Minimum-wage workers across the US are getting a pay bump in 2022. Higher minimum wage laws took effect across 21 states and 35 cities in the US on Jan. 1. It’s the largest simultaneous increase of sub-national minimum wage policy in US history, according to the National Employment Law Project.
While most states’ increased their minimum wage to $10 and $13 per hour, California and New York set $15 statewide minimums. California’s applies to nearly all businesses across the state. New York’s applies to fast-food workers across the state, as well as all workers in New York City.
The federal government last raised minimum wages to $7.25 per hour (the equivalent of $9.54 in today’s dollars) in 2009. While this is still the floor in 20 states, it applies to fewer and fewer Americans. Local policies and economic pressure have pushed wages well above this rate giving employers little choice except to raise wages if they want to attract employees or meet city and state mandates. In 2020, only 1.5% of hourly workers in the US earned at or below $7.25 per hour, according to the Bureau of Labor Statistics.
Waging the minimum wage fight
The fight to increase wages has largely moved to cities and states. While some of the wage increases on Jan. 1 were regularly-scheduled inflation adjustments, roughly half were the result of new legislation or ballot measures phasing in wage hikes. In 2018, Massachusetts passed legislation to create a $15 minimum wage by 2023. Delaware and Illinois approved a $15 minimum by 2025. A 2020 ballot initiative in Florida raised the minimum wage to $10 per hour.
Cities have been even more aggressive: Seattle was the first major US city to introduce legislation forging a path to a $15 minimum wage in 2014. California cities including Berkeley, San Francisco, and San Jose followed suit within a few years. Denver, Colorado implemented its own “catch up” legislation in 2019 and crosses the $15 threshold this year.
Worker advocacy groups like the National Employment Law Project attribute much of this change to worker advocacy efforts like “Fight for $15,” a grassroots movement that has organized worker strikes and protests, mostly among low-wage fast-food workers, to advocate for minimum wage increases in cities and states in 2012. Rebecca Dixon, executive director of NELP, said this was accelerated by “the pandemic’s exposure of stark inequities and hazardous work conditions.”
Businesses can see profit in higher wages
Even without the threat of new legal mandates, large companies are raising wages to stay attract and retain employees a tight labor market. Amazon implemented a $15 minimum wage in November 2018. After the onset of the pandemic, Target did the same and Starbucks’ minimum wage will rise to $15 this year. In the past year, average wages across the retail and hospitality sectors have increased sharply as employers have tried to retain workers in public-facing jobs during the pandemic.
Historically, opponents of minimum wage increases have argued that higher wages are too costly for small businesses, leading them to raise prices on goods and services and hire fewer workers. But several decades of research have consistently found that increases in the minimum wage do not lead to a reduction in available low-wage jobs. Neither do they have a significant impact on consumer good prices; A study of the impacts of Seattle’s minimum wage hike in 2014 found that raising the minimum wage across the city didn’t lead to a rise in grocery store prices.
“A lot of business owners haven’t really run the numbers to see just how much they can save with a higher wage floor,” says Alissa Barron-Menza, vice president of Business for a Fair Minimum Wage, a non-profit organization that advocates for a higher minimum wage. “Increases in consumer spending, decreases in turnover, and the increase in employee productivity and morale more than offset the increased wages and help businesses be more resilient and successful in the long term.”
Some small business owners who have elected to raise their wages can attest to this; John Schall is a member of Business for a Fair Minimum Wage and owner of a chain of Mexican restaurants across several northeastern states. Schall sets starting hourly wages between $12.50 and $14.25, and pays many of his employees above $15 per hour. As a result, he has retained a consistent staff of experienced workers who work efficiently and turnover less frequently.
For Schall, having higher wages and low turnover has also meant strong employee networks that came in handy during the pandemic. Schall says his restaurants didn’t see large numbers of people quitting, as happened across the service industry, and when he opened a new location in 2021, offering competitive wages allowed him to staff up quickly and build a reliable worker network there too.
Across the US, low-wage workers in leisure and hospitality have seen the greatest wage gains of any group in 2021. Schall believes this change is here to stay, and that more state and local minimum wage increases would codify the change.
“That way of seeing staff as disposable is coming to an end,” says Schall. “A state law would put employers on the same footing and have everyone competing [for employees] by the same rules.”