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Indexed minimum wage puts CT ahead of region. Here's how it happened and what it means

FILE, 2019: Supporters of the minimum wage celebrate in the Senate gallery after passage at nearly 3 a.m. As a result of the bill's passage, Connecticut’s minimum-wage workers saw their hourly wages rise from $10.10 to $15 over the next four-and-a-half years.
Keith Phaneuf
/
CTMirror
FILE, 2019: Supporters of the minimum wage celebrate in the Senate gallery after passage at nearly 3 a.m. As a result of the bill's passage, Connecticut’s minimum-wage workers saw their hourly wages rise from $10.10 to $15 over the next four-and-a-half years.

Connecticut became the state with the highest minimum wage in New England in January 2024, when it automatically increased from $15 to $15.69 an hour.

Connecticut pulled ahead of Massachusetts, where the minimum wage hit $15 in 2023 and has not increased since. Connecticut now boasts the fourth highest minimum wage in the United States, behind California ($16), Washington ($16.28) and Washington, D.C., ($17), according to the Economic Policy Institute.

Connecticut was ahead of the curve in terms of its minimum wage even before Congress increased the federal minimum to $7.25 in 2009. One year prior, the state minimum wage in Connecticut was $7.65. By 2010, the state’s minimum increased to $8, then $8.25. It remained fixed until 2014, when Connecticut became the first state in the country to set a $10.10 minimum wage. The $10.10 was achieved gradually through three successive wage bumps ending in 2017.

Step-by-step approaches to increasing the minimum wage are commonplace in Connecticut.

Legislation in 2008, 2013 and 2019 all relied on yearly increases for reaching the desired minimum wages instead of making immediate jumps to higher amounts.

Gov. Ned Lamont, a Democrat who supported a $15 minimum wage during his 2018 gubernatorial campaign, signed Public Act 19-4 in 2019. The law enacted five yearly bumps in the minimum wage, increasing it to $15.

Indexing the wage

What made the 2019 legislation distinct from its predecessors is the fact that it indexes the wage to inflation. The modest $0.69 increase in 2024 was the first annual “economic indicator adjustment,” a yearly increase in the minimum wage pegged to growth in workers' pay and benefits.

The value of the adjustment is determined by the U.S. Department of Labor, which calculates changes in the average wage employers pay to employees. This measure is also known as the Employment Cost Index.

At a September press conference announcing the increase, Lamont argued that a stagnant minimum wage exacerbates pay inequality and makes financial stability for working families more difficult.

“That is why several years ago I signed a bill into law enacting several increases in the minimum wage and then ultimately attaching it to federal economic indicators so that as the economy grows the wages of low-income workers can grow with it,” Lamont said.

The value of future adjustments to Connecticut’s minimum wage will be announced by Oct. 15 of each year and implemented in the following January.

Political calculation

Former state Rep. Edwin Vargas Jr., a Democrat who represented Hartford from 2013 to 2023 and is the endowed chair of public policy at Central Connecticut State University, was a strong backer of increasing the minimum wage.

“The good thing about this bill is that we also made it automatically increase according to the consumer cost of living,” he said in an interview.

Vargas said the state legislature was always close to passing legislation indexing the wage, but he attributed its eventual passage to a Democratic majority responding to the election of former President Donald Trump. The automatic adjustment made it unnecessary to worry about political calculations in the future.

“We built in that formula so we wouldn’t have to revisit it for a while,” Vargas said.

On the other side of the aisle, some Connecticut Republicans are concerned about the effects of an increased minimum wage on employee benefits and inflation.

“The biggest concern is that a lot of people earning minimum wage are entitled to other benefits,” said House Republican Leader Vincent Candelora, who represents North Branford, Durham, East Haven and Guilford in the 86th District.

According to Candelora, the “aggressive phasing” that pushes the minimum wage to match inflation risks may disqualify workers from state benefits if their income crosses the benefits threshold.

Candelora said he has seen this issue in the nonprofit sector, with personal care attendants — who provide in-home care for adults who need help with everyday activities, such as bathing — affected because the workforce is structured around state benefits like Medicaid, which comes with strict income thresholds.

Wage increases “knocked off a lot of their employees,” Candelora said. “Connecticut never adjusted their benefits.”

Candelora also expressed concern that workers might not seek employment to avoid being kicked off entitlements.

According to the minority leader, workers could face the decision to stay on benefits and “stay home” or to continue working but lose entitlements like SNAP, which disqualifies any individuals making more than $2,430 a month, and cash assistance, which carries an income threshold of just under $2,100.

“One of the areas we have to look at is phasing down our social services,” said Candelora, who added that they should provide people with an “incentive to work” instead of relying on benefits.

“Generally speaking, people want to work,” he said. But when faced with what he calls draconian income limits for state benefits, Candelora worries that “people will forgo employment.”

Candelora attributes inflation to regional and national trends rather than factors unique to Connecticut. However, he added that increasing wages will nonetheless have an impact.

“Businesses have to adjust … by raising prices, so it is certainly affecting inflation,” he said.

Since 2018, Connecticut’s minimum wage has increased at a higher rate than any other state in New England, with an average increase of $0.93 per year, according to data collected by the Federal Reserve of St. Louis.

Behind Connecticut and Massachusetts are Maine ($14.15), Rhode Island ($14), Vermont ($13) and New Hampshire, where the minimum wage has stood at the federal minimum of $7.25 for the past decade and a half. New Hampshire’s low minimum wage brings the regional average down to $13.18.

Despite more than doubling the federal minimum, a higher minimum wage is necessary to weather the cost of living in Connecticut, Vargas argued.

“Connecticut is a high-cost state,” he said.

He said that states still paying the federal minimum tend to be warm weather states with a lower cost of living.

“Not that you’re living high off the hog on $7.25, but in some of the low cost-of-living states, people find ways to survive,” said Vargas, who conceded that people in low-wage states may still have to work multiple jobs to make ends meet. But this would be untenable in Connecticut, where housing costs are high and availability is low, especially in urban centers, he noted. It was residents of those areas that lawmakers had in mind.

“We know that [$15 an hour] was meaningless to most middle-class people, because most were making $15 or $20 an hour, even the lower-middle-class people,” Vargas said. “Forget the wealthy people. It was even more meaningless to them.”

“We knew the group it would really benefit were single moms raising kids. We knew that was our demographic.”

Vargas and other lawmakers’ rationale for supporting an increase to $15 an hour is that, unlike the super-wealthy, working class people “spend 100% of what [they] make.”

“If you’re a wealthy person, and let’s say you can live a very good lifestyle with … 10% of your income, that other 90% gets invested on Wall Street or in the Caribbean,” Vargas said. “That income never gets recirculated into the economy.”

But the person who makes minimum wage typically has to support kids, buy food for the family and pay rent, he said.

“That money’s going to recirculate," he said.

Vargas noted that “we had a lot of small businesspeople on our side too,” citing the concern over the effects of a minimum wage increase on smaller employers. “It all depends on how you want to look at it.”

According to Vargas, many of the businesses who would benefit from a wage increase are small, family-run businesses where family members comprise a bulk of the employees.

Additional costs

CBIA — the Connecticut Business and Industry Association — has expressed concerns that the increase in the minimum wage hurts small businesses.

“Historically, our view has been more on the side of ‘no,’ and being roadblocks,” Ashley Zane, the group’s senior public policy associate, said about CBIA’s attitude toward minimum wage increases. “There’s a lot of concern about adding additional costs to the labor market.”

Zane noted that the state still has a workforce crisis. She explained that Connecticut has roughly 90,000 job openings — 1.3 openings for every individual looking for work. And increasing cost burdens on businesses may limit employers’ ability to hire new workers.

“You usually don’t go back to cut wages, you only increase them,” Zane said, adding that a rising minimum wage provides concern for the future.

Vargas disagreed. Similar arguments made in 2019 “bore no resemblance to reality,” he argued, and the “catastrophic predictions” of opponents had yet to be realized. Among the proponents of the legislation – including the 10% of the Connecticut workforce that earns minimum wage — raising the wage is a matter of making ends meet.

“For us, this was a survival issue,” Vargas said.

Learn more
Small business owners in Connecticut react to the changes to the state's minimum wage.

As Connecticut raises the minimum wage, workers worry about rising costs.

Nell Srinath is a journalism student at the University of Connecticut. This story is republished via CT Community News, a service of the Connecticut Student Journalism Collaborative, an organization sponsored by journalism departments at college and university campuses across the state.

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