As 2025 dawns, workers in 21 states are set to receive a much-needed boost in their paychecks, but the federal minimum wage remains frozen in time.
At a Glance
- 21 states will increase their minimum wages in 2025, most effective January 1
- Federal minimum wage remains at $7.25, unchanged since 2009
- Washington, D.C. leads with the highest state-level minimum wage at $17.50 per hour
- Delaware will see the largest increase, raising its minimum wage by $1.75 to $15.00
- By 2027, nearly half of U.S. workers will live in states with a $15 minimum wage
State-Level Changes Amid Federal Stagnation
As the calendar turns to 2025, workers across 21 states are preparing for a welcome increase in their minimum wages. This wave of state-level changes comes against the backdrop of a federal minimum wage that has remained stubbornly fixed at $7.25 per hour since 2009. The federal rate’s purchasing power has eroded by 30% due to inflation, leaving many low-wage workers struggling to make ends meet.
Washington, D.C. continues to lead the nation with the highest state-level minimum wage, set at $17.50 per hour. Delaware is making the most significant leap, with plans to raise its minimum wage by $1.75, bringing it to $15.00 per hour. Other states making substantial increases include Illinois, Missouri, Nebraska, and Rhode Island, each raising their minimum wages by at least $1 per hour.
Impact on Older Workers and Retirement Planning
The minimum wage increases are particularly significant for older workers. More than 20% of workers aged 55 and older earn less than $17 per hour, indicating that these increases can have a substantial impact on their financial well-being. Minimum wage jobs can play a crucial role in helping older workers delay claiming Social Security and other retirement benefits, potentially leading to higher benefits later in life.
“Minimum wage increases lead to increased employment, delayed full permanent exit from employment, and delayed claiming of retirement benefits,” according to a study published in the Journal of Public Economics.
It’s important to note that in 2025, benefits recipients who have not reached full retirement age will have their benefits reduced by $1 for every $2 earned over $23,400. This underscores the delicate balance many older workers must strike between current income and future benefits.
State-Specific Changes and Voter-Driven Initiatives
Several states are taking unique approaches to minimum wage adjustments. Oregon, for instance, adjusts its minimum wage annually based on the U.S. City Average Consumer Price Index. Michigan will see two minimum wage increases in 2025: one on January 1 and another on February 21, following a Michigan Supreme Court decision.
Voter-driven initiatives continue to play a significant role in minimum wage policy. Alaska and Missouri have approved ballot initiatives to increase their minimum wage rates, effective July 1, 2025, in Alaska and January 1, 2025, in Missouri. Oklahoma is set to vote on raising its minimum wage to $15 by June 2026, reflecting a growing trend towards more substantial wage floors.
“The truth is the number of workers that earn $7.25 per hour is quite low, but that still means with inaction we are leaving tens of millions of workers out to dry,” Sebastian Martinez Hickey, a Research Assistant at the Economic Policy Institute, pointed out.
The Road to $15 and Beyond
The movement towards a $15 minimum wage is gaining momentum across the country. By 2027, it’s projected that nearly half of U.S. workers will live in states with a $15 minimum wage. However, the gap between minimum wage and living wage remains substantial in many areas. For example, Ohio’s minimum wage will rise to $10.70, but a living wage in the state is estimated at $17.73.
As of 2025, 30 states and D.C. will have minimum wages above the federal level. However, five states still do not have their own minimum wage laws, relying instead on the federal standard. Wyoming and Georgia have state minimum wages of $5.15, but eligible employees in these states receive the federal rate of $7.25.
The minimum wage will increase in 21 states in 2025. Here's what to know https://t.co/6BbWK2K1n0
— Quartz (@qz) December 9, 2024
The ongoing state-level increases highlight the growing divide between federal and state wage policies. As more states take the initiative to raise their minimum wages, pressure continues to mount for federal action to address the needs of low-wage workers across the nation.
