NerdWallet's Smart Money Podcast - Money News: Some States, Cities Crank Up Minimum Wage While Feds Lag

Episode Date: January 31, 2024

Get an in-depth look at U.S. minimum wage variations, with budgeting tips and assistance programs for financial security. Are we in a recession? How much inflation has happened in the US recently? Is it too early to file your taxes? Hosts Sean Pyles and Anna Helhoski delve into this week’s financial headlines, including positive GDP growth and the implications of inflation on interest rates, before taking a closer look at the pressing issue of minimum wage in the United States. They address the disparities in minimum wage across states and cities and how it impacts workers. Plus, analysis of data on minimum wage increases in various areas, highlighting significant bumps in pay rates. Their discussion covers the highest minimum wages in the U.S., emphasize the challenges faced by those stuck at the federal minimum wage of $7.25 per hour and the struggles of hourly workers to keep up with inflation, and offer suggestions to help listeners facing financial difficulties, including budgeting tips and reaching out to organizations equipped to offer support for those who need it. In their conversation, the Nerds discuss: minimum wages, budgeting tips, financial assistance, hourly workers, inflation, GDP growth, interest rates, personal finance, money headlines, tax season, federal minimum wage, income, consumer confidence, financial crisis, eviction, food insecurity, assistance programs, 50/30/20 rule, SNAP benefits, bills, payment plans, mortgage, rental assistance, legal aid, economic outlook, economic trends, gross domestic product, Federal Reserve, inflation-adjusted GDP, disposable incomes, financial counselors, 211, Emergency Rental Assistance Programs, Legal Services Corporation, National Low Income Housing Coalition, Inflation Reduction Act, stock market, recession predictions, part-time jobs, gig economy, and financial security. To send the Nerds your money questions, call or text the Nerd hotline at 901-730-6373 or email [e-mail]. Like what you hear? Please leave us a review and tell a friend.

Welcome to NerdWallet's Smart Money Podcast. I'm Sean Piles. And I'm Anna Helhosky. And this is our weekly personal finance news roundup, where we take a look at recent developments in the world of money, and then go in-depth on an issue that's important to your life and your bottom line.

Today, we're looking at minimum wage, what parts of the country it's highest and lowest, what this means to wages across the board, and how to manage your budget if minimum wage isn't doing it for you. But first, a few money headlines from the last few days. So Ana, it's been a pretty banner start to the year in the broader economy. Last week, we told folks about the bullish stock market and a spike in consumers feeling

better about the economy. And last week, the Commerce Department reported that fourth quarter gross domestic product, GDP, grew at an annual rate of 3.3%. It's quite an end to a year that started with a raft of predictions that we'd be in a recession by the end of 2023. Yeah, what's that saying? The stock market has predicted nine of the last five recessions. Well, from the fourth quarter of 2022 through the fourth quarter of 2023, inflation adjusted GDP grew at 3.1%. And not only that, but for that same time period, disposable incomes rose 4.2%. What do all those percentages mean? Well, again, we are not in a recession. And thanks to a lot of spending on the part of us consumers, the economy is humming along. As long as inflation stays in check. Speaking of inflation. I was speaking of inflation. Well, we got the latest

figures on that score last week and prices, so-called core inflation, rose just 0.2% from November to December. That's something the Federal Reserve's Open Market Committee will be taking a close look at when they meet this week to decide what to do with interest rates. And finally, Sean, I hope you're ready because the tax man cometh. Oh, I was hoping maybe they'd just skip taxes this year. I mean, it's a leap year, so it's special. Not special. And this week marks the official serve tax season.

The IRS started accepting returns on Monday. Did you send yours in already, Sean? Oh, of course. No, that's not true. I know there are a lot of expectations on us nerds, but getting my taxes in before the IRS even starts accepting them isn't one of them. Me either. I'll be working on them soon, though, as will the rest of our fellow Americans.

One thing to know is that the IRS has endeavored to speed up both its customer service response times and the time it takes to get a refund back to you. All thanks to a budgetary infusion from the Inflation Reduction Act that was passed back in 2022. Yeah, you can check the IRS Where's My Refund app to see when yours should arrive. The app itself is called IRS 2 Go. That's the number two there. But if you type Where's My Refund into the App Store, it'll find it for you. The IRS says that most folks should get their refund

within 21 days of filing. And this year, the deadline is, as usual, April 15th to file your taxes. No weekend gimmies, so get cracking. That's what we saw and heard over the last week in Money News. Let us's what we saw and heard over the last week in Money News. Let us know what we missed and send us the headlines that you've seen and want to hear more about. And now on to our in-depth look at minimum wages across the country.

The federal minimum wage is $7.25 an hour, and that amount hasn't budged since 2009. It's the longest stretch without a pay bump since 1938. And 20 states have their minimum wage set at that rate. But over the years, some states and cities have raised their minimum wages much higher. In fact, on January 1st, minimum wages were raised in 22 states and 38 cities and counties. And those wage increases are estimated to impact 9.9 million workers. Ana, you've been analyzing minimum wage data across the country. What were some of the biggest bumps for this year? Let's start with states, Sean. The biggest increase as of January 1st was in Hawaii.

Workers there saw a 28% bump, or about $2, that brought the minimum level up to $14 an hour. Most of the state increases this year were due to inflation adjustments that went into effect for the new year. But the highest minimum wage among all states was actually set last July in Washington, D.C. Workers there now earn $17 an hour. That's right. And D.C. isn't the only coastal place that has a higher minimum wage. Washington state, where I live, isn't too far behind at $16.28. Connecticut, New Jersey, New York, Massachusetts, and Maryland are all in the $15 and up category. But Sean, the top wages are actually found in individual cities. Right now, 58 cities and counties across the U.S. have set their base wages above their states. Guess which

coast is leading the pack, Sean? I'm a little biased, but I'm going to go with the West Coast. Ding, ding, ding. That's correct, Sean. The top three are all in Washington state with Tukwila at the tippy top at $20.29. Seattle and SeaTac are both over $19 an hour. Among the other cities with the highest minimums, five are in the Bay Area and one is in Southern California, West Hollywood. The only other city in the top 10 that's not on the West Coast is number eight, Denver at $18.29. So Ana, what about all the places that are stuck at the federal minimum wage? It doesn't look like that's going to grow anytime soon. Any congressional efforts to change the federal minimum wage have fallen flat. That's right, Sean.

But federal data shows that most hourly workers are earning more than that level. So, for example, in Louisiana and Mississippi, only 3% of hourly paid workers earn $7.25 per hour. Nationally, among all hourly workers, less than 0.2% get paid that rate. And those are usually tipped workers. Still, the federal minimum wage isn't enough to keep up with inflation. And for hourly workers, that means your dollar doesn't go as far. Even cobbling together multiple part-time jobs or gigs on the side doesn't mean you're financially secure. That's right, Sean.

So what are some things you can do if you're in a precarious money situation? The important thing to note is that you don't have to navigate programs alone. Financial counselors, local and national organizations, and other nonprofits can help. For example, if you're in a financial crisis like a possible eviction or facing food insecurity, you can call 2-1-1 to reach a local expert to connect you with all kinds of resources, like assistance programs for food, housing, and utility costs, as well as medical bills. I bet reaching an actual person to guide you through the red tape makes a big difference compared with dealing with an automated phone system. I want to point out one thing, Sean, and that's sometimes people hesitate to get the help they need from assistance programs. That's right. And making the decision to get that help

can make all the difference. There's also no benefit to waiting either because there can be lag time to get through applications for certain programs and have them approved. But things like SNAP benefits, also referred to as food stamps, can kick in quickly, seven days if you have no income. So what if you're not in a financial crisis per se,

but you're just generally having trouble making ends meet? Well, that's where tried and true budgeting methods can come in handy. Start by writing down your entire income and how much you spend on bills and groceries. We usually advise the 50-30-20 rule. That's 50% of your income on needs, 30% on wants, and 20% towards savings and debt repayments. But those percentages might not work for your situation. So you've got to prioritize needs and debt repayment first, then figure out possible extras and eventually savings. And if you're not sure if you can pay your bills or you're juggling which ones to pay or not, contact your landlord, utility company,

medical provider, credit card company, mortgage lender, basically whoever sends you a bill and ask for payment plan options or any other assistance available. And speaking of assistance, there are a few other organizations that I wanna shout out that can help you navigate local, regional, and national programs. The Association for Financial Counseling

and Planning Education, which can help you manage expenses and build a budget. The National Low Income Housing Coalition has a database of emergency rental assistance programs. And finally, the Legal Services Corporation, which can help you find legal aid organizations that provide free legal help if you're low income. That's it for this week's Money News.

We always welcome your money questions and comments. Turn to the nerds and call or text us your questions at 901-730-6373. That's 901-730-NERD. Or send us a voice memo at podcast at nerdwallet.com. And remember to follow, rate, and review us wherever you're getting this podcast. Today's episode was produced by Tess Biglin and edited by Rick VanderKneife. Sarah Brink mixed our audio.

And here's our brief disclaimer. We are not financial or investment advisors. This nerdy info is provided for general educational and entertainment purposes and may not apply to your specific circumstances. And with that said, until next time, turn to the nerds.