On Jan. 1, Montana was one of seven states to raise its minimum wage, joining four other western states – Washington, Oregon, Arizona and Colorado – along with Vermont and Ohio. The increases range from nine to 12 cents.
Montana’s minimum wage is now $7.35 per hour, up from $7.25, which is the federal minimum wage. Washington’s increase of 12 cents was the largest. At $8.67, Washington continues to have the highest minimum wage in the nation.
In 2006, Montana voters approved an initiative that raised the state’s minimum wage to be the greater of either the current state or federal minimum wage, while adding an annual cost-of-living adjustment. Competing studies have argued the effects of mandated minimum wage increases on the overall economy, a debate that’s amplified in uncertain economic times.
Webb Brown, Montana Chamber of Commerce’s president and CEO, said his organization is “generally opposed to government determining what the private sector should pay” and specifically opposed to a system in Montana that bases minimum wage hikes on the consumer price index, which he said isn’t based on data from Montana cities.
According to the state Department of Labor and Industry, “the increase in the minimum wage is based upon any increase in the U.S. City Average Consumer Price Index for All Urban Consumers for All Items (CPI) from August of the preceding year to August of the year in which the calculation is made. This amount is to be rounded to the nearest five cents.”
Brown also said the law doesn’t factor in variables such as employee productivity and training, while also failing to account for economic conditions and other factors that may prevent employers from being able to afford the increases.
“Regardless of that, we’re trying to inform our members and other businesses across Montana about that additional cost for business in the new year,” Brown said.
But proponents praise minimum wage increases as an effective way to put a few extra dollars in the pockets of low-income people. With recent statistics showing that one in seven Americans rely on food stamps, even a modest boost in wages, proponents say, can go a long way. Furthermore, they argue that more money in consumers’ wallets translates to more money spent at local businesses.
In a report by the National Employment Law Project (NELP), executive director Christine Owens notes that “regular increases in the minimum wage that help workers keep up with rising living costs are critical during tough economic times and directly benefit workers and state economies.”
The NELP and other organizations joined in a lawsuit defending Washington’s increase after a coalition of business groups sued to stop the 12-cent raise from taking effect. A judge ruled against the business groups in December.
“These small increases,” Owens said, “mean that thousands of minimum wage earners like health aides, child care workers, restaurant workers and retail clerks will be better able to put food on the table, provide for their children, and keep a roof over their head.”
She added: “Congress and other states should follow this smart policy of indexing the minimum wage to keep pace with the rising cost of living.”
The NELP report states that there are 11,043 minimum wage earners in Montana. A 10-cent minimum wage spike would equal $4 every week before tax deductions for a person working 40 hours per week. For a year, that’s $208.
After voters passed the initiative in 2006, Montana’s minimum wage jumped from $5.15 to $6.15 on Jan. 1, 2007. Before then, the minimum wage had remained unchanged for nearly a decade, staying at $5.15 from September 1997 through 2006. State laws stipulate that the minimum wage for businesses grossing less than $110,000 per year is $4.
Montana has a number of exemptions from its minimum wage requirements, according to the state Department of Labor and Industry. Among the exemptions are people employed in private homes “whose duties consist of menial chores, such as babysitting, mowing lawns, and cleaning sidewalks.”
In addition to the seven states that raised their minimum wage on Jan. 1, three other states base their minimum wage on cost of living but did not enact any increases. Those states are Florida, Missouri and Nevada. Of the seven states that made increases, Montana and Arizona have the lowest minimum wages at $7.35.