Richard Florida is a co-founder and editor at large of CityLab and a senior editor at The Atlantic. He is a university professor in the University of Toronto’s School of Cities and Rotman School of Management, and a distinguished fellow at New York University’s Schack Institute of Real Estate.
Four red states passed referendums on higher minimum wages Tuesday, but it's not enough.
The pundits will tell you that yesterday’s election signals a more conservative, redder America, as Republicans took control of both houses of Congress and picked up three governorships in traditionally blue states.
But on one economic issue, the election results were solidly progressive. New minimum wage laws passed in four out of the four states that had referendums on the ballot. The minimum wage will rise to $8.50 in South Dakota by 2015 and Arkansas by 2017, to $9.00 in Nebraska by 2016, and to $9.75 in Alaska in 2016. The kicker? Three of those states—Arkansas, South Dakota and Alaska—elected new Democratic senators with Republican ones on Tuesday.
Writing over at Slate, Jordan Weissmann notes that these traditionally conservative states now have some of the highest minimum wage levels in the country, once cost of living is taken into account. Weissmann cites research by University of Massachusetts Amherst economist Arindrajit Dube, who sets the ideal standard for the minimum wage at 50 percent of the prevailing median wage (the wage paid to the middle worker). (A year ago, I showed what minimum wages for America’s large cities and metros would look like at this threshold and at a slightly higher standard of 60 percent, which Dube suggested to me might be an upper bound that would not compromise economic competitiveness.)
The bar graph below shows the new, old, median, and suggested minimum wages for the four states that enacted new minimum wage laws last night. The median wage numbers are based on data and analysis from the labor market data and research firm EMSI. (The EMSI data are more current and take into account additional sources besides federal ones, so they differ slightly from Dube’s earlier estimates).
The good news is that Arkansas’ 2017 minimum wage of $8.50 will exceed a minimum wage of $8.38 pegged to 50 percent of its median wage (the third lowest of any state). But that is still a full $1.56 below the 60 percent median wage estimate of $16.76. At $8.50 an hour, minimum wage workers in Arkansas who work 40 hours a week and 52 weeks a year will earn $17,680 annually. That’s 51 percent above the federal poverty level for a household of one, but 26 percent below the federal poverty level for a household of four. And of course, most minimum wage workers toil in more precarious conditions than their highly paid counterparts.
South Dakota’s minimum wage will also rise to $8.50 in its case by next year. That is also $0.12 higher than its 50 percent median wage level, $8.38. And the 60 percent median level threshold remains $1.55 above its just-passed minimum wage.
Nebraska’s 2016 minimum wage of $9.00 will fall slightly short of its estimated minimum wage at 50 percent of the median wage level, and remains nearly two dollars short of its median pegged at 60 percent, $10.84. At $9.00 an hour, a full-time, 40-hour-a-week worker in Nebraska would earn $18,720 a year.
Alaska’s new minimum wage of $9.75 sounds like the biggest increase of all. But remote Alaska is one of the states with the highest cost of living. It also has the highest median wage—$24.43. So its new minimum wages falls short of both the 50 and 60 percent median wage levels: $2.47 short of 50 percent and a whopping $4.91 short of 60 percent.
The map below extends the analysis to all 50 states and the District of Columbia. It shows what the state minimum wage would look like at these 50 and 60 percent thresholds.
The table below zooms in on the top and bottom spectrums of these states based on their median wage. Note that the “current minimums” column shows the minimum wage as it is currently enacted in the states.
|States with Highest Median Wages|
|State||Median Hourly Earnings||Current Hourly Minimum Wage||50 Percent of Median||60 Percent of Median|
|District of Columbia||$34.65||$9.50||$17.33||$20.79|
|States with Lowest Median Wages|
There are very few states where the current minimum wage hits 50 percent of the local median, and none that even approach the 60 percent of median wage level. Unfortunately, there are five states—Alabama, Louisiana, Mississippi, South Carolina, and Tennessee—with no minimum wage at all.
The biggest gaps are in the liberal blue states. Of course, these are the states with the most highly educated workforces, the highest housing and living costs, and the highest wages. For example, the minimum wage in Washington, D.C., is currently $9.50. This is 82 percent lower than it would be at the 50 percent median level ($9.50 versus $17.33) and 118 percent lower at 60 percent.
Massachusetts’ minimum wage is $8.00, 57 percent lower than its 50 percent and 89 percent lower than its 60 percent minimums. New Jersey’s minimum wage is $8.25, 46 percent lower than its 50 percent and 75 percent lower than its 60 percent minimums. And California’s minimum wage is $9.00, 30 percent lower than its 50 percent and 56 percent lower than its 60 percent minimums.
There are some cities that are pushing the minimum wage to $15.00. The city of SeaTac, right near the Seattle airport, became one of the first in the country to reach that wage level on January 1 of this year. Just last night, San Francisco voted to gradually raise its minimum wage to $15.00 by 2018. At $31,000 per year, these sound like ideal numbers. But in many of these cities, that’s still not over 50 percent, never mind 60 percent, of the local median. San Francisco’s new policy sounds incredibly progressive until we remember that the city median income is $73,802, leaving minimum-wage workers with just 42 percent of the metro's middle-worker pay.
Last night’s election shows that Americans, even those in the red states, are concerned about lagging wages and growing inequality. It’s high time we raise the wage floor for those at the bottom. And given the uneven and spiky nature of our economy, that’s best done by pegging state and local minimum wages to the local cost of living.