On July 1, three states, 16 cities and counties, and the District of Columbia raised their minimum wages. These updates can all be viewed in EPI’s interactive Minimum Wage Tracker and in Table 1 and Table 2 below. At a time when families are coping with rising prices, these increases will help many low-wage workers and their families make ends meet.

State minimum wage increases

Connecticut, Nevada, Oregon, and the District of Columbia raised their minimum wages, with increases ranging from $0.50 per hour in Oregon’s nonurban counties1 to $1.00 in Connecticut. The new wage floors in Connecticut ($14.00), Nevada ($10.50), and Oregon ($13.50) were set in legislation passed in the last few years, while the District of Columbia’s minimum wage ($16.10) went up due to automatic annual inflation adjustment built into the District’s minimum wage law. (Eighteen states and the District of Columbia, as well as dozens of cities and counties, have automatic annual inflation adjustment built into their minimum wage laws.)

Added to the 21 states that raised their minimums at the start of the year, a total of 24 states and the District of Columbia have raised their minimum wages in 2022. Florida and Hawaii also have minimum wage increases scheduled to occur in October. Hawaii’s increase will be the first of four increases, recently enacted by state lawmakers, that will ultimately bring the state’s minimum wage to $18 by 2028.

Local minimum wage increases

In addition to the state-level increases, 16 localities raised their minimum wages, bringing the total number of city and county increases to 44 localities for 2022. Increases ranged from $0.40 in Chicago, Illinois, to $1.11 in Pasadena, California. While the July 1 increases in Minneapolis and St. Paul, Minnesota, were scheduled increases from city ordinances, all the other local increases are automatic annual inflation adjustments. Laws that automatically raise the minimum wage with inflation each year ensure that minimum wage workers’ paychecks can still buy at least the same amount of goods and services year after year.

Many workers earning the minimum wage, particularly those supporting a family, struggle to make ends meet. Even with the increases taking effect this month, minimum wage earnings throughout the country will be far from adequate for workers to achieve economic security. For example, in Chicago, where the minimum wage increased to $15.40, a minimum wage worker working full-time will earn an additional $832 in wages for an annual total of $32,032. However, according to EPI’s Family Budget Calculator—which uses localized price data to calculate what people and families of different sizes need to achieve a modest, but adequate standard of living—a Cook County resident with no children needs $39,204 annually to meet the family budget threshold. A worker with one child needs $62,959 a year for this modest standard of living. Notably, the Family Budget Calculator data reflect 2020 prices and thus do not take into account rising costs of living over the past 18 months—meaning that low-wage workers and their families may be even further from economic security today than these data suggest.

Does raising the minimum wage lead to faster inflation?

Research shows that higher minimum wages have only small impacts on prices in industries that employ many low-wage workers and have no meaningful effect on overall price growth in the economy. For instance, a study examining the effect of San Jose’s 25% increase in its minimum wage in 2013 found that restaurants raised their menu prices by a mere 1.45%, even as average restaurant worker weekly earnings rose by 5.5%. Similarly, researchers at the Upjohn Institute examined all state and local minimum wage changes across the country between 1978 and 2015 and found that for every 10% increase in the minimum wage, prices in the affected geography experienced, on average, a one-time increase of 0.36%—a trivial amount relative to the resulting increase in affected workers’ pay.

Higher minimum wages have little impact on overall inflation simply because for most of the things that U.S. households buy, domestic low-wage labor is simply not a significant portion of production and distribution costs. A higher minimum wage has no tangible effect on global oil and gas production, global grain supply, global shipping costs, or production of cars, timber, semiconductors, or any number of the other goods that have been in short supply over the last 18 months.

As EPI’s Josh Bivens explains, current high levels of inflation are the result of global supply-chain disruptions caused by the pandemic, huge mismatches in what households were looking to buy and what suppliers were able to quickly provide, and corporations leveraging the moment to extract larger profits than normal. Over the past year, wage growth for workers has lagged far behind inflation, meaning that labor costs are not the primary driver of recent price increases—if anything, they’ve been dampening the pace of inflation.

Any wage growth induced directly by a minimum wage hike is tiny relative to overall consumer spending. One simple illustration of this is to consider what would happen if the United States enacted a $15 minimum wage. In a March 2021 paper, we estimated that raising the federal minimum wage to $15 by 2025 would lift wages for 32 million low-wage workers throughout the country, delivering roughly $108 billion in additional wages to affected workers over a five-year period. U.S. consumer spending is over $16 trillion annually—meaning that even if affected businesses were to pass on to consumers the entirety of the additional labor costs resulting from the higher minimum wage in a single year, it would amount to less than 0.7% of what U.S. consumers are buying. In other words, even in the most extreme and unlikely scenario, the one-time price change would be less than 1%.

In short, at a time when many low-wage workers and their families are facing rising costs, the minimum wage increases happening in states, cities, and counties across the country will help many of them keep pace. Moreover, workers in jurisdictions that have automatic annual inflation adjustment built into their minimum wage laws will continue to be protected from future price increases. Raising the minimum wage lifts pay for low-wage workers, and does not have any meaningful bearing on inflation.

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Note

1. Oregon’s minimum wage legislation sets different increase schedules for three regions in the state: the Portland urban growth boundary, nonurban counties, and the remainder of the state.