South Dakota, where wages buy more

The Washington Post Sunday - - OUTLOOK - By Niraj Chok­shi Niraj Chok­shi re­ports for Gov Beat, The Post’s state and lo­cal pol­icy blog. If you have a can­di­date for best state, e-mail niraj.chok­shi@wash­post.com.

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.

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