State Minimum Wage Rates to Go Up With Inflation in 2012

By: - October 14, 2011 12:00 am

Increases in the minimum wage often involve protracted political battles, but no so for 10 states that will increase their rates in 2012. That’s because these states tie annual increases in their minimums to increases in the cost of living.

The minimum wage will increase by 28 cents next year in Colorado; 30 cents in Montana, Ohio and Oregon; and 37 cents in Washington State. Other states that have laws requiring their minimum wages be adjusted annually are Arizona, Florida, Missouri, Nevada and Vermont. Announcements regarding rate increases in those states are still to come.

Nationwide, 18 states and Washington, D.C. have minimum wage rates that are higher than the federal minimum wage of $7.25, according to  U.S. Labor Department data. Washington State has the highest hourly rate at $8.67, which will go to $9.04 next year when the new rate goes into effect.

Minimum wage hikes for 2012

The automatic revisions aren’t without controversy. As Stateline has reported , Florida didn’t want to increase its rate this year because of slight deflation that occurred in 2008-09. Washington businesses sued to block the increase for this year. In both cases, courts ruled that the rates had to go up.

Proponents of a higher state minimum wage see it as a way to put more money into the pockets of working families who then boost the local economy by spending more. “Oregon’s economy will not rebound if we allow 144,538 minimum wage earners to fall behind inflation,” Oregon Labor Commissioner Brad Avakian said in The Portland Tribune .

One in five American adults last year worked in jobs that paid “poverty-level wages,” Paul Osterman, an economist at the M.I.T. Sloan School of Management wrote in a recent New York Times editorial. He says the current minimum wage is lower, in inflation-adjusted terms, than it was in 1968. Currently, 6 percent of all hourly workers make no more than the federal minimum wage of $7.25, reports

A study from the National Employment Law Project found that the majority of new jobs created in the wake of the recession are in low- and mid-wage industries. The group says that supports the case for higher rates. “These modest annual minimum wage increases are one of the few policies that counteract declining wage trends and prevent America’s lowest-paid workers from falling even further behind,” NELP Executive Director Christine Owens said in a statement. NELP estimates that the federal hourly minimum wage would have to increase to $10.39 to keep up with inflation.

Critics say a higher minimum wage doesn’t help the poor and often forces employers to let go of workers when the rates go up. These increases, says the Employment Policies Institute, come with “unintended consequences that are particularly harmful to less-educated and minority groups” who are the most likely to lose their jobs, the group says.

In Colorado, the increase in the hourly rate is estimated to provide workers an extra $582 a year. “Businesses will try to pass the cost on to people,” economist Fred Crowley told KRDO broadcast in Colorado. “But for businesses like fast food restaurants, people could buy less and in turn it could end up hurting unemployment.” 

Bradley Schiller, a professor of economics at the University of Nevada, Reno, has a different critique. While there is serious poverty in the United States, he says, very few families depend on the earnings from a single minimum-wage job for their economic support. In a recent Wall Street Journal editorial , Schiller predicted that the minimum wage issue is likely to be a hot-button topic in the 2012 presidential campaign. 

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