A Bigger PayDay

Hundreds of thousands of the country’s lowest-paid workers started the new year with good news: a little more money in their paychecks. 

Seventeen states raised their minimum wage this month (see map, below). That is the lowest hourly rate a company can legally pay most workers. The federal, or national, minimum wage has been $7.25 per hour since 2009. But states and cities can require employers to pay workers more—and 29 states and dozens of cities have done so. 

The increased wages—topping $10 an hour in some states—offer some relief to Americans who live paycheck to paycheck and struggle to afford their basic needs. 

“It’s basically going . . . toward me maybe having a little bit more to eat,” says Antwan Williams, a fast-food worker from Detroit, Michigan. His hourly pay went from $8.90 to $9.25 on January 1.   

But not everyone is happy about the pay hikes. Some people fear that, in order to afford the increase, businesses will have to cut back on employees’ hours or eliminate jobs altogether. 

Still others say minimum-wage workers in all states deserve bigger paychecks. “There are states that are still dragging their feet,” says Rogelio Sáenz, a professor at the University of Texas at San Antonio. “A federal increase in [the] minimum wage is very much necessary.” 

Hundreds of thousands of the country’s lowest-paid workers started the new year with good news: a little more money in their paychecks.

Seventeen states raised their minimum wage this month (see map, below). That is the lowest hourly rate a company can legally pay most workers. The federal, or national, minimum wage has been $7.25 per hour since 2009. But states and cities can require employers to pay workers more. Twenty-nine states and dozens of cities have done so.

The increased wages top $10 an hour in some states. This offers some relief to Americans who live paycheck to paycheck and struggle to afford their basic needs.

“It’s basically going . . . toward me maybe having a little bit more to eat,” says Antwan Williams. He is a fast-food worker from Detroit, Michigan. His hourly pay went from $8.90 to $9.25 on January 1.

But not everyone is happy about the pay hikes. Some people have concerns. They fear that in order to afford the increase, businesses will have to cut back on employees’ hours or cut jobs altogether.

Still others say that minimum-wage workers in all states deserve bigger paychecks. “There are states that are still dragging their feet,” says Rogelio Sáenz. He is a professor at the University of Texas at San Antonio. “A federal increase in [the] minimum wage is very much necessary.”

People have been debating the minimum wage since President Franklin D. Roosevelt first enacted it—at 25 cents an hour—in 1938. Roosevelt wanted Americans to be paid more than “starvation wages” so they could afford the necessities.

Today, about 2.2 million Americans are paid at or below the federal minimum wage. (Labor laws allow for some workers, including those who get tips, to be paid at a lower rate.) About half of minimum-wage workers are ages 16 to 24. 

Although the federal minimum wage hasn’t increased in nearly a decade, the cost of rent and health care has risen, even after adjusting for inflation. As a result, some workers can’t afford to take care of their families, says Sáenz. 

Even in areas with higher wages, the cost of living often increases faster than pay. In Chicago, Illinois, for example, the minimum wage is $11 an hour for most workers. Yet to cover basic expenses, a family of four would need two people to earn at least $17.05 an hour, according to researchers. 

Raising the minimum wage actually helps states too, Sáenz says. His research found that unemployment rates dropped in states that raised their minimum wages between 2009 and 2013. Those benefits extend to the entire country, he says. 

“These are funds that are going to be used to pay for rent, to buy food, to buy medicine,” Sáenz says. “That money goes back into the economy.” 

People have been debating the minimum wage since President Franklin D. Roosevelt first enacted it in 1938. At that time, the minimum wage was 25 cents an hour. Roosevelt wanted Americans to be paid more than “starvation wages” so they could afford their basic needs.

Today, about 2.2 million Americans are paid at or below the federal minimum wage. (Labor laws allow for some workers, including those who get tips, to be paid at a lower rate.) About half of minimum-wage workers are ages 16 to 24.

The federal minimum wage has not gone up in nearly 1o years. In that time, the cost of rent and health care has risen, even after adjusting for inflation. As a result, some workers cannot afford to take care of their families, says Sáenz.

Even in areas with higher wages, the cost of living often goes up faster than pay does. Take Chicago, Illinois, for example. For most workers there, the minimum wage is $11 an hour. Yet, say researchers, a family of four would need two people making at least $17.05 an hour to cover basic expenses.

Raising the minimum wage actually helps states too, Sáenz says. His research found that unemployment rates dropped in states that raised their minimum wages between 2009 and 2013. He says those benefits extend to the entire country.

“These are funds that are going to be used to pay for rent, to buy food, to buy medicine,” Sáenz says. “That money goes back into the economy.”

Still, as economists point out, the money for higher wages has to come from somewhere. Some companies raise prices. Others cut employees’ hours. One study by the University of Washington found that minimum-wage workers in Seattle actually made $125 less a month after their pay went up, because their shifts were shortened. 

Other businesses hire fewer people or replace entry-level workers with unpaid interns or machines, says Joyce P. Jacobsen, a professor at Wesleyan University in Connecticut. McDonald’s, for example, started replacing some cashiers with automatic kiosks last year. 

That hurts teens especially, Jacobsen says. “It’s made it harder for young people to . . . get that first job,” she explains.

Still, as economists point out, the money for higher wages has to come from somewhere. Some companies raise prices. Others cut employees’ work hours. One study by the University of Washington found that minimum-wage workers in Seattle actually made $125 less a month after their pay went up. That was because their shifts were shortened.

Other businesses hire fewer people. Some companies replace entry-level workers with unpaid interns or machines, says Joyce P. Jacobsen. She is a professor at Wesleyan University in Connecticut. McDonald’s, for example, started replacing some cashiers with automated order-and-pay stations last year.

That hurts teens especially, Jacobsen says. “It’s made it harder for young people to . . . get that first job,” she explains.

The federal minimum wage isn’t likely to be raised anytime soon. A bill to increase it recently stalled in Congress. The legislation would have increased the national base pay to $15 an hour by 2024. 

Low-paid workers are still pushing for the increase, including members of Fight for $15. Since 2012, that group has held protests across the U.S. to urge Congress to raise the minimum wage.

Some experts worry that a $15 national wage would be too high in some communities and could bankrupt many small companies.

But for minimum-wage workers like Hannah Nimz, 19, of Highland, Kansas, any pay bump would be welcome. Her state still pays just $7.25 an hour. 

“It would be more money,”she says of a wage hike, “to put back toward the things I need.” 

The federal minimum wage is not likely to be raised anytime soon. A bill to increase it was recently delayed in Congress. The legislation would have increased the national base pay to $15 an hour by 2024.

Low-paid workers are still pushing for the increase. This includes members of Fight for $15. Since 2012, that group has held protests across the U.S. They urge Congress to raise the minimum wage.

Some experts worry that a $15 national wage would be too high in some communities. They also fear it could bankrupt many small companies.

But for minimum-wage workers like Hannah Nimz, 19, of Highland, Kansas, any pay bump would be welcome. Her state still pays just $7.25 an hour.

“It would be more money,” she says of a wage hike, “to put back toward the things I need.”