California and New York are about to get a raise.
California Gov. Jerry Brown (D) signed into law a measure Monday that will hike the state's minimum wage to $15 per hour by 2023 — making the Golden State the second in the nation to legislate a wage hike to that level. The first came minutes earlier in New York, where Gov. Andrew M. Cuomo (D) signed a similar piece of legislation, implementing staggered wage hikes throughout the state over the next several years.
In a pair of statements, President Obama commended both Cuomo and Brown, describing the increase as a step in the right direction.
"Since I first called on Congress to increase the federal minimum wage in 2013, 18 states and more than 40 cities and counties have acted on their own -- thanks to the strong leadership of elected officials, businesses, and workers who organized and fought so hard for the economic security families deserve," he said in the statement on New York — and echoed in nearly identical language later on California's minimum wage hike. "Now Congress needs to act to raise the federal minimum wage and expand access to paid leave for all Americans."
The wage hikes have prompted a lot of discussion about the appropriate minimum-wage level, but such debate often ignores critical differences in the purchasing power of the dollar among states and cities: A dollar in California or New York just does not go as far as it does in many other states.
We know that thanks to a relatively new federal measure unveiled just three years ago by the Bureau of Economic Analysis.
The BEA's Regional Price Parity indicator tracks the purchasing power across states and cities. It is based in part on the Consumer Price Index, a national measure of inflation that tracks the prices of goods and services in more than 200 categories — items as wide-ranging as cereal and milk, rent, chicken, shirts, jewelry, college tuition, wine and funeral expenses.
What the data show is that $15 in California buys much less than it would in most other states. That's because prices in California are among the highest in the nation, as of 2013, the most recent year for which data is available.
Hawaii led the list, followed by New York and New Jersey. California was fourth, followed by Maryland.
D.C. was higher than any state, though due to its unique structure it does not compare directly to states.
As a result, California's proposed wage hike will only buy so much. In Mississippi, where prices are lowest in the nation, a worker would have to earn about $11.60 per hour to have the same purchasing power as a $15 hourly worker in California. In other words, at those levels, both workers can buy virtually the same goods and services.
Here's a look at the hourly wage one would have to earn in each state to buy as much as $15 does in California.
Prices are, of course, incredibly variable within states, too.
In New York, for example, prices in metropolitan areas are as much as 24 percent higher than in non-metro areas, according to the BEA data.
In Illinois and Maryland, metro areas can be 23 percent higher than their non-metro counterparts.
The difference is not quite as large in California, where prices in metro areas are about 16 percent higher than in non-metro areas.
Prices can vary dramatically even among metropolitan areas in the same state. A resident of the San Francisco metro area, for example, would have to earn about $19.80 per hour to have the same purchasing power as someone in El Centro working at a $15 wage, for example.
Another major source of variation is rent, which is among the most variable goods and services.
A $1,000 rent in California buys far less than it does in other parts of the nation. (Rents are only higher in Hawaii and D.C.) In Arkansas, home to the nation's cheapest rents, one need only spend $431 to match the value of a $1,000 rent in California. In Pennsylvania, $621 goes as far as $1,000 in California.
Here's a look at how much one would have to pay in rent in each state to match the value of a $1,000 rent in California.