Accounting for 2020 Minimum Wage Hikes When Calculating Household Income
The minimum wage in more than 20 states and 26 cities and counties across America increased on Jan. 1, according to the National Employment Law Project (NELP). This affects more than half of the country’s population and marks the greatest jurisdictional raise in U.S. history. Of the states and municipalities increasing their minimum wage, 17 of them will hit or surpass $15 an hour. And later this year, four more states and 23 more municipalities will raise their wage floors.
The highest rates in the nation are found at the municipal level. Seattle has the highest minimum wage rate at $16 per hour for large employers and $15 for small employers. New York City’s minimum wage is set at $15 per hour for all employers. California raised the minimum wage rates by $1 on Jan. 1 ($12 per hour for employers with 25 employees or fewer, and $13 per hour for employers with 26 employees or more), while the highest state rate will remain in Washington at $13.50 per hour.
While various states and municipalities have enacted their own minimum wages, the federal minimum wage has been unchanged at $7.25 an hour since 2009. But there has been some pressure at the federal level to increase the minimum wage. House Democrats passed legislation last July that would gradually increase the federal standard to $15 an hour by 2025.
With minimum wage changes occurring in many parts of the country, you must know if and when any changes will occur in your jurisdiction, so that you can make sure you’re properly determining the income of applicants and residents at your site.
Annualizing Wage Income from Full-Time Jobs
To determine whether a household is eligible to occupy a low-income unit at your tax credit site, HUD requires you to count income that the household “anticipates it will receive” during its 12-month certification year [HUD Handbook 4350.3, par. 5-5(A)]. Because you can’t know for sure how much income household members will actually receive, you must “annualize” their income—that is, project what the household’s income will be for the next 12 months based on current information.
HUD’s rules for annualizing income vary, depending on the type of income a household member earns. But you and your staff members must follow them exactly. If you follow your own rules or rely on common sense, your tax credit site could fall out of compliance.
For household members who earn wages by the hour, week, or month, you must multiply the household member’s periodic wages by the correct factor to annualize his income. Here are the factors HUD says you must use:
- Multiply hourly wages by 2,080;
- Multiply weekly wages by 52;
- Multiply biweekly wages by 26;
- Multiply semimonthly wages by 24; and
- Multiply monthly wages by 12 [Handbook 4350.3, par. 5-5(B)].
For example, Adam earns $8 an hour at a full-time job. To annualize his income, simply multiply $8 by 2,080 hours to get $16,640. If, instead, you annualized Adam’s hourly wages by first determining how much Adam earns per day, then per week, per month, and finally per year, you might come up with a different, incorrect amount.
Annualizing Wage Income from Part-Time Work
If a household member works part time, annualize her income by multiplying her periodic wages (for instance, her hourly or weekly pay) by the number of periods (that is, hours or weeks) that she’s expected to work during the next 12 months [Handbook 4350.3, par. 5-5(B)]. Don’t use the standard annualization factors described above. You must annualize the income based on the estimated time that the household member will work at her pay rate in the coming year.
For example, Marilyn tutors a student one hour a week and gets paid $15 an hour. She expects to tutor this student for 25 hours over the next 12 months. To annualize Marilyn’s tutoring income, multiply $15 (her hourly wages) by 25 (the number of hours she expects to work). You must count $375 as Marilyn’s tutoring income.
Annualizing Income from Sporadic Jobs
If a household member works sporadically, the Handbook says to reasonably estimate what the household member will earn in the next year. You can choose the best way to make the estimate depending on the household member’s individual circumstances [Handbook 4350.3, par. 5-5(C)].
For example, Jack is a roofer. He works only if the weather permits. In the past three years, he has earned $7,500 (year 1), $3,000 (year 2), and $2,500 (year 3). A reasonable way to annualize Jack’s income is to average his earnings from the past three years [Handbook 4350.3, par. 5-5, Examples--Irregular Employment Income].
States with Minimum Wage Increases in 2020
$10.19 per hour, up 30 cents from $9.89 per hour, based on a 3% increase in the cost of living. Wage rates are adjusted annually based on inflation. School bus drivers are to be paid two times the minimum wage.
$12 per hour, up from $11 per hour. In addition, employees are entitled to paid sick leave, at the rate of one hour of paid sick time for every 30 hours worked, but with limits based on the size of the employer.
$10, up from $9.25 per hour. The minimum wage will reach $11 by 2021.
$13 per hour, for businesses with 26 or more employees; $12 for smaller employers. On April 4, 2016, California Governor Jerry Brown signed legislation to gradually raise the state minimum wage with annual increases to reach $15 by 2022 for businesses with 26 or more employees and by 2023 for smaller employers. The plan also allows for the governor to “pause” wage hikes, to be determined by Sept. 1 of each year for the next year, if negative economic or budgetary conditions emerge.
$12 per hour, up from $11.10 per hour.
$11 per hour, scheduled to increase to $12 on Sept. 1, 2020. The minimum wage is scheduled to reach $15 per hour in 2023.
District of Columbia
$14 per hour. The minimum wage is scheduled to increase to $15 on July 1, 2020. The minimum wage for tipped employees is $4.45, and is scheduled to increase to $5 per hour on July 1, 2020. Starting in 2021 both wage rates will be adjusted based on inflation.
$8.56 per hour, up 10 cents, based on a 1.12% increase in the cost of living. Tipped employees must be paid $5.54 per hour, also up 10 cents from the 2019 rate. Wage rates are adjusted annually based on inflation.
$9.25 per hour, up from $8.25. The minimum wage is scheduled to reach $15 in 2025.
$12 per hour, up from $11.
Beginning in 2020, the minimum wage is $11, increasing at different increments to reach $15 in 2025 for large employers and in 2026 for small employers.
$12.75 per hour, an increase of 75 cents. The minimum wage is scheduled to reach $15 by 2023.
$9.65, up from $9.45 per hour.
$10 per hour (up from $9.86) for employees of large employers with an annual gross volume of sales not less than $500,000. Small employers must pay employees a minimum wage of at least $8.15 per hour (up from $8.04).
$9.45, up from $8.60 per hour. The minimum wage will increase by 85 cents per hour each year until 2023, when the state minimum wage will reach $12 per hour.
$8.65 per hour, up 15 cents, based on a 1.75% change in the cost of living and rounded to the nearest 5 cents. Wage rates are adjusted annually based on inflation.
$8.25 per hour for employees who don’t receive health benefits, to increase to $9 on July 1, 2020; $7.25 per hour for employees who do receive health benefits, to increase to $8 effective July 1, 2020.
$11 per hour for most employees, up from $10 per hour; $10.30 per hour for those in seasonal employment, who work on a farm for an hourly or piece-rate wage, or who work for an employer with fewer than six employees. The minimum wage is scheduled to reach $15 for most employees in 2024, and for those in seasonal employment, who work on a farm for an hourly or piece-rate wage, or who work for an employer with fewer than six employees in 2026.
$9 per hour, up from $7.50. The minimum wage will increase to $12 in 2023.
Tiered rates vary by region: $15 per hour in New York City; $13 per hour in Nassau, Suffolk, and Westchester counties (then $1 each year after, reaching $15 on Dec. 31, 2021); $11.80 per hour in the remainder of the state (then another 70 cents, reaching $12.50, on Dec. 31, 2020).
The piece rate for agricultural workers must be equivalent to the basic minimum wage, unless a youth rate certificate is issued (wage rate then must be equivalent to the youth rate). Existing wage orders are to be adjusted to reflect the wage increases. Paid family leave is also part of the Budget Bill.
The minimum wage for workers in fast food establishments is $15 per hour in New York City and $13.75 per hour in the rest of the state.
The minimum wage at all airports (LaGuardia, JFK, and Newark Liberty International) is $15.60, and will reach $19 in 2023.
$8.70 per hour, up 15 cents from $8.55 per hour, based on a 1.5% increase in the cost of living. Wage rates are adjusted annually based on inflation. The minimum wage rate applies to employees of businesses with annual gross receipts of $319,000 per year (changed from $314,000 in 2019). For employees at smaller companies and for 14- and 15-year-olds, the state minimum wage is $7.25 per hour, which is tied to the federal rate.
The state minimum wage is tiered, with the highest rate in the Metro Portland area at $12.50 per hour ($13.25 effective July 1, 2020), the lowest in rural (non-urban) areas at $11 per hour ($11.50 effective July 1, 2020), and a minimum wage of $11.25 per hour ($12 effective July 1, 2020) in the rest of the state.
$7.25 per hour, but $12 for employees under the governor’s jurisdiction.
$10.50 per hour.
$9.30 per hour, up 20 cents from $9.10 per hour, based on a 1.7% increase in the cost of living. Wage rates are adjusted annually based on inflation.
$10.96 per hour, an 18 cent increase over the prior rate.
$13.50 per hour, for employees who have reached the age of 18, per voter-approved Initiative 1433, effective Jan. 1, 2017. The Department of Labor and Industries will resume calculating the minimum wage for calendar years 2021 and beyond, based on increases in the cost of living. This excludes minimum wage rates in Seattle.