Minimum Wages will increase in 19 states at the start of 2017 affecting approximately 4.3 million workers. In January, increases occurred in Alaska, Arizona, Arkansas, California, Colorado, Connecticut, Florida, Hawaii, Maine, Massachusetts, Michigan, Missouri, Montana, New Jersey, New York, Ohio, South Dakota, Vermont, and Washington. While Oregon, Washington, D.C., and Maryland will see wage increases in their states later on this year.
With minimum pay rates varying so widely across the United States and many changes coming over the next several years it is now that much more important to have a sound workforce management strategy in each location where contingent labor is engaged. In addition to wage requirements, overtime regulations and benefits requirements also vary widely from state to state throughout the US. Many organizations inadvertently leave money on the table in states were regulations are more relaxed and/or expose themselves to risk in states were regulations are more stringent. Whether an employer leverages remote workers, temporary labor, or makes adjustments to its geographic strategy, there are a number of ways to adjust cost management strategies in workforce planning to account for these new wage levels.
Increases, as well as the final minimum wage amounts, will vary by state and even by municipal area in some states. In Massachusetts, the minimum wage rises by $1, to $11 an hour, affecting about 291,000 workers. In California, the minimum goes up 50 cents, to $10.50 an hour for employers with over 26 employees, boosting pay for 1.7 million people. Businesses in California with fewer than 26 employees are eligible for delayed implementation but larger California businesses will raise their minimum pay rate to $15 per hour by 2022. However, in New York State the minimum wage increases to $11 per hour in New York City, $10 in downstate suburbs, and $9.70 elsewhere. Small businesses in the city will increase the wage to $10.50 for city employees in New York.
The federal government has not raised the federal minimum wage in over seven years, when it was raised from $6.55 to $7.25 on July 24, 2009. While the federal government sets the floor at $7.25 per hour, most states have legislation in place to raise the minimum wage to a number more in line with local economic conditions. With many states and municipal areas increasing this minimum wage over the course of the past four years, and with plans to raise it even further in states such as California and New York extending clear into the next decade, many employers have less incentive to add to their payrolls.
A 2014 study by the nonpartisan Congressional Budget Office found raising the federal minimum wage to $10.10 an hour would reduce job creation by 500,000 positions over two years. At the same time, the report estimated the increase in the federal minimum wage would raise the pay of 16.5 million workers who would remain employed despite the increased wages. In some states organizations are resisting the changes despite voter approval of Propositions such as Proposition 206 in Arizona.
The Arizona Chamber of Commerce and Industry has challenged the law in court. In the final week of 2016, the state’s highest court said it wouldn’t stop the raise from going into effect on Sunday, January 1st 2017, after a lower court rejected a motion for a preliminary injunction on December 21st, 2016. The court will decide whether to consider the case in February of this year.
Arizona’s increase of $1.95 to $10 an hour on January 1st will be the largest single step increase in Minimum Wage among the 19 states. It is also one of the largest one-time increases ever enacted nationwide. Nearly 12% of Arizona’s workforce will receive an increase in pay, this January. This is due to the fact that Arizona has a larger share of low-wage workers than coastal states like California and Massachusetts. States like California have had small regular minimum-wage increases over the past several years. Other states with less dramatic increases include Florida, where the minimum wage is only increasing by 5 cents, from $8.05 to $8.10. While in Vermont, the minimum wage moved to $9.00, a 40 cent increase from $8.60. And in Massachusetts, the minimum wage increased a dollar, from $10.00 to $11.00.