Florida’s minimum wage will increase by $1 Wednesday, for the last time, as part of a phased plan that will eventually tie future increases to inflation using the Consumer Price Index as the marker.
Florida will use a specific Consumer Price Index: CPI-W, which tracks price changes for households whose income is more closely tied to hourly wage and clerical work. That differs from the more commonly cited CPI-U, which broadly covers a population of urban consumers.
Florida’s Constitutional language specifically calls for the CPI-W for the South Region, which includes 15 other states, when calculating future minimum wage adjustments.
The increase from $14 to $15 an hour completes the series of $1 annual increases Florida voters approved in 2020, but it also marks a significant change for the state’s lowest-paid workers.
For the past five years, the $1 increases have amounted to substantial percentage raises. The increase from $10 to $11 was 10%. The new increase from $14 to $15 is about 7.1%.
Once the inflation adjustments begin, increases are likely to be considerably smaller (low cents, not dollars, annually) if inflation remains near historical norms – roughly 3%.
At a normal 3% inflation rate, for example, a $15 minimum wage would increase by about 45 cents. A full-time worker would receive about $18 more a week, compared with the $40-a-week increase produced by tomorrow’s $1 raise.
Inflation would have to reach about 6.7% for the first inflation-based adjustment to produce another full $1 increase.
The $1 increases Florida workers have received during the phase-in were intended to raise the state’s wage floor to a new level. Inflation adjustments are designed primarily to keep that wage floor from losing purchasing power as prices increase.
If prices rise 3% and wages also rise 3%, a minimum-wage worker is earning more dollars but has not received the same kind of increase in purchasing power that comes from a raise exceeding inflation.
So, why change a system that seemingly benefits the working class?
Supporters of indexing argue that the system prevents inflation from gradually eating away at the value of the minimum wage and gives both workers and employers predictable annual adjustments.
Higher minimum wages generally mean bigger paychecks for workers who keep their jobs, and the effect can spill over to employees already earning slightly more than the minimum.
For businesses, the math is less straightforward. Employers can absorb higher labor costs through lower profits, pass some of the expense to customers through higher prices, cut hours or hiring, or find ways to operate more efficiently, such as laying off workers.