18 states will raise their minimum wage on January 1 — here’s what to expect
While the White House and members of the GOP package the sweeping tax code overhaul as a win for the average American, low-wage workers may be hit the hardest.
This setback comes as the U.S. minimum wage has remained stagnant over the last decade. The last time the federal minimum wage increased was in July 2009, from $6.55 to $7.25. However, now 18 states are taking matters into their own hands, raising the minimum wage, effective January 1, 2018.
Ten states are doing so as the result of legislation over the last few years. Eight states will have smaller inflation-adjusted increases.
4.5 million workers
Left-leaning think tank Economic Policy Institute estimates that the increases will benefit 4.5 million workers. In the absence of Congress raising the wage floor, states and cities are tasking themselves with paying the lowest rung of workers a bit more.
“Increasing the minimum wage is a crucial tool to help stop growing wage inequality, particularly for women and people of color who disproportionately hold minimum wage jobs,” according to EPI economic analyst Janelle Jones.
Though the economy has been humming along, wage growth is lackluster and low-income workers have been disproportionately affected.
“For much of the past three decades, the wages of those at the bottom of the wage distribution have failed to keep up with overall economic gains. Most of the wage increase has occurred among the top half of the wage distribution, especially since the 1990s,” said UMass Amherst economics professor Arindrajit Dube.
The arguments against raising the minimum wage
The longstanding argument against raising wages is that it would have an adverse effect and force employers to lay off workers. The other concern is that the impact of wage hikes will trickle down to consumers, as well. For example, some restaurant owners say they feel pressure to increase prices if they have to dole out more to pay workers.
“What we are seeing is that there is an increase in restaurant operators who are taking price increases and the number one reason relates to labor,” Darren Tristano, CEO of Technomic, told CNBC.
Perhaps the most existential danger is the growing threat of automation as a more economical replacement for workers who require increasing wages.
“If the cost of an employee rises artificially, but employee skills or output don’t rise commensurately, competitive companies look for alternatives,” said Vanessa Brown Calder, policy analyst at libertarian think tank Cato Institute. “Possible alternatives may include automating work, eliminating the position altogether, or transferring responsibilities to more productive employees.”