Anyone who has ever worked a minimum-wage job knows how tough it can be to stretch those dollars. In some cities and states, the minimum wage goes further than in others, though. The places with the highest statutory minimum wage aren’t necessarily the places where the minimum wage goes furthest. We crunched the numbers to find the places with the highest and lowest real minimum wage.
This is SmartAsset’s second annual study of the cities with the highest and lowest real minimum wage. Check out the 2015 rankings here.
What does the “real” minimum wage mean? In this case, “real” means adjusted for cost of living. Our study took minimum wage data from a variety of sources to compile the minimum wage laws across all 50 states and the cities that have enacted their own minimum wage ordinances. We then pulled city cost of living index data from the Council for Community and Economic Research (C2ER).
For each city with cost of living data we took the higher of either the state minimum wage or that city’s minimum wage (if applicable). We used the formula statutory minimum wage/(cost of living index/100) to get each city’s adjusted minimum wage. We then ranked each city based on its adjusted minimum wage. The cities with the 10 highest and lowest adjusted minimum wages are in the charts below.
- Washington has it figured out. Four cities on our top 10 list are in Washington state. Only one of them (Tacoma) has adopted a city minimum wage ordinance that’s higher than the state minimum. For the other three cities, the state minimum wage of $9.47, combined with the reasonable cost of living in those cities, makes for a real minimum wage high enough to make our top 10.
- Minimum wage changes have an immediate effect. This year’s top 10 list includes two cities that weren’t on last year’s top 10 list. Why? Because the state of Nebraska adjusted its minimum wage law. That adjustment was enough to win two Nebraska cities a spot on our list of the cities with the highest real minimum wage. Similarly, Anchorage, Alaska dropped off our list of the cities with the lowest real minimum wage after the state of Alaska raised the minimum wage from $8.75 to $9.75.
- Minimum wage laws are under fire. Two cities, Montgomery, Alabama and Kansas City, Missouri, would also have been strong contenders for our top 10 list, but their city-level minimum wage laws were contested by the state legislatures of Alabama and Missouri and the legal battle over whether cities can adopt minimum wages that are higher than the state standard is ongoing. One of the cities with the lowest real minimum wage (Madison, Wisconsin) tried to raise its minimum wage, but the state legislature voided the minimum wage hike that local voters had approved.
- States and cities need to keep up with the times. Two of the cities in our study with the lowest real minimum wage have statutory minimum wages that are quite high by current standards. But Stamford, Connecticut’s minimum wage of $9.60 and Boston’s minimum wage of $10 still aren’t enough to offset the high cost of living in those cities.
1. Kennewick, WA
Once again Kennewick, Washington takes top honors as the city in our study with the highest real minimum wage. Located in southeastern Washington, Kennewick is part of the Tri-Cities urban cluster, along with Pasco and Richland. Kennewick’s below-average cost of living and the high Washington state minimum wage earned it top honors in our study.
2. Kalamazoo, MI
Since SmartAsset’s 2015 study, the minimum wage in Michigan has increased from $8.15 to $8.50. As a result of this increase and Kalamazoo’s below-average cost of living, Kalamazoo has climbed in our ranking and now claims the #2 spot for the city with the second-highest real minimum wage. In January of 2017 Michigan’s minimum wage will climb again, to $8.90, and in January of 2018 the rate will rise to $9.25. However, a 2015 bill signed into law by Governor Rick Snyder prohibits municipalities from setting local minimum wages above the state minimum.
3. Spokane, WA
Spokane is another city in Eastern Washington that boasts a below-average cost of living and benefits from Washington’s high state minimum wage of $9.47. Though winters in Spokane can be gloomy, the city has a lot going for it.
4. Lincoln, NE
In 2015 Nebraska’s minimum wage jumped from $7.25 (the federal minimum) to $8. Then, on January 1, 2016 Nebraska’s minimum wage rose again, to $9. That helped Lincoln and Omaha break into the top 10 cities with the highest real minimum wage this year. The minimum wage increase passed by a 59.5% – 40.5% vote on a ballot initiative in 2014.
5. Omaha, NE
Omaha is another Nebraska city that has benefited from the statewide minimum wage increase. Omaha’s cost of living is a 91 on the C2ER’s index, where 100 is the average. That gives Omaha an adjusted minimum wage of $9.86. Before the 2014 ballot initiative that set Nebraska’s minimum wage hike in motion, Nebraska had never had a state minimum wage that exceeded the federal minimum.
6. Tacoma, WA
Tacoma went above and beyond Washington’s state minimum wage of $9.47, adopting a citywide statutory minimum wage of $10.35. But because Tacoma’s cost of living is higher than average (105 on the cost of living index), its real minimum wage is still lower than in Kennewick and Spokane. It’s also worth noting that the real minimum wage in Tacoma ($9.86) is lower than the statutory minimum wage. The only other city on our list where this is true is Bakersfield, California.
7. Yakima, WA
The $9.47 statutory minimum wage in Yakima becomes $9.85 when you adjust for the city’s below-average cost of living. That’s good news for Yakima, located in the agricultural heartland of the Yakima Valley. According to the Greater Yakima Chamber of Commerce, Yakima’s main employer is the Yakima Valley Memorial Hospital.
8. Pueblo, CO
Colorado’s state constitution mandates annual adjustments for inflation to the state’s minimum wage. That helped Pueblo, with a cost of living index of 85 compared to an average of 100, crack our top 10 list. Though Pueblo’s statutory minimum wage of $8.31 is the lowest on our list, the low cost of living translates to an adjusted minimum wage of $9.71.
9. Buffalo, NY
Currently, New York’s statewide minimum wage is $9. Adjusting for Buffalo’s low cost of living gets you a real minimum wage of $9.44. Expect that number to rise next year, however. New York Governor Andrew Cuomo signed into law a gradual state minimum wage hike that will eventually reach $15. The pace of the increase varies by location, with the fastest increase slated for New York City and the slowest increase in upstate New York.
10. Bakersfield, CA
California’s statewide $10 minimum wage doesn’t go very far in expensive cities like San Francisco, but in Bakersfield it goes much further. The low cost of living in Bakersfield leads to an adjusted minimum wage of $9.37. Bakersfield and Tacoma are the only cities on our top 10 list where the adjusted minimum wage is lower than the statutory minimum wage.
Related Article: The Cost of Living in California
1. Honolulu, HI
Honolulu is a notoriously expensive city in a very expensive state. Its cost of living index? 188, compared to a national average indexed at 100. The minimum wage is $8.50, which despite being $1.25 higher than the federal minimum wage doesn’t go too far in Honolulu. The real minimum wage in Honolulu is just $4.52.
2. Philadelphia, PA
Philadelphia’s minimum wage is the same as the federal minimum wage, $7.25. That doesn’t go very far in the expensive city, which has a cost of living index of 119.5. Municipalities in Pennsylvania are prohibited from setting their own, higher minimum wages, except for workers on city contracts (which the mayor of Pittsburgh has done). Efforts to raise the state’s minimum wage through the legislature have failed, but the Pennsylvania Governor raised the minimum wage to $10.15 for state government employees and workers on jobs contracted by the state.
3. Manchester, NH
Manchester is another city that defaults to the federal minimum wage. In affordable rural areas it may be a little easier to get by on that wage than in Manchester, which has an above-average cost of living. Adjusted for cost of living, the real minimum wage in Manchester is just $6.13. In February 2016 the New Hampshire Senate voted down a bill that would have raised the state’s minimum wage to $12 an hour.
4. Stamford, CT
Connecticut’s minimum wage is $9.60, which is one of the highest in the nation. Still, the high cost of living means that $9.60 minimum wage doesn’t stretch that far. The real minimum wage in Stamford, which has a cost of living index of 146.9, is just $6.13. By 2017, Connecticut’s minimum wage will be $10.10.
5. Newark, NJ
The poverty rate in Newark is notoriously high, and a recent SmartAsset study found that Newark has the highest percentage of residents spending 50% or more of household income on housing costs. When you adjust for a cost of living index of 126.6, Newark’s statutory minimum wage of $8.38 translates to a real minimum wage of just $6.62.
6. Flagstaff, AZ
The statutory minimum wage in Arizona is $8.05, but the cost of living index in Flagstaff is 116.4. Adjusted for cost of living, the real minimum wage in Flagstaff is $6.92. In his January 2016 State of the State speech Arizona Governor Doug Ducey threatened to withhold state revenue from any cities or counties that raise their minimum wage beyond the $8.05 state minimum. Still, Flagstaff residents may see a proposal to raise the local minimum wage on their ballots this November.
7. Boston, MA
Massachusetts has a minimum wage of $10, which puts it on par with California’s current minimum wage (set to rise to $15 eventually). But because the cost of living in Boston is so high, that $10 minimum wage translates to a real minimum wage of just $6.93. On January 1, 2016 the Massachusetts minimum wage will rise to $11, and talk of a $15 minimum has already begun.
8. Madison, WI
Back in 2014, voters in Dane County, Wisconsin (where Madison is located) approved a ballot initiative increasing the county minimum wage to $10.10. However, the state legislature quashed the measure by passing a law forbidding cities and counties from passing minimum wages that exceeded the state minimum wage. That led to a campaign to increase Wisconsin’s state minimum wage to $10.10 or $15, but the campaign was unsuccessful. Madison’s real minimum wage is now just $6.94.
9. Fort Lauderdale, FL
The minimum wage in Florida is $8.05 and Fort Lauderdale doesn’t have a city-level minimum wage. When adjusted for Fort Lauderdale’s cost of living index of 114.2, the real minimum wage in Fort Lauderdale is $7.05. However, employees of companies that have service contracts with the government of Broward County, where Fort Lauderdale is located, must be paid a living wage of $11.84 with benefits or $13.38 without benefits.
10. Fort Worth, TX
Texas is another state that defaults to the federal minimum wage of $7.25. Because the cost of living in Fort Worth is above average (102.8) the real minimum wage in the city is $7.05. Texas has also passed so-called “local preemption” laws that prohibit cities from passing minimum wage laws that push the minimum wage higher than the state minimum.
To find the cities with the highest and lowest real minimum wage SmartAsset pulled minimum wage data for cities and states from a variety of sources, including the UC Berkeley Labor Center’s Inventory of U.S. City and County Minimum Wage Ordinances and the National Conference of State Legislatures. Some states have a different, higher minimum wage for larger companies. In those cases, we used the lowest minimum wage in the state (i.e. the one that applies to small businesses).
Our cost of living data was the 2015 annual average Cost of Living Index from the Council for Community and Economic Research (C2ER).
To get our rankings we took each of the cities for which a cost of living index appeared in the C2ER’s data set. We pulled each city’s statutory minimum wage, whether it was a city-, county- or state-level minimum. We used the formula statutory minimum wage/(cost of living index/100) to get each city’s adjusted minimum wage.
Finally, we ranked each city based on its adjusted minimum wage, a.k.a the real minimum wage in that city. The 10 cities with the highest and lowest real minimum wage made the charts above.
Questions about our study? Contact firstname.lastname@example.org.
Photo credit: ©iStock.com/RiverNorthPhotography