Inflation-based minimum wage increases that are baked into many city and state laws cost businesses a few cents more per hour in a typical year, but this year’s unusually high inflation threatens to drive hourly wage jumps of $1 or more in some locales.

Automatic increases tied to inflation will take effect in about a dozen states in 2023, plus about twice as many cities and counties, most of them pegged to growth in the Consumer Price Index. Many of those states will make announcements in October or November of what new, inflation-based wage floors will be starting Jan. 1.

Large minimum wage increases could provide a boost to low-wage hourly workers, while putting an added financial strain on businesses that employ them. On the other hand, the steeper-than-usual increases might have limited impact in places where businesses already must pay above minimum wage to attract workers.

The annual inflation rate nationally stood at 8.5% in July, according to the latest CPI figures released by the US Bureau of Labor Statistics.

Denver is an early indicator of where minimum wages might be headed. The mayor announced the city’s minimum wage will rise to $17.29 per hour starting Jan. 1, up from $15.87 this year, an increase of 8.9%—more than triple a typical inflation-based increase, such as the 2.7% and 1.9% raises for...

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