"State and local governments can set minimum wages in excess of the statutory federal minimum wage," Dube writes. And many do: 22 states and a handful of cities have all set their minimum wages above $7.25. But how do they know they are picking fair, helpful rates? What should guide states and municipalities as they try to target their wage rates to their specific populations?

Dube outlines two ways: Either set the minimum wage at half of a state's median wage, or begin with a wage that is half the national median and then customize it based on the costs of a particular region (as measured by the the Bureau of Economic Analysis’ regional price parities—RPPs). Between the two, Bernstein prefers the latter, since a state's median wage washes out the variations that occur within that state.

"Ikea had this very notion in mind when it announced that it would raise the minimum wage of its employees," Bernstein writes. "The hourly wage for each store will be based on the cost of living in that particular area, ranging from $8.69 to $13.22."

Bernstein adds that Dube's proposal doesn't just make economic sense but it has political merit too. "Economists endlessly and fruitlessly argue about whether the impact of minimum wages on jobs is very small or zero," he writes. "Policy makers who most resist minimum wage increases tend to be ones representing the interests of states with lower prices and wages. To their credit, many states and even some cities are ignoring this unhelpful debate and taking action to raise the pay of their low-wage work force, push back a bit on inequality, and work around Washington’s dysfunction. If adjustments for local wages and prices makes this go down easier, so much the better."