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Despite the nationwide pandemic and recession, the Nutmeg State has increased its minimum wage according to schedule.

The Connecticut minimum wage increased last week from $11 to $12 an hour, making it the fifth highest in the nation. This increase was instituted automatically as part of legislation signed into law last June by Gov. Ned Lamont. The law mandated a minimum wage increase of $1 every 11 months until it reached $15 in 2023, at which point it would rise alongside the employee cost index.

“Nobody working a full-time job should live in poverty,” Lamont said in an Aug. 31 press release. “This is a fair, modest increase, and the money earned will go right back into our own economy, supporting local businesses in our communities.”

According to the Economic Policy Institute, 465,000 workers in Connecticut would be affected by an increase in the minimum wage to $15, nearly 60 percent of which are women. The demographic affected by minimum wage also skews significantly older, with only 12 percent of those workers aged 19 or younger expected to be impacted.

An increase in the minimum wage to $15 per hour will also disproportionately benefit Black and Hispanic workers. This demographic makes up just 25 percent of the total workforce in Connecticut, but 43.8 percent of the affected population. 

Though this increase in the minimum wage makes Connecticut one of the best states in the nation in which to work on minimum wage, it still is not a living wage, according to the Living Wage Calculator at the Massachusetts Institute of Technology. For a single adult with no children, the living wage is nearly $2 more per hour than the new Nutmeg State minimum wage. The disparity is even greater in households with more than one adult and children, where, in some cases, the higher minimum wage will not cover even half of the annual expenses. 

Yannet Lathrop, a research and policy analyst at the National Employment Law Project told the News in an interview that, “a $15 minimum wage may be adequate for areas of the state that have a lower cost of living, but for higher cost of living areas a $15 minimum wage may not be adequate.”

“Fifteen-dollar minimum wage is a good step towards a living wage, [but] it may not be a decent wage in areas such as New Haven,” Lanthrop said.

One of the arguments made in favor of the automatic increase to the minimum wage and the subsequent indexing to a federal standard is that it provides employers with stability and predictability when looking at their long term costs. However, Andy Markowski, the Connecticut State Director of the National Federation of Independent Business, pointed out how this year highlights the flaws of this system. 

Markowski told the News that, this year, demonstrated the need for a “circuit breaker” since businesses were already facing higher costs and limited revenue due to the pandemic.

One of the important impacts of the long term increase in the minimum wage in Connecticut is on income inequality in the state. In 2019, David Cooper, senior analyst at the Economic Policy Institute, testified to the extent of this income inequality, stating that a worker receiving federal minimum wages receives less than a third of what “typical middle-class workers” are paid.

In his testimony, Cooper highlighted that the preponderance of economic research and data found that there is no significant impact on the unemployment rate as a result of a higher minimum wage. 

Markowski, however, said that following his conversations with small business owners, it is “absolutely” less likely that they hire the same number of workers because of the higher minimum wage, claiming that many small businesses, even prior to the pandemic, were “operating on very thin margins.”

Proponents of the automatic increase have pointed out that the economy’s major hurdle to overcome in recovery is not necessarily the cost of labor but rather contractions in demand.

One group of workers, however, will go without experiencing the benefits of Public Act 19-4: tipped workers. The portion of salary that has to be paid by employers will remain capped at $6.38 and $8.13 for hotel and restaurant employees and bartenders, respectively. 

As a result, in order to earn the new higher minimum wage, tipped workers will be under greater pressure to earn tips; this will likely widen the gap between those workers and those on minimum wage, especially as the cost of living rises alongside inflation. 

The federal minimum wage is $7.25.

Philip Mousavizadeh | philip.mousavizadeh@yale.edu