Nebraska nixes annual inflation adjustments

Nebraska’s minimum wage will likely grow at a slower pace under a new bill signed into law yesterday.

Instead of being increased by the rate of inflation every year, Nebraska’s minimum wage will be increased by a flat 1.75% per year.

Proponents said fixed-rate minimum wage increases will provide business owners with consistent and predictable labor costs. “That consistency is good for workers and it’s good for business owners,” state Sen Jana Hughes said in a statement.

Although the change won’t necessarily slow the growth of the Nebraska’s minimum wage, it is highly likely to do so since the rate of inflation has historically outpaced 1.75%.

The following chart shows the projected change in the trajectory based on 1.75% annual growth versus 2.4% growth, the average annual change in the Consumer Price Index for All Urban Consumers (CPI-U) for the Midwest Region (the index that would have been used to calculate annual inflation adjustments if the law had not passed) during the past 25 years:

The new law also will: 

• Establish a youth minimum wage for employees ages 14 and 15, which will start at $13.50 per hour and then be increased by 1.5% once every five years starting in 2030; and
• Increase the 90-day training wage for new employees under age 20 from $5.44 per hour to $13.50 per hour, and then increase it by 1.5% annually.

These changes will take effect 90 days after the state legislature adjourns, which currently is scheduled for April 17, making the projected effective date July 16.