Minimum wage workers in seven states will soon receive a pay rise based on the latest consumer prices report showing an 8.3% increase in inflation.
Minimum wages in Arizona, Maine, Montana, Ohio, South Dakota, Vermont and Washington are pegged annually with August’s annual consumer price data released on Tuesday, and will therefore increase in tandem into next year — at least, most of it.
The current minimum hourly wages for seven states are as follows: Arizona ($12.80), Maine ($12.75), Montana ($9.20), Ohio ($9.30) , South Dakota ($9.95), Washington ($14.49) and Vermont ($12.55).
Vermont has a slightly different procedure for calculating its minimum wage increase; it limits the annual increase to 5%. Additionally, some states round off the adjustments they make to the nearest five cents.
This year, inflation hit a four-decade high, fueled by lingering shocks in supply chains in the aftermath of the pandemic and soaring food and energy prices because of the war in Ukraine. Higher prices sent shock waves through the economy and eroded the real value of savings and workers’ wages.
Instead of relying on the Consumer Price Index (CPI), Minnesota pegs its minimum wage to changes in the Personal Consumption Price Index (PCE), which is expected to be released later this month. this. The PCE measures the change in goods and services consumed, as opposed to the CPI, which measures the change in out-of-pocket spending.
The District of Columbia and several other states including Alaska, Colorado, New York and Oregon also set their minimum wages with inflation, but based on other measurements. For example, Oregon fixes its minimum wage with the March-to-March change in the CPI. New York’s annual indexing is determined annually at the discretion of the Director of the Budget Board.
Dave Kamper, senior state policy coordinator at the Economic Policy Institute, said Luck that automatic minimum wage adjustments help low-wage workers in certain states keep up with inflation.
“This is what minimum wage indexing does: It means that the lowest-wage workers don’t have to wait for the legislature to act together and raise the minimum wage to do so,” he said. they keep up,” he said. “Prices are up this year, significantly higher than we’ve been used to for a long time, and low-wage workers will suffer more than anyone else.”
Kamper said five other states, and DC, that don’t use August’s CPI report will still see minimum wage increases but at various times of the year. In addition, he said, more states will likely start indexing their minimum wages based on inflation because wages are rising more slowly than prices.
“What we’re seeing here is that as prices go up, workers’ wages lag,” he said.
However, Kamper argues that it should be a federal policy that the federal minimum wage should be tied to inflation. It allows workers to be predictable and stable, and gives them the ability to keep up with inflation as the cost of goods soars, he said.
“Minimum wage indexing means that the state minimum wage is protected from prevailing changes in political headwinds,” added Kamper.
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