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FAQs & Figures

Minimum Wage Questions

1. What is the minimum wage in Vermont?

2. What is the federal minimum wage?
3
. Are there other states with higher minimum wages?
4.
What is a COLA?

5
. Isn't it mostly just young people starting out who aren't earning livable wages?
6
. I never thought the minimum wage was supposed to be a livable wage.
7. Increasing the minimum wage will be good for businesses.
8.
Plus, it's fair.
9.
Increasing the minimum wage will be good for taxpayers.
10.
Won't increasing the minimum wage make it harder for Vermont businesses to compete with New Hampshire and other border states?

What is the minimum wage in Vermont?
Currently the minimum wage in Vermont is $8.06 an hour ($16,765 /yr.) in 2009. The Vermont minimum wage increases every Jan 1st based on a cost-of-living adjustment (COLA) using the national CPI-U (Consumer Price Index-Urban) figure.  Nationally, the minimum wage is $7.25 an hour ($15,080 /yr.) in 2009. The minimum wage is important even to those earning considerably above it. Because the minimum wage sets a limit on how low wages can go for most people, it also sets the starting point for where wages move up from. Since the minimum wage is so low, it helps keep wages in general lower -even for those of us earning in the $8 to $9 an hour range. If the wage had just kept pace with inflation since 1969 when it was a $1.60 an hour, minimum wage would be approximately $10.00 an hour in 2009.  However, because it has not, the extremely low minimum wage is helping to pull wages down for everyone.

What is the federal minimum wage?

On July 24th, 2007 the federal minimum wage increased to $5.85, the first increase in 10 years.  The Fair Minimum Wage Act of 2007, signed into law on May 25th, 2007, increases the federal minimum wage from $5.15 to $7.25 by 2009.

 

Are there other states with higher minimum wages?
Yes. Several states have higher minimum wages than Vermont. Vermont's rate is the third highest rate in the country as of January 2009. Many state legislatures are currently debating increases to their state minimum wage rates. For states with a minimum wage lower then the federal they adhere to the federal wage.  As of July 24th, 2009 the federal minimum wage  increased to $7.25 therefore any state with a minimum wage lower will automatically be increased.  For the most up to date list of state rates go to: http://www.dol.gov/esa/minwage/america.htm

New England

General MW
(as of Jan 2009)

Connecticut

$8.00

Maine

$7.25

Massachusetts

$8.00

New Hampshire

$7.25

New York

$7.15

Rhode Island

$7.40

Vermont

$8.06

 

 

State - Ranked from Highest to Lowest

 

Minimum Wage (as of Jan 2009)

 

Washington $8.55
Oregon $8.40
Vermont $8.06
California $8.00
Connecticut $8.00
Massachusetts $8.00
Illinois $7.75
New Mexico $7.50
Michigan $7.40
Rhode Island $7.40
Ohio  $7.30 (4) 
Colorado $7.28
Arizona $7.25
Hawaii $7.25
Iowa $7.25
Maine $7.25
New Hampshire $7.25
West Virginia $7.25
Florida $7.21
Alaska $7.15
Delaware $7.15
New Jersey $7.15
New York $7.15
Pennsylvania $7.15
Missouri $7.05
Montana $6.90
Nevada $6.85 (2)/ $5.85 (3)
Alabama (F) $6.55
Georgia (F) $6.55
Idaho (F) $6.55
Indiana (F) $6.55
Kansas $6.55
Kentucky (F) $6.55
Louisiana (F) $6.55
Maryland $6.55
Mississippi (F) $6.55
Nebraska $6.55
North Carolina $6.55
North Dakota $6.55
Oklahoma $6.55
South Carolina (F) $6.55
South Dakota $6.55
Tennessee (F) $6.55
Texas $6.55
Utah $6.55
Virginia $6.55
Wyoming $6.55
Wisconsin $6.50
Arkansas $6.25
Minnesota  $6.15 (1) 

(F) - State does not have its own minimum wage laws, but adheres to federal minimum wage requirements. (1) Applies to employers with an annual sales volume of more than $625,000.  The federal minimum wage applies to employers with annual sales of $625,000 or less. (2) Without benefits.  (3) With benefits.(4) Applies to employers with an annual sales volume of $267,000 or more. The federal minimum wage applies to employers with annual sales less than $267,000 and 14 & 15 year olds.

What is a COLA?
A cost of living adjustment (COLA) is a tool used to increase wages based on inflation. The Consumer Price Index (CPI) is used to adjust dollar values for inflation. There are several ways to calculate a COLA for the minimum wage rate. Some states, such as Washington, base their COLA for the minimum wage rate on changes in the Consumer Price Index for Union Wage Earners and Clerical Workers (CPI-W). In other cases, such as the Federal Poverty Measure, an alternative CPI is used to calculate annual increases. There are currently minimum wage COLA's in Vermont, Oregon, Washington, and Florida.

Isn't it mostly just young people starting out who aren't earning livable wages?
This is a favorite argument of businesses- the only people earning the minimum wages or low wage in general are teenagers living with their parents. But it just isn't true. According to the phase 8 of the Vermont Job Gap study, Sixty-one percent (61%) of all year round full time workers in Vermont who earned less than $15,000 ($7.20/hr) in 1999 were over 29 years old. Over 10,000 full time workers over 29 earned less than $15,000 per year.

I never thought the minimum wage was supposed to be a livable wage.
When originally passed as part of the Fair Labor Standards Act in 1937, the minimum wage was supposed to be enough for one working parent to support a family of four. President Franklin Delano Roosevelt declared, "No business which depends for its existence on paying less than living wages to its workers has any right to continue in this country. By living wages I mean more than a bare subsistence level-I mean the wages of decent living."

Won't increasing the minimum wage lead to inflation with prices going up and mean that people end up no better off than before?
There is no good evidence one way or the other that increasing the minimum wage will lead to increase inflation. There are examples over the last thirty years when wage hikes did not spur inflation and other times when inflation occurred with no wage hikes.

In any event, what does it tell us that we are always hearing from politicians, business organizations and the media about the possible inflationary effects of increasing wages at the low end of pay scale but no concern is mentioned about the effects of the enormous concentration of wealth by the richest Americans, or the obscene speed at which pay for corporate executives is increasing.

The average annual compensation of a CEO of a large company in 1998 was $10.6 million, 419 times what the average worker makes, according to the organization United for a Fair Economy. That ratio has risen from 49 times to 1 in 1980. Had workers' pay risen at the same rate, the average worker would earn $110,000 today, not the $29,000 that an average worker makes. Had the minimum wage increased at the same rate as CEO pay, it would be $22.08 today, according to the Institute for Policy Studies. (Washington Post, 8/30/99)

The bottom line is that inflation is constantly on the rise, whether workers get a wage increase or not. Blaming inflation on those who make the least is nothing short of shameless. Since the last time the minimum wage was raised nationally in 1996 the economy has created 3.9 million new jobs and inflation has fallen from 2.7% to 1.9%--its lowest level in a generation. According to John Schmitt, an economist with the Economic Policy Institute in Washington, D.C., "The fact is that we have seen and will continue to experience price increases in cities and nationwide that have little or nothing to do with the minimum wage. In reality, proposed efforts to raise the wages of America's lowest paid workers will help wages catch up with price increases that are happening independent of wage fluctuation."

Increasing the minimum wage will be good for businesses.
We all know that when we have more money we will spend more. This will work with a minimum wage increase too. Higher wages will mean more discretionary income that people can choose what to do with. So while businesses will have to pay that higher wage, they will get their money back in increased business. This money will circulate in the economy and multiply, leading to increased economic growth for everyone.

Plus, it's fair.
Right now businesses paying a livable wage because they believe it's the right thing to do have to compete with businesses that don't. This will put all businesses on a level playing field and allow businesses to compete on the basis of the quality of their products and service.

Increasing the minimum wage will be good for taxpayers.
When people are paid below a living wage, they are forced to receive public assistance or go without necessities. This helps drive up taxes for everyone. If businesses paying a living wage directly to employees, it could mean lower taxes for everyone.

Won't increasing the minimum wage make it harder for Vermont businesses to compete with New Hampshire and other border states?
No. A 1992 study by Princeton University economists examined changes in employment at 410 fast food restaurants on the border area of New Jersey and Pennsylvania before and after New Jersey increased its' minimum wage from $4.25 to $5.05-a 18.8% increase. Their study found no significant differences in employment in these businesses after New Jersey raised the minimum wage.

Soon there will be a Job Gap Study that determines livable wage amounts for Maine and New Hampshire, and will provide us with much more information on this issue. Preliminary results show that Maine's livable wage levels are comparable to Vermont's. Perhaps, instead of competing among the northern New England states, we could work to pass minimum wage rates that are similar across the region.

 

 

 

 


FAQs & Figures

Basic Livable Wage

Minimum Wage

Economy and "Impact"

Issues of Fairness

The Big Picture

 


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