Minimum Wage on the Election Day Ballot
In addition to casting ballots for candidates today, voters in Alaska, Arkansas, Nebraska, South Dakota, and Illinois will vote on initiatives to raise their states’ minimum wages. Though there are high levels of popular support for raising the minimum wage in these states, the effects of doing so vary depending on local labor market and cost of living characteristics.
Minimum wage levels tend to follow cost of living and wage levels, and are less disruptive to employment growth when these measures are higher. For this reason, voters in areas that do not have high costs of living, especially those in Arkansas and Nebraska, should pause before voting for a minimum wage hike.
Alaskans will vote on whether to raise the state minimum wage from $7.75 an hour to $9.75 an hour by 2016. While Alaska has the nation’s 4th highest cost of living, no other state with a minimum wage increase on the ballot is in the top 20.
South Dakota, which seeks to raise its wage from $7.25 to $8.50, has the 21st highest cost of living and Illinois has the 29th. Voters in Illinois are considering a minimum wage increase from $8.25 an hour to $10.00 an hour. The referendum is non-binding but will gauge the political climate for future legislation. If the referendum receives high levels of support, the Illinois legislature will likely move to pass a minimum wage increase next year.
Arkansas, which might raise its minimum wage to $8.50 an hour by 2017, and Nebraska, which might go to $9.00 an hour by 2016, are both in the bottom 10 states in terms of cost of living, with rankings of 45 and 41, respectively.
Five states (Connecticut, Hawaii, Maryland, Massachusetts, Vermont) and Washington, D.C. have already voted to raise their minimum wages to $10.10 an hour or higher in the coming years.
All of the jurisdictions that are in the process of raising their minimum wage levels to $10.10 an hour or higher are among the top 12 states in terms of cost of living. Hawaii has the highest living costs in the nation, Connecticut the second, and Washington, D.C. has the third. These places, similar to Alaska, are better-suited to absorb the negative consequences of raising the minimum wage than are states such as Arkansas and Nebraska. When wages and costs of living are high, minimum wage increases are not as large of a shock to labor markets as in places with lower wages and costs of living.
State minimum wages following cost of living levels are not new to today’s election. The twelve states with highest cost of living all have, or will have next year, a minimum wage above the federal level. Alternatively, ten of the twelve states with the lowest cost of living have a minimum wage at or below the federal level. Depending on the outcome of today’s vote, the two outliers (Michigan and New Mexico) could be joined by Arkansas and Nebraska.
Residents of some cities are also considering minimum wage hikes. San Francisco has a ballot proposal to raise its minimum wage from $10.74 an hour to $15 an hour by 2018, similar to the increase Seattle passed earlier in the year (see e21’s response to Seattle’s increase here). Both San Francisco and Seattle have higher average hourly wages than does the overall United States. The average wage is 45 percent higher in San Francisco and 27 percent higher in Seattle. Cost of living is also far above the national average in both these cities: 64 percent higher in San Francisco and 21 percent higher in Seattle.
Across the Bay, Oakland voters will decide if the city should raise its minimum wage to $12.25 an hour by March 2015. Mean hourly wages in Oakland are 29 percent higher than the national average and living costs are 39 percent higher.
For some states, a higher minimum wage is more harmful than for others. While the labor markets of Alaska and San Francisco would likely survive a minimum wage hike, Arkansas and Nebraska residents have the most to lose if they vote for a higher minimum wage today.
Jared Meyer is a policy analyst at Economics21 at the Manhattan Institute for Policy Research. You can follow him on Twitter here.
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