U.S. minimum wage expected to increase in at least 20 U.S. states in 2023

Minimum wage workers in 26 U.S. states experienced a pay bump in 2022, according to the Bureau of Labor Statistics. This increase was largely in response to inflation and one of the most competitive labor markets in history. According to the BLS, at least half of U.S. states will increase the minimum wage again for 2023 (as of Dec. 1, 2022).

(A full list of minimum wage laws by state is below.)

What’s the difference between federal and state minimum wage?

Thirty 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.

On January 1, 2023, Washington, D.C. will have the country’s highest minimum wage at $16.10 per hour. Washington state is close behind with an increase to $15.74, followed by California at $15.50. The minimum wage in Massachusetts will increase to $15.00 per hour.

Meanwhile, some state governments have laws unique to their states: Minnesota and Ohio base their minimum wage on the employer’s size. In Nevada, the minimum wage is partially determined by whether an employer offers health benefits to its workers. Meanwhile, many states are now tethering their minimum wage laws to inflation, unlike the federal rate.

What are the minimum wage laws by state for 2023?

For employers with locations in multiple states, keeping up with minimum wage rate changes can be challenging. To help you get started, PeopleReady shares a detailed breakdown of minimum wage laws by state.

*This state does have not established state-level minimum wage policies, effectively defaulting to the national federal minimum of $7.25.

Who are today’s minimum wage workers?

More than half of the workers in the United States work entry level and minimum wage jobs, according to the BLS. As the majority workforce, they’re an essential part of nearly every industry.

Workforce outlook: In 2021, about 1.3 million U.S. workers age 16 and over earned exactly the federal minimum wage of $7.25 per hour. Another 1.7 million had wages below the federal minimum. These workers make up 4% of all hourly paid 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

How do minimum wage increases affect employers?

For some employers, the wage increases won’t significantly affect their operations because they are already paying above minimum wage standards. While several factors inform a wage increase’s amount, the average growth is 3%, according to HR Dive. However, 22% of employers offered increases of 4-5% in 2022.

“Almost half of all American companies will increase wages between five and seven percent.”

With higher inflation and a labor shortage, the upward trend is likely to continue in 2023. In a recent Salary.com survey, almost half of all American companies will increase wages between five and seven percent. Given today’s tight labor market and fierce competition, many employers are reconsidering their pay structure and adding benefits for hourly-wage workers in order to avoid turnover and improve company morale and culture.

Companies with multiple locations have different options to align workers with the minimum wage in their respective city, county and state. The first option is to match wages in each municipality. But other employers apply the highest minimum wage from municipalities in which they operate to all locations. For example, many large corporations like CVS, Target, and Starbucks choose instead to raise their minimum wage company-wide.

PeopleReady worked with a major national retailer to create a temp-to-hire staffing model including higher wages, improved attendance and increased employee retention.

Ensure success in your 2023 staffing plan with PeopleReady

With 35 years of experience in staffing, PeopleReady works with a variety of businesses across North America in industries spanning hospitality, construction, retail, manufacturing, and more. Reach out to us today to learn how can support your business in 2023.