Last month, the state of Michigan’s minimum wage increased to $13.73 per hour, $2.73 higher than Ohio’s minimum wage of $11 an hour.
Ohio’s minimum wage grows every year due to a constitutional amendment passed by Ohio voters in November 2006 that tied the state minimum wage to the inflation rate.
Despite being lower than Michigan’s minimum wage, Ohio’s minimum wage is higher than West Virginia’s, which is currently $8.75, and Indiana, Kentucky, and Pennsylvania, which are each set at the federal minimum wage of $7.25
Minimum wage increases have benefits that go beyond worker income.
Economic security from higher wages lead to lower suicide rates, lower rates of firearm homicide, and lower infant mortality rates.
In a 2024 cost-benefit analysis Scioto Analysis conducted on a $15 minimum wage for Ohio, we estimated a minimum wage increase of that magnitude would save about 4,000 lives in its first ten years from fewer suicides, homicides, and infant deaths.
What should the minimum wage be in Ohio?
For about a decade now, the “Fight for $15” movement has championed a $15 minimum wage nationwide. But $15 when the movement began in 2012 would equal over $21 today.
Is $15 too low now?
University of Massachusetts Amherst Economist Arindrajit Dube proposes state and local governments tie minimum wages to median wages, making subnational minimum wages equal to half the median area wage.
This has some reason to it since half the median income is a common international benchmark for poverty in developed countries and is used by the Organisation for Economic Co-operation and Development as its poverty benchmark.
Statewide, that benchmark would put the minimum wage at $10.83, half the median annual wage of about $45,000, suggesting the current minimum wage could be a good benchmark for the state if labor markets are competitive.
But for the Columbus Metropolitan Statistical Area, that number is closer to $50,000, leading to a median wage of about $12.
For my home town of Bexley, the median wage is closer to $73,000, meaning half the hourly wage would be closer to $17.50.
There can be problems with making minimum wages too localized.
Having a $17.50 minimum wage in Bexley next to a $10.30 minimum wage in Columbus and its median wage of $43,000 could cause some strange incentives for businesses to locate on the other side of city lines to skirt wage laws.
But if I am looking at Dube’s guidance and Ohio’s current policy, a moderate minimum wage reform would empower local governments to increase their local minimum wages as they see fit.
This would allow communities to bring their minimum wages closer in line with local conditions.
One limitation of the Dube approach is that sometimes wages are kept artificially low due to market power by employers.
In oligopsonistic labor markets where a small number of employers employ most of the workers, employers can keep wages lower than the market would set them as if it was competitive.
In these cases, minimum wages can bring the prevailing wage closer in line with the market-clearing wage, both increasing wages for workers and increasing employment by encouraging workers to enter the labor market who were staying out of it due to low wages and tradeoffs inherent with working such as transportation costs, child care costs, and loss of time to care for children.
All in all, minimum wages can be a tool for meeting affordability challenges since empirical research on minimum wages finds a $100 increase in minimum wages only leads to a $4 increase in grocery prices.
They also can support public health and reduce poverty and inequality.
In this era of affordability challenges, it might be time for Ohio to revisit its minimum wage.
This commentary first appeared in the Ohio Capital Journal.