Typically, increases in the minimum wage are aimed at assisting low-wage earners in meeting their basic needs, including food, healthcare, and housing.

However, an increasing number of states and municipalities are elevating their minimum wage to $15 an hour or more. This adjustment offers workers a bit more financial flexibility, enabling them to manage essential expenses with less difficulty and even afford occasional discretionary items.

A report from the National Employment Law Project, a worker advocacy organization, reveals that 21 states, along with 48 cities and counties, are planning to increase their minimum wages on January 1. Additional states and a few more cities will follow suit later in 2025.

While adjustments in pay rates have become a yearly event, the report indicates that the magnitude of minimum wage increases has escalated over recent years.

Which states are raising the minimum wage to $15?

Starting on New Year’s Day, three states—Illinois, Delaware, and Rhode Island—will establish a $15 minimum wage for the first time, joining seven other states that have already reached or exceeded this amount. Additionally, California and New Jersey will raise their minimum wages for certain healthcare workers to over $17.

Furthermore, 47 local areas will also surpass $15 on January 1, particularly more than two dozen in California, most of which will exceed $17.

In Burien, Washington, the existing minimum wage of $16.28 will increase to $21.16 for businesses with 500 or more employees in King County, establishing it as the highest minimum wage in the nation.

“Keep in mind that a full-time employee making $17 an hour earns just $35,360 a year before taxes,” said Yannet Lathrop, a senior researcher and policy analyst at NELP, in an email. “These wage levels won’t make anyone rich, but they will assist with meeting basic needs and allow for a few luxuries.”

She further noted, “Higher wages could also enhance mental and physical well-being, improve access to credit, and lead to better educational outcomes for their children.”

In January, several states will begin a sequence of gradual hikes in their minimum wages over the next few years. Among those reaching $15 for the first time, Illinois and Rhode Island currently stand at $14, while Delaware is at $13.25.

Other states will also increase their minimum wages, although not reaching the $15 mark. Missouri’s minimum wage will rise to $13.75 from $12.30 and Nebraska’s will increase to $13.50 from $12.

Kaamilya Hobbs, 33, from Kansas City, Missouri, earns $13.44 per hour while working 20 to 25 hours each week at a local Arby’s. Her boyfriend primarily looks after their three young children, which includes a newborn and two toddlers, and occasionally delivers food for DoorDash.

Their combined income barely covers their basic necessities. At times, they need to postpone rent or cellphone payments by 30 days.

“It’s quite challenging,” Hobbs remarked. “After accounting for rent, food, and expenses for the children, there isn’t much left for daily activities.”

The increase in Missouri’s minimum wage to $13.75 “would help somewhat,” she expressed. It may decrease the frequency of juggling bill payments. Additionally, she noted, “I could visit my mom more often.” Currently, visits are rare as her mother lives about 25 miles away, and gas costs are substantial.

However, Hobbs anticipates further increases to the minimum wage. “Living costs are still set to rise,” she stated. “We can’t survive on $13.75.”

Many states, including Arizona, Colorado, Connecticut, Ohio, and Virginia, are implementing smaller increases in minimum pay that are tied to annual adjustments in living costs based on the consumer price index.

Who stands to gain from higher minimum wages?

In the latter part of 2025, several states and multiple local areas will also increase their minimum wages. Ultimately, 23 states and 65 cities and counties—setting a new record of 88 jurisdictions—will raise their minimum wage at some point next year. This change will directly impact 3 million minimum wage workers and will also likely affect an additional 6.2 million higher-paid workers due to ripple effects on business compensation structures, according to the Economic Policy Institute.

Notably, a growing number of states have already reached or surpassed the $15 mark. States such as New York, California, Massachusetts, Washington, Maryland, New Jersey, and Connecticut are currently at or above this level. In addition to the three states reaching this milestone on New Year’s Day, Oregon will also achieve it by July due to a cost-of-living adjustment.

States like Alaska, Florida, Hawaii, Missouri, and Nebraska will hit the $15 threshold by 2026 or 2027, bringing the total to 16 states, incorporating nearly half of the U.S. workforce within states that have enacted minimum wages of $15 or higher over the next three years, as per NELP and EPI.

“$15 has become the standard target,” Lathrop noted. “It’s now the competitive rate.”

How will a minimum wage increase benefit individuals?

Recent years’ increases to the minimum wage have enabled many Americans to keep pace with a significant annual inflation rate that reached a 40-year high of 9.1% in mid-2022, before gradually  has decreased to 2.6%.

According to Lathrop, the new laws mean that “Workers and their families don’t have to prioritize which bills to pay.”

However, Lathrop pointed out that none of the proposed minimum wage increases would actually reach a “living wage” level, which is essential for workers to afford basic necessities such as food, childcare, healthcare, housing, transportation, and access to the internet.

For instance, in King County, Washington, the minimum wage is expected to increase to $20.29 starting January 1.

Yet, the living wage for a single adult in that area is calculated to be $30.08, based on data from the MIT Living Wage Calculator.

Michael Saltsman, managing director of the Employment Policies Institute, which receives support from the restaurant sector, mentioned that not all minimum wage workers face financial hardship, as some reside in households with higher overall incomes.

The push for a $15 minimum wage was seen as unrealistic when the Fight for $15 movement started staging walkouts by low-wage workers, including those in fast-food, back in 2012. However, on April 1, California’s minimum wage for fast-food employees jumped by $4 to $20, significantly surpassing the standard of $16 in the state.

Meanwhile, the federal minimum wage has stagnated at $7.25 per hour since 2009, with ongoing resistance from Congressional Republicans to any attempts at raising it. Over 30 states, which represent more than 60% of the U.S. workforce, currently have minimum wage rates higher than that of the federal government.

Lathrop contends that this issue transcends party lines. This year, both Alaska and Missouri, states with Republican majorities, passed initiatives via ballot to increase the minimum wage to $15 over the next few years.

What is the impact of raising the minimum wage on employers?

Saltsman noted that voters in California and Massachusetts—both mainly Democratic states—recently turned down measures to increase the minimum wage for certain categories of workers.

“People associate these wage increases with higher prices and job losses,” he stated.

Restaurants, he argued, have raised menu prices to offset their increased labor costs, leading to closures and layoffs in some cases.

Many studies have yielded mixed results regarding this issue. Research from both the University of California, Berkeley, and the National Bureau of Economic Research indicates that while pay increases did not significantly impact employment rates in low-wage sectors, there was a reduction in jobs for some teenagers and low-skilled workers.

A 2021 report by the Congressional Budget Office determined that raising the federal minimum wage to $15 per hour would uplift incomes for millions of Americans and lift around 900,000 individuals out of poverty; however, it would also lead to a reduction of approximately 1.4 million jobs within a few years.

Is there a correlation between raising the minimum wage and price hikes?

Dante DeAntonio, an economist at Moody’s Analytics, stated that increases in the minimum wage have not significantly influenced inflation, partly due to the small number of workers earning at or below these new wage levels.

According to Ryan Sweet, chief U.S. economist at Oxford Economics, annual state-level minimum wage increases in January have contributed to some short-term inflation but have not affected overall price growth in the subsequent months.