As the economy has been recovering from the COVID-19 crisis, employers have struggled to find workers amid an ongoing labor shortage. The number of job openings in the U.S. economy jumped to more than 10 million in June, the highest on record, according to the Bureau of Labor Statistics.
The reasons jobs have remained open are many and varied: pandemic-related retirements and career transitions; lack of affordable childcare; increased savings during the pandemic; enhanced unemployment benefits; and lingering fears of COVID-19. A labor market that is spurring competition for part-time and entry-level employees might tighten even further in 2022 when the minimum wage will increase in many states.
Minimum wage workers in 24 states across the country experienced a pay bump in 2021, according to the U.S. News & World Report. A similar number of states are expected to increase their minimum wage in 2022. As of Jan. 1, 15 states had already announced wage increases, including California, Massachusetts and Virginia. (A full list of minimum wage laws by state is at the bottom of this article.)
Federal minimum wage hikes continue to be under discussion
Meanwhile, House and Senate Democrats have introduced the Raise the Wage Act of 2021 to progressively increase the federal minimum wage to $15/hour by 2025. The federally mandated minimum wage was last updated in 2009 to its current $7.25 per hour. Also, the U.S. Department of Labor has recently issued new minimum wage rates for employees who perform work on or are connected to federal contracts. The rate will increase to $11.25 an hour for existing contracts on Jan 1, 2022. Starting Jan. 30, 2022, the rate will be $15 for work performed on new, renewed and extended contracts.
Impact of minimum wage increases on business
For some business owners, the wage increases won’t have a large effect on their operations because they are already paying above wage minimums. Over the past six months, wages are running at an average 6% annual gain, according to CNBC. Many jobs, even part-time and entry-level positions, now offer starting wages higher than the mandated wage due to staffing shortages. That means hourly-wage jobs are being boosted to pay levels never seen before.
Given today’s tight labor market and fierce competition, employers are reconsidering their wage structures and other benefits. Employers have said that in addition to solving the labor shortage, wage increases help attract stronger candidates, reduce turnover, and improve company morale and culture, according to a recent report from the Washington Post. PeopleReady recently worked with a major national retailer to create a temp-to-hire staffing model including higher wages which improved attendance and increased employee retention.
New overtime and wage rules also expected for 2022
Higher state minimum wages also mean an increase in the minimum salary an employee must earn in 2022 to be overtime exempt. In some states, the minimum salary requirement for overtime exemption increases automatically whenever the minimum wage increases. Employers may be required to increase salaries for exempt employees or reclassify them to nonexempt and pay overtime premiums, according to the Society of Human Resource Management.
As a first step, employers will need to assess job duties that qualify for a particular exemption, which may be different under federal and state law. They must also review the wage standards of counties and cities in which they do business to ensure that they follow all rules and regulations.
Minimum wage laws by state for 2022
Twenty-nine states and Washington, D.C., have higher minimum-wage rates than federal law. Five states—Alabama, Louisiana, Mississippi, South Carolina and Tennessee—don’t have a minimum wage. Two states—Georgia and Wyoming—have a lower minimum-wage rate than the federal standard. In those states, the federal minimum wage of $7.25 applies.
Excluding Washington, D.C.’s $15.20 hourly minimum wage, California will have the highest in the country at $15 per hour come Jan. 1, 2022. Washington ($14.49/hr.) and Massachusetts ($14.25/hr.) are next on the list. Meanwhile, certain states such as Minnesota and Ohio base minimum wage on the size of the employer. And in Nevada, minimum wages are determined in part by whether an employer offers health benefits to its workers.
Alabama: No state minimum wage law.*
Arizona: $12.80 ($12.15 in 2021)
Arkansas: $11.00 (applicable to employers of 4 or more employees)
California: $14.00 (applicable to employers with 25 employees or less); $15.00 (applicable to employers with 26 employees or more) ($13.00; $14.00 in 2021)
Georgia: $5.15 (applicable to employers of 6 or more employees)
Indiana: $7.25 (applicable to employers of 2 or more employees)
Louisiana: No state minimum wage law.*
Massachusetts: $14.25 ($13.50 in 2021)
Maine: $12.75 ($12.15 in 2021)
Maryland: $12.50 ($11.75 in 2021)
Michigan: $9.87 ($9.65 in 2021) (applicable to employers of 2 or more employees)
Minnesota: Large employer (enterprise with annual revenues of $500,000 or more): $10.33 ($10.08 in 2021)
Small employer (enterprise with annual revenues of less than $500,000): $8.42 ($8.21 in 2021)
Missouri: $11.15 ($10.30 in 2021)
Mississippi: No state minimum wage law.*
Montana: $9.20 ($8.75 in 2021) (business with gross annual sales of more than $110,000); $4.00 (business not covered by the Fair Labor Standards Act with gross annual sales of $110,000 or less)
North Carolina: $7.25
North Dakota: $7.25
Nebraska: $9.00 (applicable to employers of 4 or more employees)
New Hampshire: $7.25
New Jersey: $13.00 ($12.00 in 2021)
New Mexico: $10.50
Nevada: $10.50 with no health ins. benefits provided by employer ($9.75 in 2021); $8.75 with health ins. benefits provided by employer and received by employee)
New York: $12.50; $14.00 (Long Island & Westchester); $15.00 (NYC)
Ohio: $9.30 (employers with annual gross receipts of $305,000 or more; $7.25 (employers with annual gross receipts under $305,000) ($8.80; $7.25 in 2021)
Oklahoma: $7.25 (employers of ten or more full-time employees at any one location and employers with annual gross sales over $100,000 irrespective of number of full-time employees); $2.00 (all other employers)
Rhode Island: $11.50
South Carolina: No state minimum wage law.*
South Dakota: $9.45
Tennessee: No state minimum wage law.*
Virginia: $11.00 ($9.50 in 2021) (applicable to employers of 4 or more employees)
Vermont: $12.55 ($11.75 in 2021)
West Virginia: $8.75
District of Columbia: $15.20
Puerto Rico: $8.50 ($7.25 in 2021)
*This state does have not established state-level minimum wage policies, effectively defaulting to the national federal minimum of $7.25.
Characteristics of minimum wage workers
Age. Although workers under age 25 represented just under one-fifth of hourly paid workers, they made up 48% of those paid the federal minimum wage or less.
Full- and part-time status. About 4% of part-time workers (people who usually work fewer than 35 hours per week) were paid the federal minimum wage or less, compared with about 1% of full-time workers.
Industry. The industry with the highest percentage of workers earning hourly wages at or below the federal minimum wage in 2020 was leisure and hospitality (about 8%). Three-fifths of all workers paid at or below the federal minimum wage were employed in this industry, almost entirely in restaurants, bars, and other food services. For many of these workers, tips may supplement the hourly wages received.
State of residence. The states with the highest percentages of hourly paid workers earning at or below the federal minimum wage were in the South: about 4% for South Carolina and about 3% for Alabama, Louisiana, Mississippi, and Virginia. Many states had less than 1 percent of hourly paid workers earning at or below the federal minimum wage: California, Colorado, Hawaii, Minnesota, Montana, Nebraska, Nevada, Oregon, Vermont and Washington.
*All data from the Bureau of Labor Statistics
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