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Minimum wage goes up based on inflation in these states

A customer thumbs through his money as he buys tickets for the Monday Powerball drawing with an annuity value of at least $1.9 billion, Monday, Nov. 7, 2022, at a convenience store in Renfrew, Pa. (AP Photo/Keith Srakocic)

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(NewsNation) — Americans have seen their purchasing power decrease in the face of rising prices but those making minimum wage in at least 12 states are set to receive an hourly wage boost tied to inflation.

Nationwide, 16 states have laws that increase the minimum wage based on inflation, according to the National Conference of State Legislatures (NCSL). In four of those states — Connecticut, Florida, Missouri and Oregon — the indexed increases have not taken effect but are set to do so over the next few years.

The 16 states cited by the NCSL are: Alaska, Arizona, California, Colorado, Connecticut, Florida, Maine, Minnesota, Missouri, Montana, New Jersey, Ohio, Oregon, South Dakota, Vermont and Washington. Voters in Nevada recently passed an amendment that will remove the annual inflation adjustments.

In Washington, which has the highest state minimum wage in the country, workers will earn $15.74 an hour starting in January — an 8.7% increase from this year.

Minimum wage workers in Ohio, which was one of the first states to approve annual increases tied to the Consumer Price Index, will see wages increase to $10.10 an hour for nontipped employees and $5.05 an hour for tipped employees next year.

Other states, like Maryland, Illinois and Delaware — which are all phasing in $15 minimum wage laws — have scheduled increases that are not tied to inflation.

Some cities, like Minneapolis, have also adjusted hourly wages to account for rising prices.

But for workers in 20 states, the federal minimum wage of $7.25 an hour will remain the floor — it’s a rate that doesn’t change in response to higher costs and has not increased since 2009.

Experts say rampant inflation has sunk the real value of today’s federal minimum wage to its lowest point in decades.

“(Congress) has really failed at their job of making sure that we have wage standards that are up to date,” said Ben Zipperer, an economist with the Economic Policy Institute — a left-leaning think tank in Washington, D.C.

If workers today earned the same value as the minimum wage in 1968, Zipperer found, they would be making $12.12 an hour — a 67% percent increase from the current rate.

That stagnation has occurred despite an increase in worker productivity, Zipperer said.

But other economists warn that minimum wage increases may offer short-term relief at the expense of long-term solutions.

“The macro problem is that you’re adding to the inflationary cycle, you’re adding to the pressures on inflation,” said Samuel Gregg, the distinguished fellow in political economy at the American Institute for Economic Research, a libertarian think tank.

In a tight labor market — where employers are struggling to find workers — companies are already paying above the minimum wage without a federal increase, Gregg pointed out.

In July 2020, Target increased its minimum wage to $15 an hour for all U.S. workers.

As inflation increased and finding workers became more difficult, other employers did the same.

In October 2021, Costco increased its minimum wage to $17 and two months later, Hobby Lobby announced an $18.50 minimum wage.

An analysis by the Brookings Institute in April found that nominal and real wage growth have been highest in the lowest-wage sectors of the economy over the past two years. Those gains occurred without increasing the federal minimum wage.

It remains to be seen whether those workers will continue to see wages rise with a possible recession on the horizon.

This week, the Federal Reserve announced another interest rate hike in an effort to further tamp down demand and curb inflation.

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