Minimum Wage: New Year, New Pay

Minimum wage increases in 2018 and beyond will impact millions of workers. But what impact will it have on businesses looking to control costs?
By: | January 3, 2018 • 3 min read

The tax reform that will impact every U.S. socio-economic class, for better or worse, isn’t the only change in finances many Americans will see. In the new year, minimum-wage workers in 18 states and 19 cities will see a pay increase; approved wages will eventually range from $12 to $15 an hour. This is a major increase from the current national average, an unlivable $7.25 an hour. (Minimum wage referenced here is for non-tipped workers.)

Minimum wage was established as part of the Fair Labor Standards Act in 1938 and kept pace with cost of living until about 1968.


“The peak value of the minimum wage in real terms was reached in 1968. To equal the purchasing power of the minimum wage in 1968 ($10.69), the current minimum wage’s real value ($7.25) would have to increase by $3.44 (or 47 percent),” says Craig K. Elwell, specialist in macroeconomic policy at the Congressional Research Service in Washington. “Although the nominal value of the minimum wage was increased by $5.65 (from $1.60 to $7.25) between 1968 and 2009, these legislated adjustments did not enable the minimum wage to keep pace with the increase in consumer prices, so the real minimum wage fell.”

Though numerous states have approved an increase in minimum wage, the full impact will happen gradually. For example, Arizona has approved state minimum wage at $12 an hour, but the 2018 minimum wage will be $10.50, a 0.50 cent increase from last year. In 2019, the amount will increase to $11 and in 2020 it will reach $12 an hour. Starting in 2021, minimum wage in Arizona will increase every year based on cost-of-living calculations.

According to a report from the National Employment Law Project, after full implementation of minimum wage increases in 18 states and 19 cities, approximately 13,101,000 workers will be impacted.

This is a great step toward financial independence for millions of minimum-wage workers, notes Carey Nadeau, founder and CEO of Open Data Nation Inc., in Washington, D.C., and Amy K. Glasmeier, professor of economic geography and regional planning at the Massachusetts Institute of Technology in Boston.