Washington's minimum wage will continue to rank highest in the nation on Jan. 1, when the base pay increases 14 cents to $8.07 an hour.

The annual pay jump comes by way of a 1998 voter-approved law that ties the wage rate to the inflation rate as determined by the federal Consumer Price Index for Urban Wage Earners and Clerical Workers.

 Each September, the state calculates the percentage change in that rate during the past 12 months and adds that amount onto the state's minimum wage. This year the figure was 1.8 percent. Last year, it was 3.9 percent, leading to a 30-cent raise.

The adjustment may intensify the debate about the merits of the annual raise. Pro-business groups say the increase hurts the low-income workers it is supposed to help by increasing the cost of hiring, and by extension hampers economic expansion. They say small businesses are hit harder because they're already besieged with high costs for unemployment insurance, workers' compensation, health care and other regulations.

A 2006 Washington State University study concluded the opposite, saying the minimum wage increase benefits most low-paid workers and does little harm to business. The study said the loss of gross state product from the wage increase is roughly $12 million or just 0.006 percent of the baseline gross state product.

Eighteen states have approved a minimum wage higher than the federal rate, according to the U.S. Department of Labor. Like Washington, Oregon pegs annual increases in the minimum wage to the Consumer Price Index to keep pace with inflation. In 2008, Oregon's inflation- adjusted minimum wage will increase 15 cents to $7.95 an hour.

In July, the federal minimum wage rate was increased by 70 cents to $5.85, the first increase since 1997. The federal rate is set to climb to $7.25 by the summer of 2009.