With California and New York poised to become the highest-paid minimum wage states in the nation, minimum wage has become a key issue for the business community as a growing number of states want to follow in their footsteps and politicians seek to tap voters.
To date, 29 states have enacted minimum wages above the federal minimum wage of $7.25 per hour. California and New York mark the first states to push for a $15 minimum wage.
That momentum is expected to continue at both the state and local level, as well as on the campaign trail where raising the minimum wage has emerged as a national priority among Democratic leaders who are hoping the issue will help bring voters to the polls. Polls consistently show that a large majority of Americans favor raising the minimum wage.
Both presidential hopefuls Hillary Clinton and Bernie Sanders have said they support a nationwide $15 minimum wage. In his 2016 State of the Union address, President Obama proposed increasing the federal minimum wage from $7.25 to $9 an hour, and indexing it to inflation thereafter. Likewise, Congressional Democrats have proposed raising the federal minimum wage to $12 an hour by 2020.
These proposals have stalled under Republican majorities in the House and Senate, but a growing number of states and cities are moving forward.
California’s landmark plan will boost the statewide minimum wage from $10 to $15 an hour by 2022. Specifically, the plan calls for an increase to $10.50 per hour effective Jan. 1, 2017, to $11 per hour in 2018, and annual increases of $1 up to $15 by 2022. Businesses with fewer than 25 employees would have an extra year to comply, delaying their workers receiving a $15 hourly wage until 2023. At a recent news conference at the state Capitol, California Gov. Jerry Brown said, “I’m hoping that what happens in California will not stay in California, but spread all across the country. It’s a matter of economic justice. It makes sense.”
New Jersey also is considering backing a statewide $15 minimum wage. Meanwhile, at the local level, Seattle, Los Angeles and San Francisco each have opted to phase in $15 hourly wage in the coming years.
In 2015, several states increased their minimum wage, including Rhode Island, which took the state minimum wage to $9.60. Both Delaware and Maryland increased their minimum wage to $8.25 an hour. Washington, D.C., jumped to $10.50 an hour, making it the first jurisdiction to cross the $10 threshold. D.C. Mayor Muriel Bowser has said she wants a $15 hourly wage in the District by 2020.
Many business groups, including the U.S. Chamber of Commerce, oppose efforts to lift the minimum wage, warning of the impact of minimum pay increases on employers. Small employers often operate under very slim profit margins and will have the hardest time absorbing higher labor costs.
Economists are sharply divided over the issue. Some argue that raising the minimum wage leads to lost jobs because employers will slash payrolls to preserve profits and may invest in other things, such as technology, instead of workers. Others argue the impact on employment is minimal or doesn’t kill jobs at all and may even give the economy a boost by channeling more pay to low income workers who are likely to spend it.
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