Blue State Wage Hikes

President Trump likes to brag about the wage gains of average workers during his time in office. Indeed, the 1st quartile of workers (lowest earning 25%) have seen the greatest relative wage gains in the economy since 2018 with wages going up at 4.4% at present and outpacing the upper quartiles (according to the Atlanta FED Wage Growth Tracker). Trump likes to link his tax cuts to the wage gains for bottom tier workers. Unfortunately, the wage gains at bottom tier are not due to the tax cuts signed by Trump, but due to minimum wage laws enacted in many Democratically-leaning states (or as many in the US call them “Blue States” for the color “blue” associated with the Democrat Party). I compiled a list of all major states that have enacted minimum wage increases in the table below. This list covers 16 states which have a combined population of 171 million people, more than half of the total population of the United States. We have California, New York and Illinois on that list and even Florida which probably doesn’t strike anybody as a hard-core Blue State but nevertheless it is a state that mandates cost-of-living adjustments to the minimum wage (adjust the minimum wage according to the consumer price index). All major coastal states where majority of the US population lives is in this list. In those states, minimum wages are scheduled to rise on average 4% in 2018, 5.3% in 2019, 8.4% in 2020, 5.6% in 2021 and 5.2% in 2022. Many states have wages jumping $1 each year until the wage reaches $15 (modeled after Bernie Sanders’ legislation), other states have more modest increases, but in many situation at minimum cost-of-living adjustment increases are being made. Many other not-so blue states like Pennsylvania are also in the process of discussing and enacting minimum wage hikes. In the list below, I have listed only the states that have already passed minimum wage legislation (or in the case of Connecticut, legislation that will be signed imminently by a Democratic governor and legislature).

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In 2016, nobody expected Trump to win the Presidency. Most blue states had postponed minimum wage legislation on the assumption that Hillary Clinton would raise the federal minimum wage which hasn’t been updated since 2009. After the Trump win and with the White House blocking Bernie Sanders’ “Raise The Wage” legislation to raise federal minimum wage to $15 by 2024, Blue States took matters in their own hands and raised wages at the state level themselves. While it is true that Trump’s corporate tax cuts have allowed for minimum wage increases to occur in the economy so far without significant layoffs by major corporations, Trump can’t claim that his tax cuts are what propelled wage increases. The tax cuts by Bush in 2001 and 2003 clearly didn’t spike the relative increase in 1st quartile wages that we see today. Corporations will not raise wages unless they are forced to and it is naïve to think that with employment participation ratio still at 40 year lows, low-wage workers have any semblance of bargaining power. The relative increase of 1st quartile wages we see today can only be explained by activist legislation in the major Blue States. As much as Trump likes to brag about the economy, the lower to middle class prosperity we have observed so far is more due to the actions of state governments where legislatures are dominated by the Democratic Party.

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