Wage increases for entry-level workers look inevitable as multiple forces converge across the U.S., applying pressure on employers. In 2015, 20 states increased their minimum wage while federal politicians continue to push for a higher federal minimum wage as well. This pressure is evidenced by Walmart’s and McDonald’s recent wage increases. Companies with call centeremployees, warehouse employees, retail workers and unskilled production workers will be among those most affected by the pressure to raise wages.   

Due to the importance that labor costs play in the site selection process, corporations will increase their scrutiny of — and perhaps penalize — states with the highest increase in minimum wages. To identify the states that may be impacted negatively in the corporate site selection process, Site Selection Group recently analyzed the minimum wage trends in its whitepaper entitled, “
The Impact of Minimum Wage Increases on Corporate Location Decisions.” One of the key findings was the identification of the states with the greatest increase in minimum wages — a focus in this discussion.

States with the greatest increases
Site Selection Group’s study found that 29 states and the District of Columbia will have a minimum wage above the federal minimum wage by 2018, subject to any future additional legislative changes that could increase these wages further over the next couple of years.

“The greatest risk lies in those states with the greatest increase over the next three years,” said Brett Bayduss, Principal of Site Selection Group. “Employers in lower-end industries such as retail, call centers, distribution centers and production facilities will need to be prepared to increase wages to attract new workers and control employee attrition,” Bayduss said.

This leads to the question: Which states will see the most dramatic increase? The following list identifies the 25 states (inclusive of the District of Columbia) with the highest projected minimum wage increase from 2014 to 2018:

Top 25 states with the Highest Minimum Wage Increases
Ranked highest to lowest

Rank State 2014
Minimum Wage
Projected 2018
Minimum Wage
Amount
Increase
%
Increase
1 Massachusetts $8.00 $11.00 $3.00 37.50%
2 Hawaii $7.25 $10.10 $2.85 39.30%
2 Maryland $7.25 $10.10 $2.85 39.30%
3 Arkansas $6.25 $8.50 $2.25 36.00%
4 Alaska $7.75 $9.75 $2.00 25.80%
4 Washington D.C. $9.50 $11.50 $2.00 21.10%
5 Vermont $8.73 $10.50 $1.77 20.30%
6 Nebraska $7.25 $9.00 $1.75 24.10%
7 Minnesota $8.00 $9.50 $1.50 18.80%
7 West Virginia $7.25 $8.75 $1.50 20.70%
8 Connecticut $8.70 $10.10 $1.40 16.10%
9 South Dakota $7.25 $8.50 $1.25 17.20%
10 Michigan $8.15 $9.25 $1.10 13.50%
11 California $9.00 $10.00 $1.00 11.10%
11 New York $8.00 $9.00 $1.00 12.50%
11 Rhode Island $8.00 $9.00 $1.00 12.50%
12 Delaware $7.75 $8.25 $0.50 6.50%
13 Colorado $8.00 $8.23 $0.23 2.90%
14 Arizona $7.90 $8.05 $0.15 1.90%
14 Missouri $7.50 $7.65 $0.15 2.00%
14 Montana $7.90 $8.05 $0.15 1.90%
14 Ohio $7.95 $8.10 $0.15 1.90%
14 Oregon $9.10 $9.25 $0.15 1.60%
14 Washington $9.32 $9.47 $0.15 1.60%
15 New Jersey $8.25 $8.38 $0.13 1.60%


Conclusion
A recent study by the Heritage Foundation indicated the proposed federal minimum wage hike would likely eliminate 300,000 jobs per year and reduce gross domestic product (GDP) by more than $40 billion annually. If the U.S. lets wage inflation get out of control, the competitiveness of the U.S. against nearshore and offshore destinations will definitely be questioned. One thing that is certain, increases in the minimum wage will play a critical role in companies deciding to locate in one state over another. To learn more about minimum wage increases and their impact on corporate location decisions, please download the whitepaper, “The Impact of Minimum Wage Increases on Corporate Location Decisions.”

 

Download our Minimum Wage Trends Whitepaper

 

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