Human Capital & Careers

States Go Their Own Way

Is federal inaction on a minimum wage law pushing some states to set a higher wage than they would otherwise?
Allan RichterSeptember 21, 2006

With a minimum-wage hike dead in Congress, individual states are likely to continue raising the pay floor on their own, creating a patchwork of laws and inconsistencies for those who run businesses in multiple states.

Maryland, Rhode Island, Michigan, Arkansas, Maine, Delaware, Pennsylvania, and North Carolina have all enacted new wage minimums this year. On July 31, Massachusetts passed a bill raising its minimum to $7.50 in 2007 and $8 in 2008. California is expected to raise its wage later this year. Ballot initiatives to raise the minimum will go before voters in November in Arizona, Missouri, Montana, and Nevada. In most states, the minimum-wage laws go into effect only if the state’s minimum wage is higher than the federal minimum.

In June, the U.S. Senate failed to enact a bill that would have raised the current federal rate of $5.15 an hour to $7.25 an hour over the next three years. (The federal hourly minimum wage has stood at $5.15 since 1997.)

“For those companies that pay minimum wages, working with a patchwork of different statutes and regulations creates headaches,” says Paul Kelly, senior vice president for government affairs at the Retail Industry Leaders Association. Companies must also contend with different rates for tipped versus nontipped workers and different thresholds for who gets paid the minimum wage, says Tom Foulkes of the National Restaurant Association.

“The uniform federal system is much easier,” says Foulkes, whose association’s members hire many entry-level workers. Foulkes predicts that a federal minimum-wage hike could prompt a slowdown in state action on the issue.

For businesses that hire minimum-wage workers, the big question is whether federal inaction is pushing some states to set a higher wage than they would otherwise. “Is the lack of a federal increase creating pressure in certain states? I think the answer is yes,” says Rob Green, vice president for government and political affairs at the National Retail Federation. “But would a federal increase take the pressure off in some states? I’m not convinced that it would.”