As federal efforts to increase the minimum wage have stalled, many states and cities are paving the way to pay workers more than $7.25 an hour. On January 1, 2022, a total of 20 states raised their minimum wage, with the largest increases taking place in Virginia (from $9.50 to $11) and Delaware (from $9.25 to $10.50). Additionally, many cities and counties are implementing pay increases. According to findings from the National Employment Law Project, 35 cities and counties increased their minimum wage beginning 2022.
Given local minimum wage increases, SmartAsset took a closer look at how far the minimum wage goes in different cities, ranking cities according to their real minimum wage rather than their statutory minimum wage.
Data and Methodology
To find the cities with the highest and lowest real minimum wage, SmartAsset collected data on state and city minimum wages around the country, pulling data from minimumwage.com along with local city government websites. Then, for 79 of the largest cities in the U.S., we adjusted the applicable minimum wage according to the local cost of living, using data from the Council for Community and Economic Research.
For example, in New York City the minimum wage is $15 per hour, but the cost of living is 86.3% higher than the national average. Thus, in terms of purchasing power, the minimum wage in the Big Apple is $8.05. This is what we consider the “real” minimum wage.
In our analysis, we used the minimum wage as of January 1, 2022. In cases where cities differentiate between small and large employer minimum wage rates, we considered the minimum wage rate required for large employers. Additionally, for cities and states that distinguish between jobs offering health benefits and those not such as Washington’s Seattle, we used the minimum wage for jobs that do not offer qualifying health benefits.
- Only three cities have a real minimum wage exceeding $13. Minneapolis, Minnesota; Buffalo, New York and Denver, Colorado are the only cities we studied where the minimum wage purchasing power is upwards of $13 per hour. Assuming a 40-hour work week and 50 weeks worked per year, a real minimum wage of $13 per hour is equivalent to $26,000 annually.
- Texas cities fall behind. Three of the 10 cities with the lowest real minimum wage are in Texas. They include Plano, Dallas and Austin. All three cities follow the Texas minimum wage rate ($7.25 per hour) and have estimated costs of living higher than the national average. As a result, in terms of purchasing power, the minimum wage is $7.16 or less in all three cities.
Cities With the Highest Real Minimum Wage
1. Minneapolis, MN
At the beginning of 2022, the minimum wage in Minneapolis, Minnesota stood at $12.50 for all employees and $14.25 for workers employed by large employers. Using the $14.25 figure, we found that the real minimum wage in Minneapolis is $13.93, the highest in our study.
Notably, the minimum wage for large employers in Minneapolis is scheduled to increase further to $15 in July 2022. This would mean an even higher real minimum wage of $14.66.
2. Buffalo, NY
With the exceptions of New York City, Long Island and Westchester, the statutory minimum wage in New York state is $13.20. This figure is almost twice as high as the federally mandated minimum wage ($7.25).
Between a statutory minimum wage of $13.20 and an affordable cost of living, we estimate that the real minimum wage in Buffalo, New York is $13.87. This amounts to $27,731 annually, assuming a 40-hour work week and 50 weeks worked per year.
3. Denver, CO
Denver, Colorado has the third-highest statutory minimum wage of all 79 cities in our study, at $15.87. The only cities with higher statutory minimum wages are Seattle, Washington ($17.27) and San Francisco ($16.32). Thus, though the cost of living in Denver is about 14% higher than the national average, the real minimum wage is $13.84.
4. St. Louis, MO
With an $11.15 minimum wage and a cost of living lower than the national average, St. Louis, Missouri ranks fourth in our study for its real minimum wage of $12.71. This amounts to a real annual minimum wage of $25,420 (assuming a 40-hour work week and 50 weeks worked per year).
5. Tucson, AZ
Tucson, Arizona ranks as the fifth city with the highest real minimum wage. Beginning January 1, 2022, the state of Arizona raised its minimum wage to $12.80 per hour, from $12.15 per hour in 2021. With that increase and a cost of living only 2.4% higher than the national average, the real minimum wage in Tucson is $12.50.
Cities With the Lowest Real Minimum Wage
1. Honolulu, HI
Hawaii’s minimum wage is nearly three dollars higher than the federal minimum wage, at $10.10. However, with an estimated cost of living that is about 85% higher than the national average, the real minimum wage in the Aloha State’s capital – Honolulu – is the lowest in our study, at $5.44. This amounts to a real annual salary of less than $10,900.
2. Plano, TX
Texas is one of 21 states with a $7.25 minimum wage. The cost of living in Plano, a city in north Texas, is 12.1% higher than the national average. This means that the real minimum wage is $6.47, second-lowest across the 79 cities we compared.
3. New Orleans, LA
Like Texas, Louisiana’s state minimum wage rate is $7.25 per hour. Combined with a cost of living that is almost 11% higher than the national average, the real minimum wage in New Orleans is $6.54. This makes the real annual salary less than $13,100.
4. Philadelphia, PA
The minimum wage in Pennsylvania is $7.25, equal to the federal minimum wage. In Philadelphia, where the cost of living is roughly 8% higher than the national average, that hourly minimum has a purchasing power of just $6.69.
5. Atlanta, GA
Atlanta, Georgia is the city with the fifth lowest real minimum wage. The statutory minimum wage is $7.25, which amounts to an annual salary of $14,500. The real minimum wage in Georgia’s state capital is lower – at $6.80 – given a higher cost of living than the national average.
Tips on Deciding Where to Live
- Calculate the true cost of living. Some cities in our study have a significantly higher or lower real minimum wage compared to their statutory minimum wage based on cost of living adjustments. If you want to have a better sense of how far your paycheck will go in different cities, check out our cost of living calculator. You can input where you currently live and where you’d like to move to compare the difference.
- Consider professional help. No matter where you live a financial advisor can help you make smarter financial decisions to be in better control of your money. Finding a qualified financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three financial advisors in your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
Questions about our study? Contact us at firstname.lastname@example.org
Photo credit: © iStock/GCShutter