Minimum wage is a hot topic in the United States, with the base per-hour pay varying greatly across the nation’s 50 individual states.
However, there are many reasons for this, and each minimum wage amount comes with its own set of pros and cons.
While it may seem prudent to want to live in the state with the highest minimum wage, there may be some hidden drawbacks.
As of 2022, the state with the highest minimum wage is California at $15.00 an hour for employers with 26 or more employees and $14.00 an hour for employers with 25 or fewer employees.
Massachusetts and Washington State are right up there as well with minimum wages of $14.25 and $14.49 an hour, respectively.
Many other states increased their minimum wages in 2021 and 2022, with some now trailing close behind.
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What is the federal minimum wage?
Understanding how California’s minimum wage stacks up against the federal minimum wage is key to evaluating just how high it is.
All states must at least meet the federal minimum wage, though they are allowed to exceed it if deemed necessary by the state’s government.
As of 2022, the federal minimum wage is $7.25 an hour.
While many states have gradually increased their hourly wages over the past decade due to economic inflation, the federal wage has remained unchanged since 2009.
Before that, it was $6.55.
It’s worth noting that as of 2022, 29 states and Washington D.C. set minimum wages that exceed the federal minimum wage.
In all other states, the federal wage applies except in some limited circumstances.
When did California’s minimum wage become the highest in the nation?
California’s state legislature voted in 2016 to change the minimum wage from $13.00 an hour to the current $14 to $15.00 an hour.
This was a long-term plan, however, and the new wage did not go into effect until January 1, 2022.
Prior to the effectual change, Washington State held the title of the highest state minimum wage at $13.69 per hour.
When did Massachusetts and Washington State set their current minimum wages?
Both Massachusetts and Washington State have minimum wages that are about double the federal wage.
Massachusetts’ increased on January 1, 2022, from the previous $13.50 an hour to the current $14.25.
Washington State’s minimum wage increased at the same time from $13.69 an hour to its current rate of $14.49.
Why don’t all states have the same minimum wage?
At a glance, it may seem unfair for different states to have wildly different minimum wages. However, this is primarily due to the cost of living differing greatly between states (and between cities within states).
California has one of the highest costs of living indexes in the nation, rated at 138.5. It is surpassed only by Hawaii (at 196.3 cost of living and a minimum wage of $10.10) and Washington, D.C. (161.1 cost of living and a minimum wage of $16.10 per hour).
For a baseline, the national average cost of living index is 100. Unsurprisingly, both Massachusetts and Washington also have above-average costs of living, at 127.2 and 118.7, respectively.
The federal minimum wage is determined by the Fair Labor Standards Act (FLSA) and is subject to change as per the U.S. Department of Labor (DOL).
All states must comply with it, but it’s worth noting that those with the highest minimum wage rates also tend to have patterns of frequent increases.
What cities in California have the highest minimum wages?
Similar to how states must be at or higher than the federal minimum wage, cities within states must be at or higher than the state requirement.
This is how multiple cities within California have minimum wage rates that are even higher than $15.00 an hour.
According to a 2020 Cost of Living Index assessment, the average California city had a cost of living that was 38% higher than the average city in the United States.
California’s city with the highest cost of living is San Francisco, but at the state minimum of $15.00, it does not have the highest minimum wage. Instead, those ranks go to the following:
West Hollywood – $16.50-$17.50 an hour (depending on the type of business, but all will increase above $17.00 in 2023)
Emeryville – $17.13 an hour
Mountain View – $17.10 an hour
Sunnyvale – $17.10 an hour
Palo Alto – $16.45 an hour
What other U.S. cities have the highest minimum wages?
California still outranks the nation’s cities with West Hollywood’s new minimum wage increase. However, some U.S. cities outside of California are not far behind:
Seattle – $17.27 an hour
Denver, CO – $15.87 an hour
Washington, D.C. – $15.50 an hour
Though it is not listed, SeaTac, WA, actually has the highest minimum wage in the country at $17.54 an hour.
But there’s a catch. This wage can only go to workers within the hospitality and transportation industries, and all other employees are subject to the state’s $14.49 an hour minimum.
What states have minimum wages that are close to the top?
Though trailing behind California, Massachusetts, and Washington on the minimum wage front, the next highest states also have above-average costs of living (with the exception of Arizona, which is right at the national average of 100).
They all hit above $12.50 an hour as of 2022:
New York – $13.20 an hour
Connecticut – $13.00 an hour
New Jersey – $13.00 an hour
Arizona – $12.80 an hour
Maine – $12.75 an hour
Oregon – $12.75 an hour
What state has the highest tipped-minimum wage?
When referring to state minimum wage, most sources look strictly at non-tipped rates. But with hundreds of thousands of food service employees that work for tips in the United States, it’s worth noting that tipped-minimum wage rates are different.
Because tips are expected to subsidize income in the U.S., front-of-house food service workers (usually including waiters, waitresses, bartenders, and baristas) typically receive significantly lower hourly wages for their work.
As of 2022, the minimum federal tipped wage is $2.13 an hour. The state with the highest tipped minimum wage rate is New York, which pays service workers between $8.35 and $12.50 (depending on the specific position and industry).
Seven states – Alaska, California, Minnesota, Montana, Nevada, Oregon, and Washington – require employers to pay employees the full state minimum wage before tips.
Regardless, there is an ongoing debate over the fairness of lower tipped-minimum wages. According to numerous reports (including a YouGov survey in 2019), only 78% of customers do not tip on a regular basis, and 6% never tip at all.
Tipping amounts also vary greatly, with many not approaching a rate that would sufficiently subsidize income.
Which state has the lowest minimum wage?
Because all states must comply with the federally set minimum wage of $7.25 an hour ($2.13 for tipped employees), no state technically has the lowest pay rate.
That said, both Wyoming and Georgia have lower minimum wages written into state law. The two states are tied for the nation’s lowest minimum wage at $5.15 an hour ($2.13 for tipped employers).
Regardless, both state laws simply haven’t been changed since the federal minimum wage increased to $7.25.
Each state is still subject to FLSA and therefore must pay higher than the minimum wages they have set.
Will the state with the highest minimum wage change?
Minimum wages have changed numerous times in several states over the past 10 years alone.
For example, the California minimum wage has changed seven times in the last decade, steadily rising from $8.00 per hour in 2012 to the current $14.00 to $15.00 per hour.
Another change is already in store for next year, as California legislators voted in 2016 to raise the state minimum wage for smaller companies (those at 25 employees or fewer) to $15.00 an hour by 2023.
Massachusetts is likewise set to raise its all-encompassing minimum wage to $15.00 an hour by 2023, but California is still likely to stay in the lead (or close to it).
In December 2021, a new bill called the “Living Wage Act of 2022” was introduced that would raise California’s minimum wage to $18.00 an hour by 2025.
Even so, other state minimum wages are likely to keep increasing as well, especially as inflation continues to rise.
Hawaii has a similar bill to California’s in the works, which would raise the state minimum wage to $18.00 an hour by 2026.
