With the federal minimum wage at $7.25 an hour, unchanged for 13 years and counting, states across the country continue to take matters into their own hands.
The latest to join the party is Nebraska, where voters passed an initiative in November’s elections to gradually raise the minimum wage there to $15 per hour by 2026. The first step in that state's process took effect with a bump for cornhuskers to $10.50 per hour on Jan 1.
Nebraska joined 27 states plus Washington, D.C., that increased minimum wage in 2023 as part of initiatives to lift the floor for low-wage workers.
States that raised minimum wage were Delaware, Illinois, Maryland, Massachusetts, Michigan, Missouri, Nebraska, New Jersey, New Mexico, New York, Rhode Island, and Virginia. Those states were joined by Alaska, Arizona, California, Colorado, Maine, Minnesota, Montana, Ohio, South Dakota, Vermont, and Washington State, which have annual cost of living adjustments taking effect on Jan. 1, 2023.
The bumps are the fruit of years-long efforts from activists and one of the groups, called Business for a Fair Minimum Wage, argues that the increases also make business sense by boosting consumer spending and improving employee morale.
“These employees are, by me, considered an asset and an investment in our business,” said Dave Titterington, the owner of bird supply stores in Nebraska and a member of the coalition. The group noted that more than 300 Nebraska businesses joined their effort this year.
Titterington added during a Yahoo Finance Live interview on Tuesday that he has always paid above the minimum wage at his business and “our retention rate is extremely high,” which he said more than offsets the increased payroll costs.
Four more states and the District of Columbia have increases scheduled for later in 2023, according to the Business for a Fair Minimum Wage.
Changes that ‘will bite hard in certain industries’
The patchwork of efforts has many detractors. Critics have long contended that these hikes actually hurt the very workers they are aiming to help because they often cause businesses to find ways to simply cut minimum wage jobs rather than pay more per hour.
A 2019 Congressional Budget Office report found that a national $15 per hour minimum wage would boost the wages for 17 million people, but would also cause about 1.3 million people to lose their jobs.
"We are realizing that there are lots of other ways that businesses can adjust,” said Ryan Bourne of the Cato Institute, noting growing evidence that employers often trim non-paid benefits or perks when these new laws come into effect and raise wages.
But even for some critics of minimum wages laws like Bourne, the current piecemeal system might be a preferred outcome over action from Washington.
“To the extent that we are gonna have minimum wage laws, it makes more economic sense to have them set relatively locally,” he said, while quickly adding that increases in Nebraska and other states “will bite hard in certain industries,” such fast food and amusement parks.
Changes that may 'force small business owners to re-evaluate their business'
But even as some states keep raising, a swath of others have not, creating vastly different environments for low-wage workers depending on where they live.
On one hand, a dozen states — including Nebraska — have passed laws that institute a $15-per-hour minimum wage in the coming years. On the other side, 20 states remain at the federal minimum wage of $7.25 per hour.
The $15-per-hour wage has long been an important symbolic line for activists. And while that doesn't appear likely to happen federally anytime soon, there are three states — Massachusetts, California, and Washington State — that will have minimum wages above that level in 2023. There are also a host of cities and counties, including the District of Columbia, that have passed their own minimum wage increases above $15 per hour.
In general, the states and cities with a higher cost of living have led the way on minimum wages — which many say is more reflective of local conditions.
In Nebraska, Titterington acknowledged that the wage hikes coming in his state may “force small business owners to re-evaluate their business,” but he hopes that businesses opt to pay the higher wages.
Happier employees, he said, “are one of our best forms of advertising.”
Ben Werschkul is a Washington correspondent for Yahoo Finance.