For millions of residents, the cost of living in major metropolitan areas continues to climb, squeezing household budgets and forcing difficult tradeoffs on everything from housing to groceries. Sky-high minimum wage mandates may be making this problem worse.
Policymakers often say higher minimum wages as a way to help workers keep pace with rising prices. Yet according to the most recent consumer price index data, there is a clear positive trend between higher minimum wage mandates and the rising cost of food, housing, and transportation.
This relationship is evident at the state level. The latest available data from the U.S. Bureau of Economic Analysis confirms that higher wage floors tend to coincide with higher overall living costs. In 2023, the top five states with the highest minimum wages were all among the top 10 states for highest cost of living. By contrast, states with the lowest cost of living all had minimum wage set at the federal rate of $7.25 per hour.
In 2025, cities including Los Angeles, Seattle, and New York had some of the highest hourly minimum wage rates in the nation – topping $16 or more. These areas had significantly higher cost of living compared to cities with lower mandates, like Atlanta, Dallas, and Miami.
This trend is not difficult to explain. In high-cost cities, labor represents a significant share of operating expenses across large parts of the local economy. When labor costs rise, those increases rarely remain isolated. Businesses respond by raising prices, adjusting services, or rethinking staffing models, and those changes ultimately show up in the costs consumers face.
For workers, that can mean earning more per hour goes hand-in-hand with paying more for rent, meals, and basic services. In expensive cities, even modest price increases can quickly absorb hourly wage gains, leaving purchasing power largely unchanged.
As lawmakers consider future minimum wage increases, especially in already high-cost metropolitan areas, they should recognize this pattern. The evidence suggests that higher wage floors, on their own, are unlikely to make expensive cities meaningfully more affordable. Instead, misguided state and local wage hikes might actually make the problem worse.