Massachusetts Gov. Deval Patrick signed into a law Thursday an increase in the state’s hourly minimum wage, from $8 to $11 an hour by 2017, including new baselines for tipped workers.
The $11 benchmark puts Massachusetts on course to have the highest minimum wage of any state in the nation. The federal minimum wage is $7.25 an hour.
“Raising the minimum is about bringing a little relief to the working poor, many of whom do jobs we could not live without and who, by the way, will recycle that money right back into the economy,” Patrick said at a signing ceremony.
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Massachusetts’ hourly minimum wage will rise in one-dollar stages on Jan. 1 over the next three years: $9 in 2015, $10 in 2016 and $11 in 2017.
The state’s tipped minimum wage has remained the same since 1999, but under this law will rise from $2.63 to $3 on Jan. 1, 2015, $3.35 on Jan. 1, 2016, and $3.75 on Jan. 1, 2017.
“We felt strongly there didn’t need to be an increase, but if there were an increase it made more sense to follow percentagewise what the true minimum wage was going up,” Bob Luz, president and chief executive of the Massachusetts Restaurant Association, said in an interview Thursday. “In essence, that’s what the House did.”
Legislators had discussed tying the minimum wage and tipped wage floor to the Consumer Price Index, Luz said, but those plans were not in the final bill.
“We went into full gear and worked aggressively to educate the full House,” he said.
In 2012, Massachusetts tipped workers were making about $13.13 an hour, Luz said.
“In theory, tipped employees in a restaurant have their own CPI,” he said. “They get pay increases every time the menu prices go up. If menu prices go up 2 to 3 percent a year, which generally they do, that flows through to the tip.”
Luz said Massachusetts has about 320,000 restaurant employees, and of those about 85,000 are tipped workers.
“We’re over 10 percent of the workforce,” he added, noting that the state has more than 15,000 food and beverage operations.
The new Massachusetts law also includes changes to the state’s unemployment insurance system that are aimed at lowering costs for businesses. The minimum wage increase, the first since 2008, is expected to affect 500,000 workers statewide.
President Barack Obama has proposed an increase in the federal minimum wage from $7.25 to $10.10 an hour, and required some federal contractors to meet that target, but Congress has declined to act on the wage legislation.
With no federal action, states have gone ahead with their own legislation to raise entry-level wages. Vermont will raise its minimum to $10.50 per hour by 2018. Minimum wage increases are also underway in Connecticut, Hawaii, Maryland, Massachusetts, Minnesota and Vermont.
The District of Columbia has adopted an $11.50 minimum, to take effect in 2016. Among municipalities, Seattle this month raised its minimum to $15 an hour over the next seven years.
A number of retailers have also announced they will raise their minimum wage for entry-level workers.
Furniture retailer IKEA said Thursday it would raise its minimum wage by 17 percent, to $10.76 from $9.17 an hour, on Jan. 1, and The Gap in February said it would raise its minimum hourly rate to $9 immediately and would set a $10 floor for 2015.
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