Minimum wage hikes traditionally have been aimed at helping low-paid workers afford the basics, such as food, medicine, and housing.
But a growing number of states and localities are raising their pay floors to $15 an hour or above, providing workers a somewhat larger financial cushion so they can not only pay for essentials with less of a struggle but also make some discretionary purchases.
Twenty-one states and 48 cities and counties are set to raise their minimum wages on Jan. 1, according to a report provided exclusively to USA TODAY by the National Employment Law Project, a worker advocacy group. Other states and a few more cities and counties will raise their minimum wages later in 2025.
While the pay floor bumps mark an annual ritual, the report highlights an acceleration in the size of minimum wage increases in recent years.
What states are raising the minimum wage to $15?
On New Year’s Day, three states – Illinois, Delaware, and Rhode Island – will reach a $15 pay base for the first time, joining seven states already there or above it. Two states, California and New Jersey, are set to push their pay floors further above $17 for some healthcare workers.
Meanwhile, 47 localities will also reach or top $15 on Jan. 1, including more than two dozen in California, most of which will climb further above $17.
Burien, Washington, already subject to the state’s $16.28 minimum pay, will vault to $21.16 for employers with 500 or more workers in King County, making it the nation’s highest pay floor.
“Remember that a full-time worker earning $17 per hour is only earning $35,360 annually pretax,” Yannet Lathrop, NELP’s senior researcher and policy analyst, wrote in an email. “Those wage levels won’t make workers wealthy, but they will help with paying for the basics, for a few luxuries (hopefully)."
She added, “Those higher wages may also improve their mental and physical health, their ability to access credit, and may lead to better educational outcomes for their children.”
In January, several states will take a step in a series of minimum wage hikes over several years. Among the three hitting $15 for the first time, Illinois and Rhode Island are at $14 and Delaware is at $13.25.
Others are increasing their minimums, but stopping short of $15. Missouri’s base pay will jump to $13.75 from $12.30 and Nebraska’s to $13.50 from $12.
Kaamilya Hobbs, 33, of Kansas City, Missouri, earns $13.44 an hour working 20 to 25 hours at a local Arby’s. Her boyfriend mostly cares for their three children, a newborn, and two toddlers, but sometimes does food delivery for DoorDash.
Their combined pay is barely enough to pay basic expenses. Sometimes, the couple has to delay paying rent or a cellphone bill for 30 days.
“It’s a little bit tricky,” Hobbs said. “After rent and food and expenses for the kids, we don’t have too much left over to be able to do anything day to day.”
Missouri’s minimum wage increase to $13.75 “would help a little,” she said. The family might have to juggle bill payments less often. Plus, she said, “I’d be able to visit my mom more often.” Now, she rarely visits her mother, who lives about 25 miles away, because of the gasoline cost.
But Hobbs said she’s hoping for additional minimum wage hikes. “The cost of living is still going to be going up,” she said. “We can’t live on $13.75.”
Many states – including Arizona, Colorado, Connecticut, Ohio, and Virginia – are imposing smaller base pay rises linked to annual increases in the cost of living based on the consumer price index.
Who would benefit from a minimum wage increase?
Later in 2025, a handful of states and a couple dozen localities will also boost their minimum wages. The upshot: A total of 23 states and 65 cities and counties – a record 88 jurisdictions – will lift their pay floors sometime next year. The increases will directly affect 3 million workers earning minimum wage and indirectly nudge up pay for 6.2 million higher-paid employees because of ripple effects on company pay structures, according to the left-leaning Economic Policy Institute.
What stands out, though, is the growing contingent of states at $15 an hour or higher. New York, California, Massachusetts, Washington, Maryland, New Jersey, and Connecticut are already there. And besides the three joining that faction on New Year’s Day, Oregon will get there in July because of a cost-of-living rise.
Alaska, Florida, Hawaii, Missouri, and Nebraska will hit the $15 benchmark by 2026 or 2027. That makes 16 states with nearly half the U.S. workforce in states with pay floors of $15 or higher within the next three years, according to the National Employment Law Project and the Economic Policy Institute.
“Fifteen dollars is still the target rate,” Lathrop said. “It’s now the competitive rate.”
How will increasing the minimum wage help people?
Minimum wage increases in the past few years have helped Americans keep pace with annual inflation that reached a 40-year high of 9.1% in mid-2022 before gradually falling to 2.6% recently.
As a result of the laws, “Workers and their families don’t have to choose which bills to pay,” Lathrop said.
Yet none of the planned wage floors would meet the threshold of a “living wage” that would allow workers to afford basics such as food, child care, health care, housing, transportation, broadband, and other necessities, Lathrop said.
In King County, Washington, for example, the minimum wage is poised to rise to $20.29 on Jan. 1.
But the living wage for an adult with no children in the county is $30.08, according to the MIT Living Wage Calculator.
Michael Saltsman, managing director of the Employment Policies Institute, which is backed by the restaurant industry, noted that at least some minimum wage workers aren't financially squeezed because they live in households with higher total incomes.
The $15 threshold was deemed a pipe dream when Fight for $15, an alliance of fast-food and other low-paid workers, began demanding it in walkouts across the nation starting in 2012. On April 1, however, the minimum hourly wage for fast-food workers in California leaped from $4 to $20, pushing it well above the state's standard $16 pay threshold.
Meanwhile, the federal minimum wage has been stuck at $7.25 an hour since 2009, with Republicans in Congress repeatedly blocking efforts to raise it. About 30 states with more than 60% of the U.S. workforce have higher pay floors than the federal government’s.
Lathrop, though, says the issue transcends politics. This year, Alaska and Missouri, both Republican-dominated states, became the latest to pass ballot initiatives raising the minimum wage to $15 over the next few years.
How does raising the minimum wage affect employers?
Saltsman, for his part, noted that voters in California and Massachusetts, two predominantly Democratic states, this year rejected proposals to raise the minimum wage for specific groups of workers.
“They’re associated with higher prices and loss of jobs,” he said of the pay increases.
Restaurants, he said, have passed along their higher labor costs to consumers by raising food prices. And the wage hikes have forced many eateries to close or lay off workers, he said.
Various studies have supported both sides of the debate. Analyses by the University of California, Berkeley, and the National Bureau of Economic Research found that pay increases didn’t cause job losses within low-wage industries but did lead to some reduced employment among teens and other low-skilled workers.
In 2021, a Congressional Budget Office report concluded that boosting the federal minimum wage to $15 an hour would raise incomes for millions of Americans and lift 900,000 people out of poverty but reduce employment by about 1.4 million workers within a few years.
Does raising the minimum wage cause prices to go up?
Economist Dante DeAntonio of Moody’s Analytics said the minimum pay increases haven’t had a noticeable effect on inflation, in part, because the share of workers at or below the pay floors is small.
State minimum wage hikes each January have contributed to sharper inflation early in the year but haven’t moved the needle on overall price increases in the months that followed, said Ryan Sweet, chief U.S. economist of Oxford Economics.