NCPA - National Center for Policy Analysis


September 7, 2005

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

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

The NCPA analysis of 50 metropolitan areas concluded that there are differences among areas in the purchasing power of federal, state and city minimum wages. 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, says the NCPA.

Source: News Release, "Cost of Living Matters More Than Minimum Wage," National Center for Policy Analysis, September 2, 2005.

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