Request a demo
Submit PR

Nearly 20 states are raising their minimum wages next year, the highest to $16/hour, as the federal rate stays frozen — is your state on the list?

The federal minimum wage has remained at $7.25 since July 2009, the longest period without an increase since the wage floor was established in 1938.

Must Read

Fortunately it only applies in states that have no minimum-wage law of their own or a minimum wage below the federal minimum wage.

A wave of minimum wage increases is coming to 18 states in 2026, according to Newsweek, offering millions of low-wage workers a modest but meaningful boost to their paychecks. [1] While the federal rate remains frozen at $7.25 per hour, states are taking matters into their own hands to address the widening gap between wages and the actual cost of living.

From Hawaii’s $2-per-hour jump, the group’s highest, down to Minnesota’s $0.28 increase, the adjustments vary widely. But they all point to the same reality: the buying power of the national minimum wage has eroded dramatically over the past 16 years, and states are stepping in where federal action has stalled.

The shrinking dollar: Why states are acting

The federal minimum wage hasn’t budged in 16 years, but the cost of everything else certainly has. What $7.25 could buy in January 2009 now requires $11.12 to purchase the same goods and services, according to the Bureau of Labor Statistics’ Inflation Calculator.

This erosion of purchasing power explains why so many states have enacted their own minimum wage laws. Where states set higher minimums, workers in that state receive the higher rate — a lifeline for millions struggling to keep pace with rising housing, food and health care costs.

Certain states like California and Washington also allow cities to have their own minimum wage laws. Seattle is scheduled to raise its minimum wage to $21.30 next year.

Which states are raising wages in 2026?

Several of the 18 states implementing increases share a common thread: they have laws that index their minimum wage to inflation, meaning the wage automatically adjusts each year to account for rising costs. In addition, Hawaii is following an increase schedule, while Missouri voters approved the increase to $15.

Here’s the breakdown of confirmed increases, nearly all effective January 1, 2026:

Read more: Want an extra $1,300,000 when you retire? Dave Ramsey says this 7-step plan ‘works every single time’ to kill debt, get rich in America — and that ‘anyone’ can do it

The ripple effect: could higher wages strengthen the economy?

California raising the minimum wage for fast-food workers was hotly debated and there doesn’t appear to be consensus on what the economic impact was. While UC-Berkeley’s Center on Wage and Employment Dynamics said it only raised prices a little and didn’t affect employment, the Employment Policies Institute said there were higher job losses as a result, according to Calmatters. [2]

However, as more people can afford to meet their basic needs, the benefits can extend beyond individual paychecks. Higher minimum wages could create positive economic ripples that help others, including those making money above but close to the minimum wage.

The Congressional Budget Office studied the Raise the Wage Act of 2023, which would see the minimum wage increase incrementally to $17, and said it “would raise the earnings and family income of most low-wage workers and thus lift some families out of poverty” but also cause other low-wage workers to become jobless. [3]

When low-wage workers earn more, they tend to spend more on necessities like groceries, rent, healthcare and other basics. This increased consumer spending can stimulate local economies, potentially creating a cycle of economic growth that benefits businesses and communities.

And research from the W. E. Upjohn Institute for Employment suggests that contrary to common fears, the pass-through effect of minimum wage increases on prices is "fleeting and much smaller than previously thought," meaning inflation concerns may be overstated. [4]

Additionally, when workers can better afford their living costs, reliance on government assistance programs may decrease, reducing taxpayer burdens. Workers earning higher wages may also contribute more in payroll taxes, which could provide additional revenue for programs like Social Security.

A frozen federal minimum wage for 16 years

The federal minimum wage stagnation reflects deep political divisions over whether and how to raise it, but an increase to $9 an hour is what most Americans wanted, according to a Gallup survey conducted in 2013. [5]

Efforts to increase the federal rate continue, though progress remains slow. In June, Republican Senator Josh Hawley of Missouri and Democratic Senator Peter Welch of Vermont introduced the Higher Wages for American Workers Act, a bipartisan proposal to raise the federal rate to $15 per hour — more than double the current rate — and allow it to increase with inflation in subsequent years.

The Raise the Wage Act of 2025, which would incrementally increase the minimum wage to $17 per hour by 2030, was also introduced into Congress in April. According to the Economic Policy Institute, “The bill would also gradually raise and then eliminate subminimum wages for tipped workers, workers with disabilities, and youth workers, so that all workers covered by the Fair Labor Standards Act would have the same wage floor.” [6]

What to read next

Join 200,000+ readers and get Moneywise’s best stories and exclusive interviews first — clear insights curated and delivered weekly. Subscribe now.

Article sources

We rely only on vetted sources and credible third-party reporting. For details, see our editorial ethics and guidelines.

Newsweek (1); Calmatters (2); CBO (3); The W.E. Upjohn Institute for Employment Research (4); Gallup (5); Economic Policy Institute (6)

This article provides information only and should not be construed as advice. It is provided without warranty of any kind.