The federal minimum wage is $7.25 an hour, as of 2018, and it rose to that level in 2009. States can raise their minimums to above the federal limit as they see fit, which is something Massachusetts enacted in July 2018 as part of what it calls the "Grand Bargain."
What Massachusetts Did
Starting in January 2019, the minimum wage in Massachusetts goes up $1 per year for five years until it reaches $15 per hour. Tipped workers also see an increase to $6.75 per hour over five years. The move follows other states that offer minimums above $10 per hour, such as California, New York, Vermont and the state of Washington. Massachusetts also reformed its Sunday and holiday pay packages to be in line with other states that offer similar packages.
Massachusetts' law also offers a generous paid family leave benefit for parents to take care of children and a permanent two-day sales tax vacation to help consumers purchase goods and to boost retail sales. The state grants up to 12 weeks a year for employees to care for a family member or a new child and 20 weeks a year for a personal medical problem. The law also gives individuals up to 26 weeks to take care of an emergency relating to a military family member's deployment. Weekly benefits are based on the person's current income with a maximum payout of $850 a week.
How It Happened
Legislators in Massachusetts took months of negotiations to figure out how best to give workers a higher minimum wage. Employers are slow to increase wages and would rather offer benefits packages instead to keep labor costs lower. These benefits include flexible work schedules and development opportunities. Instead of waiting for the federal government to make changes, Massachusetts took the initiative and improved wages and benefits for workers on its own.
The move it also part of a tight labor market in 2018. More companies may see the need to increase wages to attract top talent as job openings become harder to fill. Retailers and fast food companies alike began raising their minimum wage in an effort to keep employees as competition for workers and dollars heats up.
Raising the federal minimum wage is a thorny political issue during major election cycles. Republicans and conservatives tend to think that raising wages would increase companies' costs and make the price of consumer goods go up to lead to inflation. Democrats favor higher wages for workers because it gives people more money to spend in a consumer-based economy, increases worker satisfaction and decreases turnover. Plus, higher wages for workers means more cumulative income taxes paid to states and more sales tax offers when it comes to higher consumer spending.
The full effects of Massachusetts' minimum wage increase have yet to be seen, but this increase certainly makes the state as competitive as some of its neighbors, like New York and Vermont, in terms of the highest starting wages for workers. Would you move to another state if it offered higher overall wages?
Photo courtesy of GoodJobsUpNorth at Flickr.com