With inflation running rampant, it’s easy to forget the changes the state’s minimum wage that will continue to roll out. Ever since the passage of the wage hikes a few years ago, employers have been dealing with $1 increases each year.
On July 1, 2022, the minimum wage per hour will increase to $14/hour. Next year, on June 1, 2023, the minimum wage will go up yet again to $15/hour.
What was overlooked when the law was first passed is that the state built in additional increases to the minimum wage each year automatically. Since inflation was relatively tame, not much was mentioned about it.
But effective January 1, 2024 — and each year thereafter — minimum wage is tied to the employment cost index, or its successor index, for wages and salaries for all civilian workers — as defined by the United States Department of Labor – as of June 30 of 2023 (or each June 30th thereafter).
According to the USDOL, the Employment Cost Index (ECI) measures the change in the cost of labor, free from the influence of employment shifts among occupations and industries. And not surprisingly, it tracks with inflationary pressures as well.
So what might that look like? Well for the 12 month period ending March 2022, wages and salaries increased 4.7 percent according to the latest ECI survey. Over the prior year, the increase was more muted at 2.7 percent.
Thus, if the ECI were to be the same as of June 30, 2023 – what would that mean to the minimum wage? A 4.7 percent increase translates to a 70.5 cent increase to the minimum wage making the potential new minimum wage on January 1, 2024 at $15.70.
If inflation were to slow and the ECI came back down to 2021 levels of 2.7 percent, the increase would be more modest at 40.5 cents (or $15.40/hour).
All of which is to say that employers will have significant pressures on costs not just this year or next, but just six months after that in January 1, 2024.
For those beginning the budgeting process, these significant increases will need to be factored into planning. Otherwise, employers need to be aware of the increases that go into effect in just 9 days.