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Some Paychecks Get Fatter: 14 States Hike Minimum Wage Entering 2016

As the new year arrives, 14 states are implementing higher minimum wages through legislative action or automatic cost-of-living increases.

From major cities like Los Angeles to big businesses like McDonald's, 2015 saw momentum for lifting pay above the federal level of $7.25 an hour. Effective Thursday and New Year's Day, 14 states will implement higher minimum wages through legislative action or automatic cost-of-living increases.

Now advocates of higher wages are focused on 2016, as several states and cities including California and New York will consider proposals in the new year to gradually lift pay further to $15 an hour.

"Consumer demand and income levels have not recovered in the wake of the Great Recession and raising the minimum wage is a very effective tool in boosting consumer demand," said Alissa Barron-Menza, vice president of Business for a Fair Minimum Wage.

But other groups contend higher mandated wages ultimately hurt workers and businesses. Forced pay hikes can trigger higher prices for goods and services, and reduced employee benefits to offset wage hikes. "Businesses, whose sales are not increasing at the same pace as wages are increasing, are going to face difficult decisions," said Jack Mozloom, a spokesman for the National Federation of Independent Business.

On Jan. 1, 10 states — Alaska, Arkansas, California, Connecticut, Hawaii, Massachusetts, Michigan, Nebraska, Rhode Island and Vermont — will implement higher wages. Massachusetts and California are the highest at $10 an hour. New Yorkers and West Virginians will usher in the holiday with hourly raises to $9 and $8.75, respectively, effective Thursday.

Two additional states will receive automatic increases based on the cost of living effective Jan. 1. Colorado's minimum hourly pay will go from $8.23 to $8.31, and South Dakota will lift pay from $8.50 to $8.55, according to the National Conference of State Legislatures.

Despite the collective pay raises, only 29 states and Washington, D.C., have wages above the federal floor of $7.25 an hour.

New York Gov. Cuomo’s Power Play for a $15 Minimum Wage

In 2015, companies including McDonald's, Facebook and Target also made decisions to lift wages for some or all of their workers. And large cities like Los Angeles, Seattle, San Francisco and Chicago have moved to hike wages beyond the current federal minimum.

Plus, small businesses have moved independently to lift pay. "Employees who are well-compensated work better and stay longer, a very important contributor to the success of my business," Rachael Solem, president and general manager of Irving House Inn in Cambridge, Massachusetts, said in a statement. "It makes no sense to expect people to work who don't earn enough money for rent, food, transport or medical attention. These employees are stressed out, resentful and just not at their best."

But there's plenty of disagreement about the impact of mandated higher pay.

Businesses absorb pay raises that can ultimately hurt workers and employers. "They will have to find ways to absorb that increase, whether it's fewer hours for workers, cutbacks in other employee benefits," said Mozloom of the NFIB. "And very likely, at the lower end of the scale, employers will take a hard look at new tech and ways to replace human workers with automation," he said.

Hiking Minimum Wage Won’t Stop Poverty: Fed Paper

With support from the White House for a higher federal minimum wage, as well as two plans from congressional Democrats to hike the federal floor to $12 and $15 an hour by 2020, expect the wage debate to intensify in 2016 on the presidential campaign trail.

Adds Mozloom, "Politically, there will be more pressure on Main Street on this issue in 2016."