NCPA - National Center for Policy Analysis


January 11, 2007

A proposed increase in the federal minimum wage from $5.15 per hour to $7.25 will have vastly different effects on workers and businesses depending on where people live, according to the National Center for Policy Analysis (NCPA).  The reason: because the cost of living varies so much, $7.25 will buy a lot more in some cities than it will in others.

The researchers also note that "red states" and "blue states" will be affected differently, which may explain the strong support for a higher minimum wage among blue state Democrats.  For example:

  • Most large cities on the east and west coast already have a minimum wage that is close to or above the proposal.
  • In Speaker Nancy Pelosi's San Francisco, the minimum wage is $9.14.  And in Rep. Charlie Rangel's New York City, the minimum wage is $7.15.

Comparing a $7.25 wage with the cost-of-living in 50 major metropolitan areas, the NCPA found that due to differences in the cost of food, housing, gasoline and other goods the purchasing power of the federal minimum can vary widely depending on where a worker lives.

  • $7.25 will buy only 58 percent as much in San Francisco as it will in Milwaukee.
  • By contrast, the same wage will buy 12 percent more in Omaha than in Milwaukee.

"Why should we have one minimum wage that is the same regardless of where people live?" asks Robert McTeer, a distinguished fellow with the NCPA.  "If the goal for all low wage workers to have the same, minimum standard of living, we need different wages for different cities."

Source: "Minimum Wage Hike Will Hit Red States Harder Than Blue States

Impact Varies from State to State Because of Cost of Living, says NCPA," National Center for Policy Analysis, January 10, 2006.


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