Minimum wage increases have been a popular topic in the news lately as advocates have been campaigning for minimum wage increases both on state and federal levels. On Election Day 2014, advocates got their way in at least four states: Alaska, Arkansas, Nebraska, and South Dakota. In all four states, voters approved ballot measures increasing their state’s minimum wage, all of which are now higher than the minimum wage guaranteed by the federal government. The success of these initiatives continued a trend in 2014 that saw many states increase their minimum wages, and likely signals that additional minimum wage increases will be approved by state legislatures or by popular vote in 2015. Moreover, the initiatives in Alaska and South Dakota reflect another growing trend in minimum wage laws – pegging minimum wage to cost of living. This means that employers must be more aware than ever of their state’s minimum wage requirements, especially as many minimum wage rates change at the beginning of the year.
Four States Approved Minimum Wage Increases
Of the four states that voted on Election Day to increase their minimum wage, Alaska voters approved the highest minimum wage. Beginning on January 1, 2015, Alaska’s minimum wage will be $8.75 and, on January 1, 2016, it will increase to $9.75. Then, beginning on January 1, 2017, Alaska’s minimum wage will be pegged to inflation and will increase each year by the increase in the cost of living as measured in the Consumer Price Index for the Anchorage metropolitan area, which is compiled by the U.S. Department of Labor, Bureau of Labor Statistics.
On January 1, 2015, South Dakota employers will be required to pay non-exempt employees at least $8.50 per hour. Then, starting on January 1, 2016, like Alaska, South Dakota’s minimum wage rate will be tied to inflation and will increase each year by the increase in the cost of living as measured by the Consumer Price Index published by the U.S. Department of Labor. Also worth noting, is that South Dakota’s approved ballot measure set the state’s tipped minimum wage rate to be half of its standard minimum wage. Thus, in 2015, the tipped minimum wage will increase from $2.13 to $4.25. In subsequent years, the tipped minimum wage will also be tied to inflation and will increase by half of the increase in the standard minimum wage.
In Arkansas, voters approved minimum wage increases over the next three years starting in 2015. On January 1, 2015, Arkansas’ minimum wage will increase to $7.50; on January 1, 2016, it will increase to $8.00; and, on January 1, 2017, it will increase to $8.50. Unlike the ballot initiatives in Alaska and South Dakota, Arkansas’s initiative did not provide for any minimum wage increases, whether fixed or tied to cost of living increases, beyond 2017. Additionally, Arkansas appears to have left intact its minimum wage exemption for employers with fewer than four employees.
Nebraska voters approved increases in the state’s minimum wage for 2015 and 2016. On January 1, 2015, Nebraska’s minimum wage will increase to $8.00 and, on January 1, 2016, it will increase to $9.00. The ballot initiative in Nebraska did not provide for any additional increases beyond 2016. Similar to Arkansas, Nebraska’s ballot initiative did not provide for on-going automatic minimum wage increases, but instead only extended the minimum wage increases to 2016. Additionally, Nebraska’s recently passed minimum wage ballot initiative does not appear to have changed Nebraska’s minimum wage exemption for employers with fewer than four employees.
It is worth noting that voters in Illinois also voted on and approved a minimum wage initiative on Election Day. However, the initiative was a non-binding advisory question and it is unknown what further action will be taken regarding the state’s minimum wage as a result of the vote.
State Minimum Wages Versus the Federal Minimum Wage
The minimum wage increases in the four states listed above continue the trend of states enacting minimum wages that are greater than the federal minimum wage, which is currently $7.25. State minimum wage rates, including the District of Columbia, as of January 1, 2015, will compare to the federal minimum wage as follows:
- 30 states will have minimum wages higher than the federal minimum wage
- 14 states will have minimum wages equal to the federal minimum wage
- 2 states will have minimum wages below the federal minimum wage
- 5 states will have no minimum wage
For an analysis of current and future minimum wages for all 50 states plus the District of Columbia and how they compare to the federal minimum wage, download our State Minimum Wage Analysis – November 10, 2014
You can also find a variation of our State Minimum Wage Analysis – November 10, 2014 on our State Minimum Wage and Overtime Summaries page.
Automatic Annual Cost-of-Living Increases
Another observation from minimum wage increases that passed on Election Day is that two of them, Alaska and South Dakota, contained provisions for future automatic minimum wage adjustments based on cost-of-living increases. Alaska and South Dakota join a growing number of states that provide for annual cost-of-living increases, which now include:
In analyzing this list, it is worth noting some states that are absent and which, with the growing movement to peg minimum wage to cost of living, may seek in the near future to join those that have already made the change. State worth watching in the near future include California, Illinois, New Hampshire, New Mexico, and Pennsylvania, amongst others. In fact, with states that tend to have more conservative employment and labor laws, like Arizona, Florida, and South Dakota, pegging their minimum wage to the cost of living, it is fair to assume that any state may adopt the practice.
With the growing call for minimum wage increases and the success of minimum wage initiatives on Election Day, it is fair to assume that 2015 will bring with it even more state minimum wage changes. We can also assume that those changes will come from the electorate directly if state legislatures fail to take action. We at will keep you up-to-date as these changes take place.