Although the federal minimum wage is $7.25 an hour, the minimum an employer must pay depends on the state the employee lives in. Some states, and even cities, have mandated minimum wages that are different from the federal minimum.
Employees who meet federal minimum wage eligibility requirements and are covered by both state and federal minimum wage laws are entitled to the higher of the two. In 2022, 1.3% of hourly workers earned at or below the minimum wage, which is the lowest since data collection began in 1979.
What is the federal minimum wage?
The federal minimum wage is $7.25 per hour for employees who are covered and nonexempt. States and cities can establish their own minimum wages, and many have mandated more than double the federal minimum. Other states have requirements below $7.25, which are only applicable to employees who can’t earn the federal minimum because they’re not covered under the Fair Labor Standards Act.
A person earning $7.25 per hour for 40 hours a week would make just over $15,000 a year before taxes. The 2023 poverty level was $15,852 for a single person under 65 years old. The median annual gross pay for all Americans in 2023 was $58,140.
When was the federal minimum wage established?
The federal minimum wage was established in the Fair Labor Standards Act in 1938, which set it at $0.25 an hour. Since then, congressional amendments have periodically increased it, most recently to $7.25 in July 2009. The federal minimum applies to eligible employees living in states without a state-mandated minimum wage.
Who’s eligible for the federal minimum wage?
To be eligible for minimum wage, an employee must be both covered and nonexempt.
“Covered” workers are those employed by a business with annual sales of $500,000 or more; or by a government agency, school, hospital, or resident nursing home; who are involved in interstate commerce; or who are domestic workers like cooks, babysitters, and housekeepers.
“Exempt” employees either earn a fixed salary that’s not hour-dependent or have weekly pay above a certain threshold (currently, $684), making them exempt from the minimum wage (and often from overtime pay). Commissioned salespeople, mechanics, people working at seasonal and recreational establishments, and computer professionals are commonly exempt.
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These exclusions and exemptions can mean some workers may earn less than $7.25 an hour. For example, the federal minimum for tipped employees is $2.13 an hour if that amount plus tips equals at least the federal minimum wage. Workers 20 years old or younger may earn $4.24 an hour for their first 90 calendar days.
How often does Congress increase the federal minimum wage?
The minimum wage has been raised twenty-two times since 1938’s $0.25. We’re currently in the longest period since an increase has been applied to the minimum wage, which was last raised in July 2009. In 2021, the Biden-Harris administration signed an executive order to raise the minimum wage to $15 for federal contractors.
Adjusting for inflation, the federal minimum wage was highest in 1968: $1.60 an hour in 1968 is equivalent to $14.01 an hour in 2023 dollars.
Who earns the federal minimum wage?
Of all the hourly workers in the US, some are more likely to earn the federal minimum, based on factors like age, occupation, education level, race, and gender.
Young people are more likely to earn the minimum wage than older workers
While 2.9% of hourly workers ages 16 to 24 earn $7.25 an hour or less, 1.1% of hourly workers ages 25 to 34 earn the minimum wage. Less than 1% of hourly workers older than 35 years old earn the minimum wage.
Less-educated people were more likely to earn the minimum wage than college graduates
Hourly workers with higher levels of education were more likely to outearn the federal minimum wage. In 2022, 1.3% of hourly workers whose maximum education level was high school diploma earned the federal minimum wage or less, as did 1.3% of people with less than a high diploma. Only 0.9% of people with an associate or bachelor’s degree earned at or below the federal minimum.
Food prep and service workers are most likely to earn the minimum wage
Nearly 9% of hourly food preparation and service workers make the minimum wage or less, the highest of any occupation type; for personal care and service workers, 2.4% earn the federal minimum or less. Of all remaining occupations, 1.1% or fewer hourly workers earn minimum wage.
Black women and white women are most likely to earn the minimum wage – and white men are least
Black or African American women and white women have the highest rate of employees earning at or below federal minimum wage, at 1.8% of hourly workers. The least likely of all genders and races to make the minimum or below are white men, at 0.7%.
What’s the minimum wage in your state?
Thirty states plus Washington, DC, have minimum wages above $7.25. Five states – Alabama, Louisiana, Mississippi, South Carolina, and Tennessee – do not have a state-mandated minimum wage at all. Thirteen states have minimum wages equal to the federal minimum, and two states – Wyoming and Georgia – have minimum wages below the federal minimum wage.
In Oregon and New York, some cities and municipalities have established their own minimum wage rates, which differ from the statewide minimum wage. These local minimum wages are tailored to address the cost of living and economic conditions specific to these areas.
Which states have the lowest minimum wage?
Georgia and Wyoming have the lowest state-mandated minimum wage, at $5.15. This minimum wage applies when employees are not subject to federal wage law, which applies when an employee is exempt, or doesn’t meet coverage requirements.
Alabama, Louisiana, Mississippi, South Carolina, and Tennessee do not have a state minimum wage, so employers are obligated to pay the federal minimum wage.
How is minimum wage different from living wage?
The minimum wage is established by Congress and enforced by the Department of Labor. The living wage is a subjective concept calculated by policymakers and advocacy groups that works backward from actual costs of living to calculate a wage that covers the basic needs and expenses — housing, food, healthcare, transportation, etc. If the minimum wage in a particular area is less than the estimated living wage, the suggestion is that earnings from a full-time minimum-wage job are not enough to support someone without additional income or aid.
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