Minimum Wage Debate 2014: Will State Ballot Victories Lead To A Federal Wage Increase?

Republicans swept the U.S. House and Senate in Tuesday's midterm elections, but it's minimum wage workers who may have emerged as the biggest winners. Voters approved minimum wage increases in five states and two California municipalities Tuesday, and "fair wage" activists hope the ballot victories will help pave the way for a raise of the $7.25-per-hour federal minimum wage, which is the floor in all states.

“We are thrilled with the outcome and not at all surprised,” said Judy Conti, federal advocacy coordinator at the National Employment Law Project, which pushes for a higher minimum wage. “We find that the minimum wage is overwhelmingly popular when it goes to the voters, and we’re happy that in the face of congressional inactivity, states and cities are taking the initiative in putting this to the vote. This translates to a message to Congress.”

Around 1.7 million minimum wage workers will be affected by the hikes approved Tuesday. Arkansas, Nebraska, South Dakota and Alaska -- all states that elected conservative Republican candidates -- all passed varied binding hikes, while Illinois passed a non-binding resolution for its Legislature to approve, which it plans to do. Both San Francisco and Oakland passed significant increases, with the former's increasing from $10.74 to $15 an hour by 2018, and the latter going from $9 to $12.25 in March.

Workers stand to greatly benefit from the raises, particularly in Arkansas and South Dakota, where living costs are generally low, according to the Obama administration, which has advocated for a minimum wage hike at the federal level. Arkansas will raise the minimum wage from $6.25 to $8.50 over two years and South Dakota will go from $7.25 to $8.50 on January 1, 2015.

Tuesday's ballots leave just two states below the federal minimum wage. Wyoming and Georgia both have a $5.15 minimum. President Barack Obama called the ballot victories "new reasons to get it done for everybody." The White House raised the minimum wage for federal employees and contractors to $10.10 an hour earlier this year, but Republicans in Congress have opposed efforts to increase the national wage, saying it would hurt small businesses and increase unemployment.

The state ballot measures did not play out along partisan lines. Republicans won three of four of the gubernatorial races and all four of the Senate races in the states that voted to raise the minimum wage. Arkansas’ next governor, Republican Asa Hutchinson, also backed the raise.

“These groups have noticed that minimum-wage increases can easily pass — they have seen this in the past few years,” said John Matsusaka, executive director of the Initiative and Referendum Institute at the University of Southern California. “They can’t get it through the legislatures in these red states, so they do it this way.”

Some "fair wage" activists said they are confident there will be a raise in the federal minimum wage in the next few years because opposing it could be disastrous for a presidential candidate. If Congress doesn’t act on the national level, states will likely continue to hold their own ballot initiatives, according to Jeanne Mejeur, a researcher at the National Conference of State Legislatures.

“This is a cyclical issue,” she said. “This is the third wave of recent [state-level] wage hikes. The last one was in 2006 when Congress didn’t act.” All of those ballot measures passed in 2006.

A federal minimum wage increase could be a tough sell because of how it might affect the national economy, said Steve Odland, president and CEO of the Committee for Economic Development in Washington, D.C. "There's this analogy of it being like peanut butter. You're trying to spread a minimum that covers a nation that's really variable," he said. "If you're going to do this, you should do it at the state and local level where you understand the labor variables."

That means the wage hike in South Dakota will probably work for the better because of the state's relatively low unemployment rate, but a similar hike in, say, Mississippi, where unemployment is high, could lead to more unemployment, Odland said.

Business leaders have also voiced concerns about how small businesses such as restaurants would handle a minimum wage increase. Gwyneth Borden, executive director of the Golden Gate Restaurant Association in San Francisco, recently warned that Bay Area restaurants could get rid of tipping and start paying a flat rate because San Francisco's measure didn't specify different standards for tipped workers.

Regardless of how the debate unfolds at the national level, economists agreed that they and politicians will be watching Arkansas to see how the wage hike plays out to inform similar campaigns in other states.

"Economically, Mississippi is similar to Arkansas," said Michael Pakko, state economic forecaster at the University of Arkansas, Little Rock. "We have a high rate of unemployment among teens and a very low cost of living. $7.25 goes a lot farther in Arkansas than in New York City, but there's still the fundamental economics to look at. Perhaps just the example Arkansas set with the ballot will be enough to spur similar action in neighboring states."

Arkansas is now poised to have the highest minimum wage among its neighboring states, which could factor into businesses moving across the border to avoid higher costs, said Pakko. That could be avoided if those states also raise wages.