NCPA - National Center for Policy Analysis

Where Paychecks Stretch The Most, And Least

August 14, 2015

The movement for a $15-an-hour minimum wage has scored high-profile victories lately. While Americans generally support higher minimum wages -- a Pew Research Center survey in January 2014 found 73% in favor of a then-current proposal to raise the federal minimum from $7.25 to $10.10 an hour -- wide disparities in local living costs, create practical complications.  A national $15 minimum would yield $17.08 worth of purchasing power in Macon, Georgia, but only $12.26 in New York City, once the differing price levels were taken into account.

Purchase power was estimated by using data on "regional price parities," or RPPs, for 381 metropolitan areas. The RPPs, developed by the federal Bureau of Economic Analysis, measure the difference in local price levels of goods and services across the country, relative to the overall national price level (set equal to 100). So on average, prices in the New York metro area, has an RPP of 122.3; 22.3% higher than the nationwide average, while in Macon (RPP of 87.8) prices are 12.2% below average. (Not coincidentally, the push for a $15 minimum wage has been particularly strong in expensive urban areas on both coasts.)

  • Honolulu is the most expensive in the United States.  A $15 national minimum wage would have a real purchasing power of $12.24 there.
  • Beckley, West Virginia, has the lowest RPP in the nation, so a $15 minimum would have the purchasing power of $19.23 there. 

If the goal were to guarantee low-paid workers everywhere in the country the same real purchasing power, that would require hundreds of different minimum wages, scaled to each locality's cost of living. For example, giving everyone the same purchasing power that $15 has in New York City would cost $13.07 in Chicago; $12 in Fresno, California; $11.10 in Cincinnati; and just $10.43 in Anniston, Alabama.

Source: Drew Desilver, "The Real Value Of A $15 Minimum Wage Depends On Where You Live,"  Pew Research Center, August 3, 2015

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