This week, low-wage workers across Ohio got a pay raise. Now that the calendar has turned to 2025, the minimum wage in Ohio has increased to $10.70 per hour. This is because Ohio is one of 20 states that adjust their minimum wage for inflation each year.
Minimum wage rates in the United States have rose in prominence in the United States over the past decade due to the rise of the “Fight for $15” movement. During the last election cycle, several states voted on minimum wage initiatives. However, one consideration that often gets left out of the discussion is how minimum wages relate to local cost of living.
We know that cost of living varies quite a lot from state-to-state, with it generally being true that it is more expensive to live on either coast of the country compared to the middle states. To measure this, we often rely on the Bureau of Economic Analysis’ Regional Price Parity index, which allows us to compare each state’s relative cost of living on a single scale.
In the following table, I used this index to adjust each state’s minimum wage for cost of living. This adjusted minimum wage represents what the equivalent wage would be for a person living somewhere with an average cost of living.
Below are some of the main takeaways that jumped out to me when I looked at this data.
New Hampshire’s unique position
New Hampshire uses the federal minimum wage of $7.25 per hour. It also has a higher than average cost of living, with residents paying about 5.3% more than the national average for goods and services. These two facts together make New Hampshire’s minimum wage $6.88–37 cents lower than the federal minimum wage. This makes New Hampshire the only state in the country whose adjusted minimum wage is lower than the federal minimum wage of $7.25.
With a regional price parity of 105.35, New Hampshire is the 8th most expensive state in the country. The state with the next-lowest adjusted minimum wage is Pennsylvania at $7.44, though they are only the 21st most expensive state by regional price parity.
Missouri and Nebraska look strong in context
Missouri and Nebraska are the two states that rise the most in the rankings, both moving up 11 spots from 18 and 19 to 7 and 8 respectively. Additionally, both of these states are in the top 5 when it comes to the difference in nominal minimum wage vs. adjusted minimum wage, with Missouri’s minimum wage being $1.23 more per hour and Nebraska’s being $1.44 more after adjusting for cost of living.
Ohio stays put
In both nominal and adjusted minimum wage, Ohio ranks 28th. This is somewhat of a surprising result given the fact that Ohio has a relatively low cost of living compared to the country as a whole. Ohio’s adjusted minimum wage is $11.65 per hour, $0.95 higher than its nominal minimum wage of $10.70.
What’s even more interesting is there is almost no movement around Ohio in these rankings. The only states that change their position relative to Ohio are Minnesota (moving from #26 to #29 after adjusting for cost of living) and Montana (moving from #30 to #27 after adjusting for cost of living). Almost all of the movement in these rankings happen near the extremities.
Minimum wage parity is greater than it appears
Before we adjust for differences in regional prices, the gap between the lowest and highest minimum wage was $10.25 per hour. When looking at the adjusted wages, this gap shrinks to $8.91 per hour.
The fact that the gap between the highest and lowest minimum wages drops by so much is especially interesting given that the lowest adjusted minimum wage is lower than the federal minimum wage. This means that this change is entirely driven by the fact that the states with the highest minimum wage have a higher than average cost of living.