Push and Pull: While Some States Seek Further Min Wage Hikes, Others Pull Back

In 2022, record-breaking inflation drilled minimum wages beyond expectations in many states and cities, as seen by new wage rates taking effect January 1 and throughout this new year. Even still, many activists and progressive lawmakers are calling for even higher rates – pushing the boundary on how high minimum wage mandates may go.

One state senator-elect in Vermont is proposing roughly doubling the tipped minimum wage up to more than $12 per hour. A state representative from New Mexico seeks to raise the state’s minimum wage up to $16 per hour (potentially including tipped restaurant workers). A New York state senator also wants to raise the minimum wage statewide up to $20 per hour. Progressive activists in Massachusetts and Maryland have also announced potential activity in 2023: calling each state’s January 1 hike “insufficient” and looking to launch campaigns for renewed increases next year.

Despite a federal $15 minimum wage bill dying in the U.S. Senate in 2021, activists continue to set their sights on raising the national minimum wage, and the target number keeps climbing. This week, one author uses the wave of various corporate minimum wage increases to justify pushing the federal rate as high as $20 per hour. This proposal would nearly triple the current minimum wage rate in dozens of states.

Other activists use inflation as a continual reason to boost wages – despite economic research that shows raising wages causes further price increases, causing many high-wage areas to already experience higher inflation than lower-wage markets. In fact, many state and local minimum wage hike schedules have far outpaced inflation, and calls for a $15 or higher federal minimum wage simply don’t track with actual inflation data. Even with the forty-year-high inflation experienced last year, if the federal minimum wage tracked inflation since it was last changed in 2009, it would only rise to about $10 per hour.

But rather than pushing the boundaries further, lawmakers in some areas are realizing the real economic consequences boundless minimum wage hikes can cause. A majority of economic research on minimum wages finds that steep wage hikes cause drops in employment, earnings, and even business closures for those in industries affected most, such as restaurants and hospitality.

As such, this year some lawmakers are looking to curb the effects of harmful minimum wage hikes already in motion.

  • In Arizona, state senators have introduced a bill that curbs the cost of rising wage bills for employers in cities where the local minimum wage is higher than the state rate of $13.85 per hour. Citing that local minimum wage mandates (including Flagstaff’s $16.80 per hour and Tucson’s $15 per hour requirements) have considerably affected employers’ ability to stay in business, the bill would provide a tax credit to alleviate the portion of employers’ labor costs that rise beyond the state minimum wage requirement.
  • In Hawaii, State Senator Glenn Wakai announced a bill to increase Hawaii’s tip credit up to 20% of the regular minimum wage by 2028, compared to the current flat $1 credit. Restaurant owners indicated such a move would allow them to pay non-tipped staff more in wages while the tip credit would leave room for servers and bartenders who make substantially more than the minimum wage through tips. One also reported the steadily rising current minimum wage in Hawaii may force restaurateurs to increase menu prices, but the new bill could help alleviate such rising cost pressures.
  • In the District of Columbia, procedural review backlogs have left restaurant employers and their employees concerned about when to implement the new $6 tipped minimum wage, compliant with the ballot measure to eliminate the city’s tip credit by 2027. As a result, D.C. City Council members unanimously voted to delay the wage hike, originally scheduled for January 1 until May 1. While restaurants and customers are still adapting to the changes, attempts to prepare for the increase notes a phenomenon already taking shape. Many restaurant employers have indicated they will be forced to introduce new service charges to customers’ dining bills to avoid raising menu prices outright to adapt to the new tipped wage.

As major headlines gravitate toward activists’ outrageous minimum wage proposals, pay attention to solutions other policymakers are using to try to alleviate upward wage pressures causing strife for businesses and their employees.