As minimum wage increases sweep across the United States, their impact sparks heated debates among workers, employers, and policymakers. With 21 states and 48 cities and counties set to raise their minimum wages on January 1, 2025, according to the National Employment Law Project (NELP), the conversation around living wages, affordability, and economic growth is more relevant than ever.
Key Highlights: Where Are Wages Rising?
- Three states—Illinois, Delaware, and Rhode Island—will join the ranks of $15 minimum wage states, bringing the total to 10 states with increased minimum wages.
- Localities leading the way: California dominates with more than two dozen cities surpassing $15, many of which will climb beyond $17. Burien, Washington, will top nationally, with a $21.16 minimum wage for large employers.
In addition, several other states, including Missouri and Nebraska, are implementing incremental increases, with their minimum wages reaching $13.75 and $13.50, respectively.
The Worker Perspective
For many workers, these wage increases are a lifeline. Yannet Lathrop, senior researcher at NELP, highlighted the potential benefits of higher wages:
- Improved mental and physical health
- Easier access to credit
- Better educational outcomes for children
Still, the struggle is real for individuals like Kaamilya Hobbs of Kansas City, Missouri. Working at $13.44 an hour and juggling family responsibilities, Hobbs said her pay increase to $13.75 would help but fall short of covering rising living costs. “The cost of living is still going up,” she said. “We can’t live on $13.75.”
Employer Concerns and Economic Trade-Offs
The flip side of these wage hikes is their impact on employers, especially in industries like food service. Michael Saltsman, managing director of the Employment Policies Institute, argued that wage increases often lead to higher prices and, in some cases, job losses.
For instance:
- Restaurants have passed increased labor costs to consumers through higher menu prices.
- Some eateries have closed or reduced staff to offset expenses.
A 2021 Congressional Budget Office (CBO) report supports this duality, estimating that raising the federal minimum wage to $15 would lift 900,000 people out of poverty but also cost 1.4 million jobs.
Inflation and the Broader Economy
While wage hikes are linked to local inflation spikes early in the year, their broader impact on national inflation remains muted. According to economists Dante DeAntonio of Moody’s Analytics and Ryan Sweet of Oxford Economics, the relatively small share of workers at or near minimum wage limits the influence on overall price levels.
The Road Ahead
The push for higher wages has gained traction in recent years. By 2027, 16 states are projected to reach or surpass the $15 threshold, encompassing nearly half the U.S. workforce. However, even a $15 minimum wage falls short of the living wage required in high-cost areas.
For example:
- King County, Washington: The minimum wage will rise to $20.29 in January, yet the MIT Living Wage Calculator estimates a true living wage for a single adult with no children in the county is $30.08.
Despite these challenges, the movement for higher pay continues to gain bipartisan support. Both Republican and Democratic states are adopting wage increases, reflecting a growing consensus on the need for economic equity.
As businesses, policymakers, and workers navigate this evolving landscape, the debate over balancing fair wages with economic sustainability shows no signs of slowing down. For small businesses, staying agile and proactive will be critical in adapting to these changes while ensuring long-term growth.
