Management & Labor

States with the Most Minimum-Wage Workers

An increase in the federal minimum wage would have far greater effects in some states than others. View new data to see where workers are earning at or below the federal rate, which has been frozen at $7.25 since 2009.
by | February 24, 2014
AP/Kiichiro Sato
 

President Obama reignited the minimum-wage issue in his State of the Union address last month, calling on lawmakers to raise the federal wage that has remained frozen at $7.25 an hour since 2009.

In some states, a federal minimum-wage hike could boost pay for hundreds of thousands of workers. In others where wages are already higher, the ramifications wouldn’t be as great.

Governing obtained new 2013 estimates from the Labor Department showing how many workers in each state earn wages at or below the federal rate.

About 7.4 percent of Tennessee’s hourly workforce took home wages at or less than the federal rate. That share topped all other states, followed by Idaho (7.1 percent), Alabama (6.8 percent) and Arkansas (6.8 percent). Regions without state minimum-wage laws, particularly in the South, tend to employ the greatest concentrations of minimum-wage workers.

Nationwide, an estimated 3.3 million Americans earned wages at or below the federal rate last year, accounting for 4.3 percent of the hourly workforce.

Much of these employees hold jobs in retail, restaurants, hotels and other service industry occupations.

While every region has its share of such workers, they’re typically most prevalent in areas supported by a strong tourism sector. Workers in tourist destinations, particularly along the coasts, incur higher costs of living.

This isn’t true for Tennessee, though. Bill Fox, an economics professor at the University of Tennessee, cited a reduced cost of living in Nashville, Memphis and the Smokey Mountains region relative to other tourist economies, helping to explain why the state has the largest share of minimum-wage workers.

“It’s a combination of high tourism intensity and areas with a low cost of living,” he said.

The presence of any state minimum-wage law remains the overriding factor driving the number of employees at or below the federal rate. Of states where the share of workers earning at or below minimum-wage pay exceeded the national average of 4.3 percent, all but four lacked higher state minimum-wage laws last year.

At the beginning of this year, 13 states raised their wage requirements, either through legislation, ballot initiatives or annual inflation adjustments. About half of states mandate wages higher than the federal rate for most employers.

At the opposite end of the spectrum, less than 2 percent of hourly workers earned average wages of $7.25 or less in Oregon, California and Washington last year.

Here’s a map showing the prevalence of these workers throughout the country. States with the lowest shares of hourly workers paid at or below $7.25 are shaded in green (click a state to display its data).

Figures represent Governing calculations using BLS Current Population Survey data for 2013 annual averages. Please zoom out for Alaska and Hawaii.

Labor Department estimates shown include workers reporting hourly wages below the federal rate, not including tips or commissions. Federal law does not require employers to pay tipped employees $7.25 per hour, unless their combined tips and direct wages don’t exceed the federal rate. Other select employers, such as smaller firms, are also not subject to the Fair Labor Standards Act.

Like in Tennessee, regional differences in cost of living help explain part of the varying tallies of low-wage workers across state borders.

From the map, it’s also clear that states with Republican-controlled legislatures less apt to pass minimum-wage hikes also record higher shares of workers paid at or below $7.25. A few lacking state minimum wage laws, though, did post low totals last year. Only 3 percent of New Hampshire’s hourly workers earned at or below the minimum wage, while the same was true of just 3.2 percent of North Dakota's workers.

By comparison, about 7.1 percent of Idaho’s hourly workforce earned wages at or below the federal rate last year, second only to Tennessee.

Idaho experienced structural changes in its economy after seeing jobs in the timber and mining industry disappear in the 1980s, said Bob Fick, a state labor department spokesman. Agriculture helps prop up its economy. But unlike neighboring states, Idaho hasn’t benefited from an oil boom.

“The challenge is to try and attract jobs that pay better than what has been generated in the initial years of the recovery,” Fick said.

A group known as Raise Idaho is petitioning voters for a ballot initiative that would incrementally increase the rate to $9.80 per hour. In Tennessee, a proposed House bill establishes a state minimum wage of $8.25 an hour for employers not providing health benefits.

When minimum-wage hikes initially go into effect, the number of workers earning the new hourly rate jumps. Then, over time, fewer and fewer earn at or less than the minimum wage.

The share of these hourly workers in Texas, for example, was 6.4 percent last year, down from 7.5 percent in 2012 and 8 percent in 2011.

Cheryl Abbot, a Dallas-based regional economist with the Labor Department, said she would feel concerned if the state's share of minimum-wage workers failed to drop. That fact that it declined is a sign that most of the jobs Texas’ economy generated pay better than the federal minimum wage, she said.

Nationally, the share of minimum-wage workers has followed a downward path since the last federal rate increase in July 2009. The number of workers earning the federal minimum should continue to fall if the economy recovers, regardless of whether Congress pushes through any legislation.

State Data

The following table lists hourly workers earning wages at or below the federal minimum wage of $7.25 per hour. Hourly earnings do not include overtime pay, commissions, or tips. Totals represent 2013 annual averages and do not include self-employed workers.

Source: Current Population Survey, 2013 Annual Averages

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