Cost of Living Matters More Than Minimum Wage


NCPA Analysis Shows Impact on Purchasing Power Varies Widely

DALLAS (September 1, 2005) – Consumer prices, especially for gasoline, are rising faster than workers' wages, but because of differences in cost of living, raising the minimum wage would have a vastly different impact from city to city, according to an analysis released today by the National Center for Policy Analysis (NCPA).

"Because cost of living varies widely across the country, increasing the minimum wage has widely different effects on different workers," said NCPA Senior Fellow William Conerly.

The NCPA analysis of 50 metropolitan areas concluded that federal, state and city minimum wages result in differences in purchasing power. For example:

  • The $5.15 federally mandated minimum wage buys $5.92 worth of goods in Lubbock, Texas, but only $2.84 in San Francisco.
  • The minimum wage buys only $3.69 worth of goods in New York City and $4.28 in Philadelphia.

Moreover, 12 states have enacted minimum wages higher than the national average, and a few cities have an even higher local minimum wage. But the purchasing power of these higher minimum wages is still less than the adjusted federal minimum wage in lower-cost areas. For example:

  • The state minimum wage in Connecticut is $7.10, but adjusted for the cost of living in Hartford, it shrinks to $5.83, lower than Lubbock, Texas's adjusted wage of $5.92.
  • In San Francisco, the city-wide minimum wage of $8.50 drops to $4.68 when adjusted for the cost of living, placing it among the bottom 10 metro areas.
  • The adjusted minimum wage in 13 other cities remains below the federal mandate, including New York City, Honolulu, Washington, D.C., Boston, San Diego, Chicago, Los Angeles and Philadelphia.

In addition, of the 11 metropolitan areas with minimum wages above the federal minimum, all have a higher than average cost of living.

The NCPA analysis also found that a mandated minimum wage disproportionately affects younger and less educated workers. For example:

  • Fewer than 3 percent of hourly workers earn the minimum wage or less, and the bulk of them are under 25 with limited education.
  • Of the minimum wage workers are younger than 25, one-fourth are between the ages of 16 and 19.

"Adjusting the minimum wage, whether on the city, state or federal level, is foolish because of the wide variation in cost of living," Conerly added. "And its effect on poverty is minimal."

 
2004 Minimum Wage
Minimum Wage
Adjusted for COL
(2nd Quarter 2004)
Portland, OR
$ 7.05
$ 6.55
Seattle, WA
$ 7.16
$ 6.06
Lubbock, TX
$ 5.15
$ 5.92
Beaumon-Pt. Arthur, Tx
$ 5.15
$ 5.87
Hartford, CT
$ 7.10
$ 5.83
Memphis, TN-AR-MS
$ 5.15
$ 5.80
Longview, TX
$ 5.15
$ 5.80
Augusta, GA
$ 5.15
$ 5.70
Texarkana, TX
$ 5.15
$ 5.67
Houston, TX
$ 5.15
$ 5.65
Huntsville, AL
$ 5.15
$ 5.62
Ft. Worth, TX
$ 5.15
$ 5.62
El Paso, TX
$ 5.15
$ 5.59
Oklahoma City, OK
$ 5.15
$ 5.59
Minneapolis-St. Paul, MN
$ 5.15
$ 5.53
Louisville, KY
$ 6.15
$ 5.52
Cincinnati, OH
$ 5.15
$ 5.50
Jackson, MS
$ 5.15
$ 5.47
Dallas, TX
$ 5.15
$ 5.39
Kansas City, MO
$ 5.15
$ 5.36
Pittsburgh, PA
$ 5.15
$ 5.34
Grand Rapids, MI
$ 5.15
$ 5.32
San Antonio, TX
$ 5.15
$ 5.31
Boise, ID
$ 5.15
$ 5.29
Atlanta, GA
$ 5.15
$ 5.29
Austin, TX
$ 5.15
$ 5.28
Providence, RI
$ 6.75
$ 5.27
Raleigh, NC
$ 5.15
$ 5.26
Birmingham, AL
$ 5.15
$ 5.23
Charleston, SC
$ 5.15
$ 5.23
Orlando, FL
$ 5.15
$ 5.21
Phoenix, AZ
$ 5.15
$ 5.20
Tampa, FL
$ 5.15
$ 5.20
Buffalo, NY
$ 5.15
$ 5.18
Richmond, VA
$ 5.15
$ 5.16
Columbus, OH
$ 5.15
$ 5.15
St. Louis, MO
$ 5.15
$ 5.13
Cleveland, OH
$ 5.15
$ 5.09
Albuquerque, NM
$ 5.15
$ 5.03
Denver, CO
$ 5.15
$ 4.92
Boston, MA
$ 6.75
$ 4.92
Washington, DC
$ 6.15
$ 4.77
San Diego, CA
$ 6.78
$ 4.72
San Francisco, CA
$ 8.50
$ 4.68
Miami, FL
$ 5.15
$ 4.59
Los Angeles, CA
$ 6.75
$ 4.29
Philadelphia, PA
$ 5.15
$ 4.28
Chicago, IL
$ 5.50
$ 4.20
Honolulu, HI
$ 6.25
$ 3.72
New York City
$ 5.15
$ 3.69

*Minimum wages and Cost of Living data reflect 2004 data. States or cities that passed minimum wages for 2005 are not included.