Montana’s minimum wage will increase to $8.50 an hour on Tuesday, but economists aren’t calling it a pay raise.
This year’s $0.20 bump ensures Montana’s minimum wage workers maintain the same level of buying power as the cost of goods and services increase. It’s an equation based on inflation.
“This year, the $.020 increase up to $8.50 an hour is due to about 2.7 percent inflation over the past year,” said Barb Wagner, the state’s chief economist. “When there’s an inflation increase, and it’s fairly likely in the next year that will occur again, it always increases every January 1st.”
Back in 2006, Montana voters passed a state minimum wage. The measure included an annual adjustment for inflation. This year’s increase reflects a 2.7 percent inflationary increase.
While some years have not seen enough inflation to warrant a boost to the minimum wage, Wagner believes 2019 could be similar to this year, resulting in a bump at the start of 2020.
“The concept of keeping things at the rate of inflation, it’s basically so those people earning minimum wage can buy the same level of goods and services as they have in the past,” Wagner said. “It’s not a wage increase, it’s maintaining the same wage in terms of purchasing power.”
An estimated 5.3 million workers nationally will receive a wage increase on Jan. 1 when 20 states increase their minimum wage.
The increases range from $0.05 in Alaska to $2 in New York. It will give affected workers roughly $5.4 billion in additional wages over 2019, according to Working Economics.
In Montana, Wagner said, an estimated 8,000 workers will see their wage brought up to $8.50 an hour, though the ripple effect could expand behind that.
“Often there might be more workers close to that level that might also have their pay adjusted,” Wagner said. “If you have a manager earning more than a minimum wage worker and you bring the minimum wage worker’s wages up, oftentimes business will also adjust the wage of that manager as well.”
Wagner said 29 states and the District of Columbia have minimum wage laws that are higher than the federal minimum wage. That includes Montana.
Among surrounding states, only North Dakota, Wyoming and Idaho are lower than the federal minimum wage. South Dakota, Montana, Washington and Oregon are higher.
“We’ll still be lower than South Dakota’s, but North Dakota, Wyoming and Idaho are still below the federal minimum wage,” Wagner said. “Washington and Oregon, where we get a lot of workers, are both significantly higher than Montana.”