South Dakota, where wages buy more
Labor advocates scored a string of victories this past week: Washington, D.C., New York state and Los Angeles County each made significant advances toward a $15 minimum wage. But how much will that extra money really buy? A dollar goes much further in states such as West Virginia than it does in Maryland or D.C., where the costs of housing, groceries and transportation are higher.
At $8.75 an hour, New York’s minimum wage is one of the highest in the country. But when you adjust for purchasing power, relative to the national average, the state’s “real” minimum wage is $7.59. In D.C., the actual minimum wage is $10.50. But adjusted, it is worth $8.92.
South Dakota’s $8.50 minimum wage, on the other hand, buys more goods and services than the minimum in any other state. Adjusted, the hourly wage is worth about $9.70. Oregon, Washington state, Rhode Island and Vermont round out the list of states where the minimum wage is most valuable.
Thanks to a high cost of living, the $7.75 minimum wage in Hawaii is “worth” just $6.67, lower than in any other state. Other states with a particularly low-value minimum wage include New Hampshire, where the $7.25 minimum is worth just $6.85. In Maryland, the $8.25 wage feels more like $7.44.
“Even in some states that have enacted higher minimum wages most recently, the relative value of those is still quite low when you’ve made this adjustment,” says David Cooper, an analyst with the Economic Policy Institute, which often advocates for pro-labor policies.
The comparisons are based on each state’s regional price parity, a relatively new government indicator for comparing costs in different places. At the extremes, it shows that the price of goods and services is about 13 percent below the national average in Mississippi and Arkansas, and 16 percent above the national average in Hawaii.
The measure compares several types of goods and services. And housing prices show a much wider gap between extremes than the other categories. “That is the single largest driver when it comes to regional price differences,” Cooper says.