Up, Up, and Away: Inflation Takes Minimum Wages Soaring to New Heights

It’s that time of year again – states and cities across the country are announcing higher-than-ever minimum and tipped wages before they go into effect in 2023. Many states are still on legislated schedules to reach a $15 minimum wage (or higher).

One trend more troubling is the rapid rate of wage increases triggered by inflation. Roughly 60 states and cities will tie their annual minimum wage hikes to the rate of inflation in 2023.

Due to rampant inflation, minimum wage hikes have been larger over the last two years than in years prior.

So far, twenty states and cities have already published their minimum wage rates going into effect in January. Some of the highest announced dollar amounts include Palo Alto, CA ($17.30 per hour) and Denver, CO ($17.29 per hour). Other areas announced hikes of more than $1 due to skyrocketing inflation, including Washington (a $1.25 increase over 2022), Arizona (a $1.05 increase over 2022), Colorado (a $1.09 increase over 2022), San Diego, CA (a $1.25 increase over 2022), and Santa Rosa, CA (a $1.19 increase over 2022). View the inflation-adjusted increases for those that been announced so far here:

State/City 2022 Min. Wage 2023 Min. Wage Percent Increase
Arizona $12.80 $13.85 8.2%
     Flagstaff, AZ $15.50 $16.80 8.4%
California $15.00 $15.50 3.3%
     Belmont, CA $16.20 $16.75 3.4%
     Burlingame, CA $15.60 $16.47 5.6%
     Daly City, CA $15.53 $16.07 3.5%
     Hayward, CA $15.56 $16.34 5.0%
     Palo Alto, CA $16.45 $17.30 5.2%
     Petaluma, CA $15.85 $17.06 7.6%
     San Diego, CA $15.00 $16.25 8.3%
     San Carlos, CA $15.77 $16.32 3.5%
     San Mateo, CA $16.20 $16.75 3.4%
     Santa Clara, CA $16.40 $17.20 4.9%
     Santa Rosa, CA $15.85 $17.06 7.6%
Colorado $12.56 $13.65 8.7%
     Denver, CO $15.87 $17.29 8.9%
Minnesota $10.33 $10.59 2.5%
     Minneapolis, MN $15.00 $15.19 1.3%
     St Paul, MN $15.00 $15.19 1.3%
South Dakota $9.95 $10.80 8.5%
Washington $14.49 $15.74 8.6%
AVERAGE $14.81 $15.63 5.6%

The average inflationary wage hike for this wave of increases is even higher than last year: already-announced inflation adjustments have an average increase of 5.6%, compared to last year’s average of 4.4%. These last two years’ averages are significantly higher than that of 2021, which was 1.7%. (Note: The average inflation increase in 2023 is subject to change as more jurisdictions announce official minimum wage hikes.)

This is an especially troubling phenomenon for many affected employees: the bulk of economic research finds steep wage hikes have serious negative impacts on employment, earnings and benefits provided by employers, and even business survival.

Now, various legislation and ballot measures are proposing to introduce inflation-adjustment criteria in new states–including Nebraska and Michigan.

Coming soon, Employment Policies Institute’s annual minimum wage update will provide all January 2023 increases, as well as scheduled changes and future indexed wages throughout the New Year.