Wednesday, January 26

15 states with the lowest minimum wage relative to the cost of living


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Editor’s Note: This story originally appeared on Oneself.

The economy of the pandemic era has many unusual and uncertain characteristics that have made it difficult to analyze. And one of the main open questions is what this economic period will affect wages and prices in the long run.

the federal minimum wage It was first created in 1938 as part of the Fair Labor Standards Act, which originally set the minimum wage at $ 0.25 per hour. The federal minimum wage is not automatically indexed to inflation or any other economic indicator, which means that an act of Congress is needed to increase the minimum. Historically, Congress has approved raises every few years to reflect inflation and the changing purchasing power of the dollar. But the last increase in the minimum wage took place in 2009 at $ 7.25 per hour, and the time between then and now represents the the longest period in history no increase. Even before recent concerns about inflation, normal changes in the cost of living have made it increasingly difficult for lower-wage workers to subsist on that amount.

The result of requiring Congress to act to increase the federal minimum wage is that the real value of the wage has fluctuated over time. At its peak in 1968, the minimum wage was worth $ 12.77 in 2020 dollars. When the last minimum wage increase took effect in 2009, the wage was worth $ 9.22 per hour in 2020 dollars. This means that the value Current actual salary of $ 7.25 is down 43% from its all-time high, down 21% since the last increase and one of its lowest levels in recent history.

The federal minimum wage is just one tool to increase workers’ wages. Another important lever of policy is state minimum wages. Currently, 30 states have enacted their own minimum wages above the federal minimum of $ 7.25, ranging from just $ 8.75 to $ 14 in the nation-leading California. Most of the states with the highest minimum wages are in the western or northeastern US, where the cost of living tends to be higher.

In some of the 20 states that have not raised the minimum wage, the cost of living is low, so the federal minimum wage does not create as much pressure on household finances. In others, however, the real value of the minimum wage relative to the cost of living is much lower, and low-wage workers may have a harder time surviving.

To determine the states with the lowest minimum wage relative to the cost of living, Self Financial researchers calculated the cost-of-living adjusted minimum wage in each state using minimum wage data compiled from state government websites, data from cost of living from the US Bureau of Economic Analysis and poverty data from the US Census Bureau.

These are the states with the lowest minimum wage relative to the cost of living.

15. Indiana

Fort Wayne Indiana
Travis Eckert / Shutterstock.com
  • Minimum wage (adjusted for cost of living): $ 8.17
  • Minimum wage (real): $ 7.25
  • Cost of living (compared to average): -11.3%
  • Poverty index: 11.9%

14. Iowa

Dubuque, Iowa
Joseph Sohm / Shutterstock.com
  • Minimum wage (adjusted for cost of living): $ 8.15
  • Minimum wage (real): $ 7.25
  • Cost of living (compared to average): -11.0%
  • Poverty index: 11.2%

13. Kansas

Overland Park Kansas
Jacob Boomsma / Shutterstock.com
  • Minimum wage (adjusted for cost of living): $ 8.13
  • Minimum wage (real): $ 7.25
  • Cost of living (compared to average): -10.8%
  • Poverty index: 11.4%

12. North Dakota

Fargo, North Dakota
Jacob Boomsma / Shutterstock.com
  • Minimum wage (adjusted for cost of living): $ 8.12
  • Minimum wage (real): $ 7.25
  • Cost of living (compared to average): -10.7%
  • Poverty index: 10.6%

11. Tennessee

Knoxville, Tennessee
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  • Minimum wage (adjusted for cost of living): $ 8.08
  • Minimum wage (real): $ 7.25
  • Cost of living (compared to average): -10.3%
  • Poverty index: 13.9%

10. South Carolina

Spartanburg, South Carolina
Kevin Ruck / Shutterstock.com
  • Minimum wage (adjusted for cost of living): $ 7.92
  • Minimum wage (real): $ 7.25
  • Cost of living (compared to average): -8.5%
  • Poverty index: 13.8%

9. North Carolina

Charlotte, North Carolina
Kevin Ruck / Shutterstock.com
  • Minimum wage (adjusted for cost of living): $ 7.91
  • Minimum wage (real): $ 7.25
  • Cost of living (compared to average): -8.3%
  • Poverty index: 13.6%

8. Wisconsin

La Crosse, Wisconsin
Jacob Boomsma / Shutterstock.com
  • Minimum wage (adjusted for cost of living): $ 7.89
  • Minimum wage (real): $ 7.25
  • Cost of living (compared to average): -8.1%
  • Poverty index: 10.4%

7. Idaho

Coeur d 'Alene, Idaho
Wollertz / Shutterstock.com
  • Minimum wage (adjusted for cost of living): $ 7.86
  • Minimum wage (real): $ 7.25
  • Cost of living (compared to average): -7.8%
  • Poverty index: 11.2%

6. Wyoming

Jackson Hole, Wyoming
f11photo / Shutterstock.com
  • Minimum wage (adjusted for cost of living): $ 7.81
  • Minimum wage (real): $ 7.25
  • Cost of living (compared to average): -7.2%
  • Poverty index: 10.1%

5. Georgia

Houses in Atlanta, Georgia
RodClementPhotography / Shutterstock.com
  • Minimum wage (adjusted for cost of living): $ 7.78
  • Minimum wage (real): $ 7.25
  • Cost of living (compared to average): -6.8%
  • Poverty index: 13.3%

4. Texas

Corpus Christi Texas
Sean Pavone / Shutterstock.com
  • Minimum wage (adjusted for cost of living): $ 7.51
  • Minimum wage (real): $ 7.25
  • Cost of living (compared to average): -3.5%
  • Poverty index: 13.6%

3. Utah

Park City, Utah
Sean Pavone / Shutterstock.com
  • Minimum wage (adjusted for cost of living): $ 7.51
  • Minimum wage (real): $ 7.25
  • Cost of living (compared to average): -3.5%
  • Poverty index: 8.9%

2. Pennsylvania

Harrisburg, Pennsylvania
Jon Bilous / Shutterstock.com
  • Minimum wage (adjusted for cost of living): $ 7.47
  • Minimum wage (real): $ 7.25
  • Cost of living (compared to average): -3.0%
  • Poverty index: 12.0%

1. New Hampshire

Manchester, New Hampshire
Wangkun Jia / Shutterstock.com
  • Minimum wage (adjusted for cost of living): $ 6.81
  • Minimum wage (real): $ 7.25
  • Cost of living (compared to average): + 6.5%
  • Poverty index: 7.3%

Detailed methodology and findings

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Minimum wage statistics by state were compiled from state government websites; Statistics on cost of living by state were obtained from the US Office of Economic Analysis. Regional price parities (RPP) data set; and poverty statistics were obtained from the 2019 US Census Bureau. American Community Survey. To determine the states with the lowest minimum wage relative to the cost of living, the researchers calculated the cost-of-living adjusted minimum wage in each state by dividing the state’s actual minimum wage by its corresponding RPP. In the event of a tie, the state with the lowest real minimum wage ranked highest.

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