Large Pay Gains Outpace State Minimum-Wage Boosts for Many Workers

Through September, the lowest 10% of workers by income in each state earned hourly wages that were on average one-third higher than their state’s minimum wages, according to a Wall Street Journal analysis of data compiled by the Labor Department and estimates from Nathan Wilmers, a professor at the MIT Sloan School of Management. The lowest 10% of the income distribution means around 10% of the workers made less and 90% made more.

That one-third margin was the highest in at least a decade, according to the Journal analysis.

In Minnesota, these workers earned $14.50 an hour on average in 2022 through September, 40% above the state’s current minimum wage of $10.33 and higher than the new minimum of $10.59 for large employers that is scheduled to take effect in January.  

“Wages are growing very strongly at the bottom” of the pay scale, said

Arindrajit Dube,

a professor at University of Massachusetts Amherst. “That’s not being driven by minimum wages but rather by the tightness of the labor market.”  

Increased minimum wages in 27 states in 2023 will indeed boost pay for some low-income workers. In Maine, they make an average of $13 an hour, 7% above their state minimum of $12.75. The state is raising its minimum above those levels to $13.80 in January. 

“I don’t want to say the minimum wage has become irrelevant, but it has certainly become less relevant,” said

David Neumark,

a professor at University of California, Irvine.

Minimum wage rates and laws vary across the country, with some states and cities having different minimum rates for larger employers, younger employees, tipped workers or for different industries, such as home healthcare. 

The differences between minimum wages across states and cities will expand in 2023 with the increases that are going to take effect, said Michael Reich, a professor at the University of California, Berkeley. 

California currently has the highest state minimum wage, at $15 an hour, and Washington state will have the highest, at $15.74 when its 8.6% scheduled increase takes effect on New Year’s Day. Seattle is also raising its own minimum wage to $18.69 for large employers, up from $17.27 currently. 

Craig Schafer said that before the pandemic he commonly paid the minimum wage as a starting point for cleaners at his two Seattle hotels. Now, he has to pay above the city’s minimum wage because of the high local demand for such workers compared with the limited number of them seeking jobs.

“Most people are paying above minimum wage,” he said.

Bobby Stuckey operates two restaurants in Denver and two more in Boulder, Colo. In January, Denver will boost its minimum wage to $17.29 an hour, and Colorado will increase its to $13.65. Mr. Stuckey said he would voluntarily pay the higher minimum wages across all four restaurants because that will be fairest for all his employees. But customers will pay more, he said. 

Colorado restaurateur Bobby Stuckey, standing, says customers eventually will feel the impact of higher wages for restaurant staff. Jeremy Schwartz, lead sommelier at Frasca Food and Wine in Boulder, Colo., operated by Mr. Stuckey, says higher wages will help his family amid higher inflation.

“Eventually society will have to pay more to eat out,” he said. “It’s impossible for me to claw back the prices in one year. I have to look two to three years down the road.”

Jeremy Schwartz, who works as the lead sommelier at Frasca Food and Wine, an upscale Italian restaurant in Boulder and one of Mr. Stuckey’s operations, welcomes the coming pay increase. Mr. Schwartz estimates the increase will boost his annual earnings by around $5,500. He will spend some of that extra money to pay for braces for his 13-year-old daughter. 

“I have a family, two kids and a wife that I support,” he said. “Everything is expensive. Everything helps.”

Twenty states don’t have a minimum wage higher than the federal minimum of $7.25 an hour, which was last raised in 2009, according to the National Conference of State Legislatures. 

Nationally, overall pay gains haven’t kept pace with inflation through 2022, the Labor Department reported. Consumer prices rose 7.1% in November from a year before. After adjusting for inflation, average hourly earnings declined 1.9% over the same period for all private employees. 

About a dozen states automatically tie their minimum wage increases to inflation, according to the Congressional Research Service, which means they are set to have substantial increases in 2023.

The coming increases to state minimum wages shouldn’t contribute significantly to inflation in 2023 as market-driven wage gains have already surpassed them in most parts of the country, said Mr. Dube. However, the increasing number of states that index inflation could add to price pressures in coming years, Mr. Neumark said, as the automatic wage increases likely would go to workers who are seeing slower earnings growth. 

In New Hampshire, low-wage workers are paid $14 an hour on average, according to the Journal’s analysis, nearly double the federal minimum wage, which is also the state’s minimum. 

David Bellman, the proprietor of Bellman Jewelers in Manchester, N.H., said employers in the state have been raising wages because workers have been so difficult to find. The state had a 2.6% unemployment rate in November. He said he has seen local fast-food restaurants advertising $20-an-hour jobs. 

“The people we hire are all over minimum wage. It hasn’t really come up in our business,” he said. “I don’t know what the minimum wage is, but no one is paying it, whatever it is.”

Write to Austen Hufford at [email protected]

Through September, the lowest 10% of workers by income in each state earned hourly wages that were on average one-third higher than their state’s minimum wages, according to a Wall Street Journal analysis of data compiled by the Labor Department and estimates from Nathan Wilmers, a professor at the MIT Sloan School of Management. The lowest 10% of the income distribution means around 10% of the workers made less and 90% made more.

That one-third margin was the highest in at least a decade, according to the Journal analysis.

In Minnesota, these workers earned $14.50 an hour on average in 2022 through September, 40% above the state’s current minimum wage of $10.33 and higher than the new minimum of $10.59 for large employers that is scheduled to take effect in January.  

“Wages are growing very strongly at the bottom” of the pay scale, said

Arindrajit Dube,

a professor at University of Massachusetts Amherst. “That’s not being driven by minimum wages but rather by the tightness of the labor market.”  

Increased minimum wages in 27 states in 2023 will indeed boost pay for some low-income workers. In Maine, they make an average of $13 an hour, 7% above their state minimum of $12.75. The state is raising its minimum above those levels to $13.80 in January. 

“I don’t want to say the minimum wage has become irrelevant, but it has certainly become less relevant,” said

David Neumark,

a professor at University of California, Irvine.

Minimum wage rates and laws vary across the country, with some states and cities having different minimum rates for larger employers, younger employees, tipped workers or for different industries, such as home healthcare. 

The differences between minimum wages across states and cities will expand in 2023 with the increases that are going to take effect, said Michael Reich, a professor at the University of California, Berkeley. 

California currently has the highest state minimum wage, at $15 an hour, and Washington state will have the highest, at $15.74 when its 8.6% scheduled increase takes effect on New Year’s Day. Seattle is also raising its own minimum wage to $18.69 for large employers, up from $17.27 currently. 

Craig Schafer said that before the pandemic he commonly paid the minimum wage as a starting point for cleaners at his two Seattle hotels. Now, he has to pay above the city’s minimum wage because of the high local demand for such workers compared with the limited number of them seeking jobs.

“Most people are paying above minimum wage,” he said.

Bobby Stuckey operates two restaurants in Denver and two more in Boulder, Colo. In January, Denver will boost its minimum wage to $17.29 an hour, and Colorado will increase its to $13.65. Mr. Stuckey said he would voluntarily pay the higher minimum wages across all four restaurants because that will be fairest for all his employees. But customers will pay more, he said. 

Colorado restaurateur Bobby Stuckey, standing, says customers eventually will feel the impact of higher wages for restaurant staff. Jeremy Schwartz, lead sommelier at Frasca Food and Wine in Boulder, Colo., operated by Mr. Stuckey, says higher wages will help his family amid higher inflation.

“Eventually society will have to pay more to eat out,” he said. “It’s impossible for me to claw back the prices in one year. I have to look two to three years down the road.”

Jeremy Schwartz, who works as the lead sommelier at Frasca Food and Wine, an upscale Italian restaurant in Boulder and one of Mr. Stuckey’s operations, welcomes the coming pay increase. Mr. Schwartz estimates the increase will boost his annual earnings by around $5,500. He will spend some of that extra money to pay for braces for his 13-year-old daughter. 

“I have a family, two kids and a wife that I support,” he said. “Everything is expensive. Everything helps.”

Twenty states don’t have a minimum wage higher than the federal minimum of $7.25 an hour, which was last raised in 2009, according to the National Conference of State Legislatures. 

Nationally, overall pay gains haven’t kept pace with inflation through 2022, the Labor Department reported. Consumer prices rose 7.1% in November from a year before. After adjusting for inflation, average hourly earnings declined 1.9% over the same period for all private employees. 

About a dozen states automatically tie their minimum wage increases to inflation, according to the Congressional Research Service, which means they are set to have substantial increases in 2023.

The coming increases to state minimum wages shouldn’t contribute significantly to inflation in 2023 as market-driven wage gains have already surpassed them in most parts of the country, said Mr. Dube. However, the increasing number of states that index inflation could add to price pressures in coming years, Mr. Neumark said, as the automatic wage increases likely would go to workers who are seeing slower earnings growth. 

In New Hampshire, low-wage workers are paid $14 an hour on average, according to the Journal’s analysis, nearly double the federal minimum wage, which is also the state’s minimum. 

David Bellman, the proprietor of Bellman Jewelers in Manchester, N.H., said employers in the state have been raising wages because workers have been so difficult to find. The state had a 2.6% unemployment rate in November. He said he has seen local fast-food restaurants advertising $20-an-hour jobs. 

“The people we hire are all over minimum wage. It hasn’t really come up in our business,” he said. “I don’t know what the minimum wage is, but no one is paying it, whatever it is.”

Write to Austen Hufford at [email protected]