U.S. Economy

Mapping the Places Where Higher Minimum Wages Bite Hardest


What’s the right minimum wage? A minimum of $100 an hour would be crazy high, while a penny an hour would simply be irrelevant because no one makes that little. Somewhere in between is the right number. The question is how states can pick a minimum that’s high enough to benefit low-wage workers but not so high that less-skilled workers aren’t worth it and get laid off.

This map displays a crucial measure that’s too often overlooked by both supporters and critics of higher minimum wages: the ratio of each state’s minimum wage to the median wage in that state. The median wage is the one that splits the workforce evenly, with half getting paid more and half less.

The map shows the ratios that will apply as of August 2014, after several states’ wage-floor increases go into effect. The median wages, released by the Bureau of Labor Statistics on April 1, date back to May 2013 and are a bit out of date, but that shouldn’t affect states’ rankings much.

The first thing to notice is that the range is huge. In Puerto Rico, where many people are employed in low-wage industries such as tourism, and worker productivity is low, the median wage is just $9.51 an hour. So the federal minimum wage of $7.25 is 76 percent of the median in Puerto Rico—probably too high. The local economy would likely be devastated if the federal minimum went to $10.10 an hour, as President Obama advocates, and the commonwealth were unable to get a waiver.

Down at the bottom, with the smallest minimum-to-median ratio, is high-wage Washington, D.C.—home to lots of knowledge workers, including federal workers, contractors, think tank staff, and lobbyists. The median wage there is $30.62, overshadowing the $9.50 minimum. Even in the nation’s capital, however, some low-wage employers would have tough decisions to make if the minimum went to $10.10. According to the BLS, the median pay of restaurant hosts and hostesses in Washington is $11.70 an hour.

Florida’s minimum wage is lower than Connecticut’s, but it bites harder—it’s more “binding,” in economists’ lingo—because the median wage in Florida is much lower than that of Connecticut. And so on.

Bloomberg Visual Data did a similar analysis looking at countries, rather than states. As it turns out, Puerto Rico’s minimum-to-median ratio is about the same as Turkey’s. Washington, D.C. is down around Estonia.

Coy_190
Coy is Bloomberg Businessweek's economics editor. His Twitter handle is @petercoy.

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