely more than the federal poverty level for a family of three.  One way to permanently set more realistic minimum wage rates, as some advocates have argued, is to fix the minimum wage at something like half the average wage in the economy.  

With so many minimum wage workers barely treading above the poverty line (and often living below it), raising the minimum wage and permanently indexing it to inflation or the average wage is critical so that Americans who work hard for a living are able to provide for their families. 

STATES THAT INCREASED THE MINIMUM WAGE ON JANUARY 1, 2009

STATE
MINIMUM WAGE (in $/hour)
Arizona*
7.25
Colorado*
7.28
Connecticut
8.00
Florida*
7.21
Missouri*
7.05
Montana*
6.90
New Mexico
7.50
Ohio*
7.30
Oregon*
8.40
Vermont*
8.06
Washington*
8.55

* This state pegs their minimum wage to the Consumer Price Index.


Minimum Wage State-by-State Graphic

Resources
Economic Policy Institute - Securing the wage floor: Indexing would maintain the minimum wage's value and provide predictability to employers
Progressive States Network - States Still Leading Feds on Minimum Wage
Bureau of Labor Statistics - Minimum Wage Laws in the States - January 1, 2009
Brennan Center for Justice, New Jersey Policy Perspective, New Jersey Institute for Social Justice - The Adequacy of New Jersey's Minimum Wage