The Cities with the Highest (and Lowest) Real Minimum Wage

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Over the past several years, cities such as Seattle, San Francisco and Los Angeles have opted to enact their own minimum wage laws in lieu of increases at the state or federal level. Part of the logic behind these increases is that living costs in cities are higher, making it harder to survive on a low income. An hourly wage that may be adequate to pay for basic expenses like housing and food in rural areas may fall short for people who live within city limits.

So which cities have the highest minimum wage in terms of purchasing power (that is, adjusted for the cost of living)? And, conversely, where does this “real” minimum wage fall short?

Data & Methodology

To answer those questions, SmartAsset collected data on state and city minimum wages from around the country. Then, for 141 of the largest cities in the U.S., we adjusted the applicable local minimum wage according to the local cost of living.1In our initial analysis, we used the current minimum wage (as of August 2015) in each city. For cities and states that differentiate between large and small employers, we used the large employer wage.

For example, in Seattle the current large-employer minimum wage is $11 per hour and the cost of living is over 20% higher than the national average. Thus, in terms of purchasing power, the minimum wage in Seattle is about $8.38. That is the “real” minimum wage. It ranks as the 37th highest of the cities we examined.

Since many cities and states have enacted legislation that calls for regular increases in the minimum wage over the next several years, we also wanted to see where things will stand once those increase schedules are complete. We applied the same cost of living analysis to every city’s future maximum rate (or the current rate for cities where no increases are scheduled) and re-ranked according to these future rates.2

Key Findings

It’s good to live in Eastern Washington. The three cities with the highest real minimum wage are all located in the eastern half of Washington State. The Evergreen State has had the highest state-level minimum wage for nearly two decades and cities in the sunny eastern half of the state have relatively low living costs.

Albuquerque’s wage pays off. Albuquerque was one of the first major cities to enact its own minimum wage law. It is the only city with its own minimum wage to rank in the top ten of our study.

The Northeast is falling behind. Five of the ten cities with the lowest real minimum wage are located in the Northeast: Philadelphia, Stamford, Boston, Newark and Portland (Maine). Furthermore, while most low-wage West Coast cities are planning future wage increases (see Anchorage and Los Angeles, for example), these northeast cities have no such plans in the works (although state-level increases are planned in Connecticut and Massachusetts).

Top 10 Cities with the Highest Real Minimum Wage

Kennewick, WashingtonKennewick is the largest of the cities located in Eastern Washington’s Tri-Cities region. Along with Pasco and Richland (the other two), it may be the very best city in the country for workers who are living on the minimum wage.

There are two reasons for that. The first is that Washington State has the highest minimum wage of any U.S. state, at $9.47 an hour. Meanwhile, the Tri-Cities area has the lowest cost of living of any major metro in Washington, with living expenses 5.5% lower than the national average. Thus, workers in Kennewick enjoy a real minimum wage closer to $10.02 per hour.

Spokane, Washington

For the second-ranked city in our study we head about 140 miles northeast to Spokane, the largest city in Eastern Washington. The cost of living in the Lilac City is about 3.7% below the national average. That makes it a little easier for workers living on Washington’s $9.47 minimum wage to afford basic expenses like rent and health insurance.

Yakima, Washington

The Yakima Valley produces a significant portion of the nation’s apples and hops and the city of Yakima is the region’s economic hub. Minimum wage workers in Yakima earn $9.47 an hour, but when considering the city’s slightly lower-than-average living costs that is equal to $9.69 in purchasing power. That’s the third highest real minimum wage in the country.

Pueblo, Colorado

The Colorado Constitution (Article XVIII, Section 15) requires that the state’s minimum wage is adjusted annually for inflation. That ensures that if living costs rise, wages paid to low-income workers do too. While many major cities in Colorado have above-average living expenses, the cost of living in Pueblo is 14% below the national average. That means the state’s $8.23 minimum wage goes a lot further.

Albuquerque, New Mexico

Albuquerque was the first major U.S. city to enact its own minimum wage law. The ordinance was passed in 2006 and called for regular minimum wage increases up to January 2013, when it would reach $8.50 per hour. Thereafter, the wage would be annually adjusted based on changes in the Consumer Price Index. Today, the city’s minimum wage is $8.75.

Unlike other cities that have recently added their own minimum wage, such as Seattle and San Francisco, the cost of living in Albuquerque is not especially high. In fact, the cost of living in Albuquerque is about 7% lower than the national average. That means that in terms of purchasing power the city’s $8.75 minimum wage is closer to $9.45.

Kalamazoo, Michigan

In 2014, Michigan lawmakers passed legislation that will gradually increase the minimum wage to $9.25 from its previously level of $7.40. The first of those increases took place on Labor Day of last year, with the wage rising to its current rate of $8.15. Future increases will take place on the first day of the year through 2018, when it will reach its maximum and be tied to inflation. That’s great news for Kalamazoo workers, who face the lowest cost of living of any major Michigan city.

Decatur, Illinois

The Illinois state minimum wage is $8.25 per hour, 14th highest in the country. Earlier this year, the Illinois state Senate passed a bill that would increase that wage to $11 but that bill has yet to pass the state house. If that bill does pass, Decatur may well one day have the highest real minimum wage in the country. Even without that increase, minimum wage workers in Decatur, where the cost of living is 11.3% lower than the national, are earning a cost-of-living-adjusted wage of about $9.30 per hour.

Springfield, Illinois

Since the city of Springfield does not have its own minimum wage, workers in the Illinois capital are paid the state minimum of $8.25. Yet, after adjusting for cost of living, that wage goes farther than the minimum wage in one Illinois city that has passed its own minimum wage law. Chicago’s $10 per hour minimum wage has a purchasing power of $8.74, while the purchasing power of the state minimum wage in Springfield is closer to $9.26.

Buffalo, New York

The current minimum wage in New York is $8.75 per hour. That is the 10th highest minimum wage in the country. For full time workers it adds up to an annual income of $18,200. That’s a fraction of what it costs to afford basics like housing and healthcare in New York City, but it goes a lot further in Buffalo. After adjusting for the city’s cost of living, the purchasing power of the minimum wage in Buffalo is $9.21. That’s good for an annual income of about $19,150.

Tacoma, Washington

SmartAsset’s analysis found that the purchasing power of the minimum wage in Tacoma is $9.17. That’s slightly lower than the nominal minimum wage ($9.47 per hour, the state rate) as Tacoma’s cost of living is about 3% higher than the national average. Yet, it still ranks as the tenth highest in the country and it soon may rise even higher than that.

In November, Tacoma residents will cast their votes for a ballot initiative to increase the city’s minimum wage to $15 per hour, following in the footsteps of nearby Seattle and SeaTac. If that initiative passes, Tacoma would likely have the highest cost-of-living-adjusted minimum wage in the U.S.

Top 10 Cities with the Lowest Real Minimum Wage

Philadelphia, PennsylvaniaThe minimum wage in Pennsylvania is $7.25, equal to the federal minimum wage. In Philadelphia, where the cost of living is nearly 20% higher than the national average, that hourly minimum has a purchasing power of just $6.12. That’s the lowest of any city in our study and its equal to an annual income of about $12,730.

Stamford, Connecticut

While Connecticut’s minimum wage ranks as the fourth highest in the country at $9.15 an hour, that is not enough to overcome the high cost of living in Stamford. According to the Council for Community and Economic Research, living expenses in Stamford are 45.9% higher than the national average. Thus, the real minimum wage in Stamford is closer to $6.27 an hour.

Boston, Massachusetts

According to rentjungle.com, the average rent on a one bedroom apartment in Boston is $2,085. At the state minimum wage of $9 per hour, a worker would need to work about 58 hours per week in order to pay that average rent.

Even if a full-time minimum wage worker were able to find an apartment at half that rate, she would need to spend over 70% of her income on rent alone. (Owning a home would be out of the question.) There is relief coming, however. The Massachusetts minimum wage will be increasing to $11 an hour over the next two years.

San Diego, California

San Diego has been on something of a minimum wage roller coaster in recent years. Following two city council votes, a mayoral veto and a last-minute signature petition drive, San Diego will have to wait until June 2016 to decide once and for all whether or not its minimum wage will increase to $11.50 an hour.

In the meantime, workers will continue to earn the state minimum wage. It is currently set at $9.00 an hour and will increase to $10 an hour in 2016. Even that number may change, however. The California State Senate recently approved a bill that would increase the state minimum to $13 an hour.

All of which is good news for minimum wage workers in San Diego. Given the city’s high cost of living, the purchasing power of the current minimum wage is just $6.63 an hour, fourth lowest of any city in SmartAsset’s study.

Newark, New Jersey

The minimum wage in New Jersey is chained to the Consumer Price Index, which means that when the cost of living in the state increases, so does the minimum wage. The current minimum wage in the Garden State is $8.38 an hour, 13th highest in the U.S. Yet, in Newark, where living costs exceed the national average by 25%, that wage has a purchasing power of just $6.67.

Portland, Maine

In July of this year, the Portland City Council voted to approve a citywide minimum wage of $10.10 in 2016, which will increase to $10.68 in 2017. When that happens, Portland’s cost-of-living-adjusted minimum wage will jump from the sixth lowest in the country to the 12th highest.

Los Angeles, California

Los Angeles is one of several cities that has adopted a plan to eventually increase the city minimum wage to $15 an hour. That increase will be implemented over the course of five years beginning in 2016 when the wage will rise to $10.50. In the meantime, minimum-wage workers will continue to face some of the highest living costs in the country, which reduce the purchasing power of the current $9 an hour minimum wage to $6.75.

Anchorage, Alaska

Anchorage does not have its own minimum wage, which means the statewide minimum wage applies. The Alaska minimum wage is currently $8.75 but is set to rise to $9.75 in 2016. It also bears mentioning that permanent Alaska residents benefit from a state tax system that pays out annual dividend checks, often exceeding $1,000, just for living in the state.

Madison, Wisconsin

Cities and other local governments in Wisconsin are specifically prohibited from enacting minimum wage laws that differ from the state minimum of $7.25.

That means that if voters or legislators in Madison wanted to increase the city’s minimum wage, they could not. Indeed, a 2014 ballot measure in Dane County (in which Madison is located) called for the state to increase the minimum wage to $10.10. It passed with over 70% of the vote.

Flagstaff, Arizona

Like Wisconsin, Arizona has a law that prevents local governments from enacting their own minimum wage laws. Recently, a group of Flagstaff residents challenged that law in the courts, citing Flagstaff’s high cost of living.

Our analysis confirms that minimum wage workers in Flagstaff earn significantly less – in terms of purchasing power – than those elsewhere in the state. The cost-of-living-adjusted minimum wage in Flagstaff is $6.81, as compared with $8.31 in Tucson and $8.41 in Phoenix.

The Real Minimum Wage in 2020

Many of the cities and states listed above have scheduled major minimum wage increases in coming years. With that in mind, SmartAsset wanted to see where things will stand when the dust settles. Assuming no further changes in city, state or federal minimum wage laws and assuming no changes in the cost of living in any of these cities (two major assumptions, we know), here are the Top Ten Cities with the Highest Real Minimum Wage for the year 2020.

Top 10 Cities with the Highest Real Minimum Wage in 2020

Photo credit: ©iStock.com/tillsonburg

1. Cost of living data comes from the Council for Community and Economic Research.
2. This portion of the analyses is inherently flawed, as the cost of living in all of these cities is sure to change over the next several years, especially given the changing wages.

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Superior Court Judge Upholds Labor Commissioner’s Decision That Truck Driver Was Misclassified as Independent Contractor: Driver to Receive Nearly $180,000 in Back Wages and Expenses

Los Angeles—A Superior Court judge last week sided with the Labor Commissioner’s Office in finding that a Los Angeles trucking company misclassified an employee as an independent contractor. The court affirmed that Laca Express Inc. owes driver Ho Woo Lee $179,390 in back wages and expenses unlawfully deducted from his paycheck.

“The Labor Commissioner determines the employment status of an individual based on the facts of each case,” said Christine Baker, Director of the Department of Industrial Relations (DIR.) “This decision shows the laws are in place to ensure that workers are properly classified.” The Division of Labor Standards Enforcement, also called the Labor Commissioner’s Office, is a division of DIR.

In his December 2012 claim filed with the Los Angeles Labor Commissioner’s office, Lee said Laca Express unlawfully deducted $83,292 from his paycheck in violation of Labor Code section 221. Lee’s claim included more than $80,000 in weekly lease and insurance payments that were deducted from his paycheck for a truck that Laca repossessed after terminating Lee’s employment. The Labor Commissioner’s Office issued an Order, Decision or Award (ODA) in Lee’s favor for $161,205.

Laca appealed the ODA, and the Labor Commissioner’s Office represented Lee in the Los Angeles Superior Court case. Judge Ross Klein determined that Lee was owed $179,390 plus costs and attorney’s fees for unlawfully deducted wages, reimbursable expenses (such as fuel and truck repair costs), interest and penalties.

“Judge Klein’s ruling will go a long way toward making Mr. Lee whole for the unlawful behavior of Laca Express,” said Labor Commissioner Julie A. Su. “The judgment will also serve as a deterrent to wrongful misclassification of workers and other forms of wage theft.”

DIR News Release No.: 2015-62
Date: July 7, 2015

Labor Commissioner Cites Grocery Chain El Super More Than $180,000 for Wage Theft Violations

El Super

Los Angeles—California Labor Commissioner Julie A. Su this week cited Paramount-based El Super grocery store chain for multiple wage theft violations, with assessments and penalties totaling $180,668. The chain of 43 markets is owned and operated by Bodega Latin, Inc., with 15 locations in Los Angeles.

The investigation revealed that El Super denied rest and meal periods, and failed to pay overtime wages for 20 workers at 10 of El Super’s Los Angeles markets.

“California labor laws are clear regarding rest periods and overtime requirements. Employees must be compensated for the hours they work and the benefits they earn,” said Christine Baker, Director of the Department of Industrial Relations (DIR). The Labor Commissioner’s Office is a division of DIR.

Investigators gathered evidence using payroll records audits and worker interviews. The evidence indicated rest and meal period violations as well as overtime premiums owed between June 17, 2012 and June 6, 2015 for all of the workers interviewed. Some employees worked an average of 55 hours per week but were paid for only 40 hours without overtime. Workers were forced to clock out for meal breaks but ordered to return to work without taking their full meal period. In some cases, workers were not allowed to take rest breaks.

Bodega Latin, Inc. was assessed $3,557 in minimum wages and an equal amount in liquidated damages, $44,463 in overtime wages, $93,228 in rest period premiums, $19,903 in meal period premiums, $8,161 in waiting time penalties and $7,800 in rest period penalties.  Bodega must also reimburse its staff at the 10 locations $101,084 for illegal uniform deductions documented during the audit.

“This citation is an expensive reminder to employers who are depriving workers of their hard-earned wages,” said Labor Commissioner Julie A. Su.

Many of the wage violations were documented in off-site interviews with the El Super workers.

“Workers often do not know their rights and fear losing their jobs for complaining about wage theft,” said Su.  “It is important that workers exercise their labor rights by contacting us if they have been victimized by wage theft – and we can help workers to feel safe by offering off-site interviews where they can speak without their employer watching.”

The Labor Commissioner’s Office, formally known as the Division of Labor Standards Enforcement, inspects workplaces for wage and hour violations, adjudicates wage claims, enforces prevailing wage rates and apprenticeship standards in public works projects, investigates retaliation and whistleblower complaints, issues licenses and registrations for businesses, and educates the public on labor laws. Updated information on California labor laws is available online.

The Wage Theft is a Crime public awareness campaign, launched last year by DIR and its Labor Commissioner’s Office, has helped inform workers of their rights. The campaign includes multilingual print and outdoor advertising as well as radio commercials on ethnic stations in English, Spanish, Chinese, Vietnamese, Hmong and Tagalog.

Employees with work-related questions or complaints may contact DIR’s Call Center in English or Spanish at 844-LABOR-DIR (844-522-6734). The California Workers’ Information line at 866-924-9757 also offers recorded information in English and Spanish on a variety of work-related topics.

Members of the press may contact Erika Monterroza or Peter Melton at (510) 286-1161 for additional details.

CA DIR News Release No.: 2015-61                                      Date: July 3, 2015