For nearly 20 years, the federal minimum wage has remained the same in the United States: $7.25 per hour. As many labor movements and workers have emphasized, such a pay rate does not represent a living wage today, leading to calls for raising the mandated hourly wages that people earn.

In turn, many states raised the minimum wages for local workers. Today, 30 states require hourly pay rates higher than the federal minimum wage, often more than twice that level. In these areas, $15 per hour is the new standard, embraced in both traditionally high pay states like New York and New Jersey but also in conventionally more conservative states such as Arkansas and Florida. Even when state legislatures have failed to pass increases, voters ushered in new minimum wages for residents.

But these efforts and demands seemingly have become moot, because the market is taking care of the issue on its own. Even in places where retail employers legally can pay $7.25 per hour, realistically, they cannot. To recruit and retain workers in today’s tight labor markets, companies recognize that they need to sweeten the proverbial pot by paying their retail, food, and hospitality workers much more. As a result, only approximately 68,000 people nationwide earn the federal minimum wage—a dramatic decrease relative to the 400,000 workers who earned it in 2019, much less the approximately 2 million employees who earned it in 2007.

Although the increasing trend has existed for years, clearly, the COVID-19 pandemic intensified its steep slope. During the lockdown, companies willingly offered something like hazard pay to keep essential workers in stores. After stay-at-home mandates were lifted, the massive increase in consumer demand required retailers to increase their staffing levels. Demand was massive; supply was low. And thus, the cost for labor increased. In New Hampshire, as one example, in 2019, the 10th percentile wage level (i.e., not the minimum, but the level at which at least 90 percent of workers earn more) was $10. By 2022, it came close to $14.

These increases in pay arguably should mean substantial benefits for retailer workers and challenges for retail employers. But the reality has not quite matched this theoretical expectation. First, as consumer prices continue to rise dramatically, even $15 per hour can be insufficient to ensure a living wage that covers rising rents, food costs, and gas prices. Minimum wage workers, whatever that wage is, still struggle to keep up with their expenses. Second, many retailers seem resigned to and comfortable with the increases. In Pennsylvania for example, the retailers’ union accepted a bill that would raise the minimum wage from $7.25 to $15 without complaint, citing members’ acknowledgment that they already were paying that rate. Whereas in the past, retailers rejected pay mandates, today, they have gotten to that point before legislators, so they have no problem with the rule.

All these trends and attitudes clearly might shift if the labor market cools and labor supply begins to outpace demand. In that situation, retailers in states with $15 minimum wages might struggle to remain profitable; workers in states that continue to apply the outdated $7.25 wage might suffer a serious blow to their income. Thus regulatory standards might remain necessary to keep retailing valuable for all its members.

Discussion Questions

1. What should the federal minimum wage be, in your opinion?
2. Why have some states already established a higher minimum wage than the federal level, and why have others not updated their rates?

Sources: Ben Casselman and Lydia DePillis, “In a Hot Job Market, the Minimum Wage Becomes an Afterthought,” The New York Times, August 23, 2023