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Marketplace

Finding the fairest minimum wage

David Lazarus Aug 7, 2015
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Over the past few months, proponents of a higher minimum wage have won in cities like Los Angeles and Seattle, where a $15 per hour minimum wage is being implemented. 

How do you find the fairest number for the minimum wage? Drew DeSilver, senior writer at the Pew Research Center, says a nationwide minimum wage amount can be hard to install due to cost-of-living differences between cities.

If the goal were to guarantee low-paid workers everywhere in the country the same real purchasing power, that would require hundreds of different minimum wages, scaled to each locality’s cost of living. For example, giving everyone the same purchasing power that $15 has in New York City would cost $13.07 in Chicago; $12 in Fresno, California; $11.10 in Cincinnati; and just $10.43 in Anniston, Alabama.

But while state-level minimums can address cost-of-living disparities between states, they’re still subject to disparities within individual states, which can be significant. In California, for instance, the priciest metro area (San Jose-Sunnyvale-Santa Clara) is 33.2 percent more expensive than the least costly (El Centro). The Virginia suburbs of Washington, D.C., are 37.5 percent more expensive than the Kingsport-Bristol metro area, which straddles the state’s border with Tennessee. And the Chicago metro area is 34.6 percent more expensive than Danville, Illinois.

While minimum wage increases would impact about 3.3 million workers, there’s also a group of employees who would be exempt from any potential increase — even if they make below that amount. “The vast majority of workers who are exempt from the minimum wage are tipped employees, such as servers in restaurants. There’s about 1.1 million of them, according to the Bureau of Labor Statistics,” DeSilver says. The BLS lists 11 minimum wage exemptions on its site.

 

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