Minimum wage in the United States
In the United States, workers generally must be paid no less than the statutory minimum wage as specified by the U.S. federal government and local as well as state governments. As of July 2009, the federal government mandates a nationwide minimum wage level of $7.25 per hour, while some states and municipalities have set minimum wage levels higher than the federal level, with the highest state minimum wage being $9.32 per hour in Washington as of January 1, 2014. On March 26, 2014, Connecticut passed legislation to raise the minimum wage from $8.70 to $10.10 by 2017, the first state to address President Obama's call for an increase on minimum wage. On June 2, 2014, the City Council of Seattle, Washington passed a local ordinance to increase the minimum wage of the city to $15 an hour, giving the city the highest minimum wage in the United States, which will be phased in over seven years, to be fully implemented by 2021.
Among those paid by the hour in 2013, 1.5 million were reported as earning exactly the prevailing federal minimum wage. About 1.8 million were reported as earning wages below the minimum. Together, these 3.3 million workers with wages at or below the minimum represent, respectively: 1.0% of the population, 1.6% of the labor force, 2.5% of all workers, and 4.3% of hourly workers.
Federal minimum wage
Since it was last re-set on July 24, 2009, the federal minimum wage in the United States has been $7.25 per hour. Some U.S. territories (such as American Samoa) are exempt. Some types of labor are also exempt: employers may pay tipped labor a minimum of $2.13 per hour, as long as the hourly wage plus tip income equals at least the minimum wage. Persons under the age of 20 may be paid $4.25 an hour for the first 90 calendar days of employment (sometimes known as a youth, teen, or training wage) unless a higher state minimum exists.
The July 24, 2009 increase was the last of three steps of the Fair Minimum Wage Act of 2007. The wage increase was signed into law on May 25, 2007, as a rider to the U.S. Troop Readiness, Veterans' Care, Katrina Recovery, and Iraq Accountability Appropriations Act, 2007. The bill also contained almost $5 billion in tax cuts for small businesses.
In April 2014, the United States Senate debated the Minimum Wage Fairness Act (S. 1737; 113th Congress). The bill would amend the Fair Labor Standards Act of 1938 (FLSA) to increase the federal minimum wage for employees to $10.10 per hour over the course of a two year period. The bill was strongly supported by President Barack Obama and many of the Democratic Senators, but strongly opposed by Republicans in the Senate and House.
Voters in the Republican-controlled states of Alaska, Arkansas, Nebraska and South Dakota will consider ballot initiatives in November that would raise the minimum wage above the national rate of $7.25 per hour. If successful, it would provide further evidence that raising minimum pay has support across party lines. It was also concluded that the wage question might also boost Democrats chances in election by drawing in low-wage workers.
List of minimum wage levels by jurisdiction
This is a list of the minimum wages (per hour) in each state and territory of the United States, for jobs covered by federal minimum wage laws. If the job is not subject to the federal Fair Labor Standards Act, then state, city, or other local laws may determine the minimum wage. A common exemption to the federal minimum wage is a company having revenue of less than $500,000 per year while not engaging in any interstate commerce.
Under the federal law, workers who receive a portion of their salary from tips, such as wait staff, are required only to have their total compensation, including tips, meet the minimum wage. Thus, often, their hourly wage, before tips, is less than the minimum wage. Seven states, and Guam, do not allow for a tip credit. Additional exemptions to the minimum wage include many seasonal employees, student employees, and certain disabled employees as specified by the FLSA.
In addition, some counties and/or cities within states may observe a higher minimum wage than the rest of the state in which they are located; sometimes this higher wage will apply only to businesses that are under contract to the local government itself, while in other cases the higher minimum will be enforced across the board.
|Tipped||$2.13||The Fair Labor Standards Act requires a minimum wage of $2.13 for tipped workers with the expectation that wages plus tips total no less than $7.25 per hour. The employer must pay the difference if total income does not add up to $7.25 per hour.|
|Non-tipped||$7.25||Per the Fair Minimum Wage Act of 2007 (FMWA) since July 24, 2009.|
|Youth||$4.25||Per the Fair Minimum Wage Act of 2007 (FMWA) since July 24, 2009, persons under the age of 20 may be paid $4.25 for the first 90 calendar days of their employment.|
|Alaska||$7.75||$7.75||In 2009, a state law was passed to keep the state minimum wage 50 cents above the federal level.|
|Arizona||$7.90||$4.90||The state minimum wage increased to $7.90 at the start of 2014. The state tipped minimum wage is $3 per hour less. Pursuant to Arizona Proposition 202 (2006), the rates are adjusted annually on January 1 based on the U.S. Consumer Price Index. This rate increase does not affect student workers in places such as libraries and cafeterias because those positions are given by universities, which are state entities.|
|Arkansas||$6.25||$2.63||Applicable to employers of 4 or more employees.|
|California||$9.00||$9.00||California's minimum wage will increase to $10.00 on January 1, 2016. Jackson Rancheria: $10.60 since January 1, 2014 on the Tribe's sovereign 1,500-acre reservation in Amador County. San Francisco: $10.74 since January 1, 2014. (San Francisco has the highest minimum wage in the United States.) San Jose: $10.15 since January 1, 2014.|
|Colorado||$8.00||$4.98||Set to increase or decrease according to yearly changes in inflation. The tipped wage is $3.02 less than the minimum wage |
|Connecticut||$8.70||$5.69||Connecticut's minimum wage will increase to $9.00 on January 1, 2015. On March 26, 2014, the state passed legislation to raise the minimum wage to $10.10 by January 1, 2017. Connecticut's tipped minimum wage is 69% of the state minimum wage (tipped employees defined as $10/wk or $2/day in tips).|
|Delaware||$7.75||$2.23||Delaware's minimum wage will increase to $8.25 on June 1, 2015.|
|Florida||$7.93||$4.91||Rate is increased annually based upon a cost of living formula, based on a 2004 ballot referendum. Florida's minimum wage is set to increase by twelve cents from $7.93 to $8.05 and the tipped minimum wage from $4.91 to $5.03 on January 1, 2015.|
|$2.13||Only applicable to employers of 6 or more employees. If fewer than six, then there is no minimum at all. The state law excludes from coverage any employment that is subject to the Federal Fair Labor Standards Act when the federal rate is greater than the state rate.|
|Hawaii||$7.25||$7.00||Tipped employees earn 25 cents less than the current state minimum wage. Hawaii's minimum wage will increase to $10.10 on January 1, 2016.|
|Illinois||$8.25||$4.95||$7.75||Employers may pay anyone under the age of 18, or anyone for the first 90 days of employment, fifty cents less. Tipped employees earn 60% of the minimum wage (employers may claim credit for tips, up to 40% of wage) There is also a training wage for tipped employees.|
|Iowa||$7.25||$4.35||Most small retail and service establishments grossing less than 300,000 annually are not required to pay the minimum wage. Tipped employees can be paid 60% of the minimum wage.|
|Maine||$7.50||$3.75||Tipped rate is half of the current state minimum wage. Mike Michaud has called for a statewide minimum wage increase to $9.00 by 2016.|
|Maryland||$7.25||$3.63||Tipped employees earn $3.63. Maryland's minimum wage will increase to $10.10 by 2018|
|Massachusetts||$8.00||$2.63||$1.60 for agricultural employees. Massachusetts' mandates time-and-a-half for retail workers working on Sunday. Massachusetts' minimum wage will increase in phases to $11.00 by 2016.|
|Michigan||$8.15||$2.65||$4.25||Minors under 18 years of age may be paid a minimum hourly wage rate of $7.25 per hour. Phased-in minimum wage increase to $9.25 by 2018.|
|Minnesota||$8.00||$6.50 Small Employer
$6.15 Large employer
|Small employers, whose annual receipts are less than $625,000 and who do not engage in interstate commerce, can pay their employees $5.25 per hour. Overtime applies after 48 hours per week.Note: The federal minimum wage for all employers grossing more than $500,000 is $7.25 an hour as of July 24, 2009, so the Minnesota large-employer rate of $6.15 an hour is obsolete as of that date, except that it applies to tipped employees as it is higher than the federal tipped rate. For large-employer, the minimum wage becomes $8.00/hour on Aug 1, 2014; $9.00 on Aug 1, 2015; and $9.50 on Aug 1, 2016. For small-employer, the same timeframe will be used for increases to $6.50, $7.25, then $7.75. Beginning January 1, 2018, all minimum wage rates will increase by the national implicit price deflator or 2.5%, whichever is lower.|
|Missouri||$7.50||$3.75||This rate is automatically adjusted annually based on the U.S. Consumer Price Index rounded to the nearest five cents. In October 2011, the Missouri Department of Labor announced that the state minimum wage would not increase in 2012. The rate was increased by 15 cents to $7.50 on January 1, 2014.|
|Montana||$7.90||$7.90||This rate is automatically adjusted annually based on the U.S. Consumer Price Index. Tip income may not be applied as an offset to an employee's pay rate. The minimum pay is $4/hour for business with less than $110,000 in annual sales.|
|Nevada||$8.25||$8.25||The minimum wage has been $8.25 ($1 higher than the federal minimum) since July 1, 2010. Employers who offer health benefits can pay employees $7.25. The rate is adjusted every July 1, based on the federal minimum or the accumulated inflation since 2006, whichever is higher, based on a 2006 Minimum Wage Amendment to the Nevada Constitution.|
|New Jersey||$8.25||$2.13||Increased to $8.25 in January 2014.|
|New Mexico||$7.50||$2.13||$10.64 in Santa Fe as of 2014. (Santa Fe has the third highest minimum wage in the United States after Jackson Rancheria, CA, and San Francisco.) Albuquerque's minimum wage became $8.60 on January 1, 2014.|
|New York||$8.00 ||Varies||Minimum wage rate will increase to $8.75 on December 31, 2014; then $9.00 on December 31, 2015. New York State also has a minimum for exempt employees of $543.75 per week as of July 24, 2009. Tipped employee minimum ranges from $4.90 to $5.65 depending on industry. Effective December 31, 2013, there are different rules for the minimum cash wage for employers employing tipped employees outside of the hospitality industry, (e.g., in car washes and in salons). For workers earning more than $1.95 on average per hour in tips, the minimum cash wage will be $6.05 per hour; for workers earning between $1.20 and $1.95 in tips on average per hour, the cash wage is $6.80 |
|North Dakota||$7.25||$4.86||Tipped minimum is 67% of the minimum wage.|
|Ohio||$7.95||$3.98||$7.25||This rate is adjusted annually on January 1 based on the U.S. Consumer Price Index and will increase to $8.10 on January 1, 2015.|
|Oklahoma||$7.25||$2.13||$2.00 per hour for employers grossing under $100,000 and with less than 10 employees per location.(OK Statutes 40-197.5).|
|Oregon||$9.10||$9.10||Rises with inflation since 2003 due to Oregon Ballot Measure 25 (2002). Rate will increase from $9.10 on January 1, 2015.|
|Rhode Island||$8.00||$2.89||Rhode Island's minimum wage will increase to $9.00 in 2015.|
|Vermont||$8.73||$4.23||Adjusted on January 1 of each year to rise with inflation. The rate will increase to $9.60 on January 1, 2016; $10.00 in 2017; $10.50 in 2018; beginning in 2019, the minimum wage will be indexed to inflation.|
|Washington||$9.32 ||$9.32||$7.81||Minimum wage increases annually by a voter-approved cost-of-living adjustment based on the federal Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). Washington's minimum wage will increase from $9.32 to $9.47 on January 1, 2015. Beginning in 2015, the city of Seattle will begin phasing in a minimum wage rate of $15.00 which is to be completed for small businesses by 2017, and for all businesses by 2021.|
|West Virginia||$7.25||$5.80||Applicable to employers of 6 or more employees at one location not involved in interstate commerce. Tipped wage is 80% of federal minimum wage. West Virginia's minimum wage will increase from $7.25 to $8.00 on December 31, 2014; and to $8.75 by December 31, 2015.|
|American Samoa||$4.18-$5.59||Varies by industry. On September 30, 2010, President Obama signed legislation that delays scheduled wage increases for 2010 and 2011. On July 26, 2012, President Obama signed S. 2009 into law, postponing the minimum wage increase for 2012, 2013, and 2014. Annual wage increases of $0.50 will recommence on September 30, 2015 and continue every three years until all rates have reached the federal minimum.|
|District of Columbia||$9.50||This rate is automatically set at $1 above the federal minimum wage rate. The tipped wage in Washington, D.C., is $2.77 per hour. A law enacted in January 2014 will have annual increases every July; $10.50 in 2015, and $11.50 in 2016. Afterwards the increases will be based on the region's cost of living.|
|Guam||$7.25||Tipped employee minimum $6.55|
|Northern Mariana Islands||$5.55||Since September 30, 2012. Wages were to go up $0.50 annually to the $7.25 rate by 2015. Bill S. 256 to delay the planned increases to the full rate until 2018 passed in Sept. 2013.|
|Puerto Rico||$7.25||Employers covered by the Federal Fair Labor Standards Act (FLSA) are subject only to the federal minimum wage and all applicable regulations. Employers not covered by the FLSA will be subject to a minimum wage that is at least 70 percent of the federal minimum wage or the applicable mandatory decree rate, whichever is higher. The Secretary of Labor and Human Resources may authorize a rate based on a lower percentage for any employer who can show that implementation of the 70 percent rate would substantially curtail employment in that business.
Puerto Rico also has minimum wage rates that vary according to the industry. These rates range from a minimum of $5.08 to $7.25 per hour.
|U.S. Virgin Islands||$7.25||Except businesses with gross annual receipts of less than $150,000, then $4.30. (In practice, the Virgin Islands adopts the federal per hour rate)|
Prior U.S. minimum wages laws
In 1912, Massachusetts organized a commission to recommend non-compulsory minimum wages for women and children. Within eight years, at least thirteen U.S. states and the District of Columbia would pass minimum wage laws. The Lochner era United States Supreme Court consistently invalidated compulsory minimum wage laws. Such laws, said the court, were unconstitutional for interfering with the ability of employers to freely negotiate appropriate wage contracts with employees.
The first attempt at establishing a national minimum wage came in 1933, when a $0.25 per hour standard was set as part of the National Industrial Recovery Act. However, in the 1935 court case Schechter Poultry Corp. v. United States (295 U.S. 495), the United States Supreme Court declared the act unconstitutional, and the minimum wage was abolished.
|“||No business which depends for existence on paying less than living wages to its workers has any right to continue in this country.||”|
The minimum wage was re-established in the United States in 1938 (pursuant to the Fair Labor Standards Act), once again at $0.25 per hour ($4.07 in 2012 dollars). In United States v. Darby Lumber Co. (1941), the Supreme Court upheld the Fair Labor Standards Act, holding that Congress had the power under the Commerce Clause to regulate employment conditions.
The minimum wage had its highest purchasing value ever in 1968, when it was $1.60 per hour ($10.94 in 2014 dollars). From January 1981 to April 1990, the minimum wage was frozen at $3.35 per hour, then a record-setting wage freeze. From September 1, 1997 through July 23, 2007, the federal minimum wage remained constant at $5.15 per hour, breaking the old record.
Congress then gave states the power to set their minimum wages above the federal level. As of July 1, 2010[update], fourteen states had done so. Some government entities, such as counties and cities, observe minimum wages that are higher than the state as a whole. One notable example of this is Santa Fe, New Mexico, whose $9.50 per hour minimum wage was the highest in the nation, until San Francisco increased its minimum wage to $9.79 in 2009. Another device to increase wages, living wage ordinances, generally apply only to businesses that are under contract to the local government itself.
On November 7, 2006, voters in six states (Arizona, Colorado, Missouri, Montana, Nevada, and Ohio) approved statewide increases in the state minimum wage. The amounts of these increases ranged from $1 to $1.70 per hour and all increases are designed to annually index to inflation.
Some politicians in the United States advocate linking the minimum wage to the Consumer Price Index, thereby increasing the wage automatically each year based on increases to the Consumer Price Index. So far, Ohio, Oregon, Missouri, Vermont and Washington have linked their minimum wages to the consumer price index. Minimum wage indexing also takes place each year in Florida, San Francisco, California, and Santa Fe, New Mexico.
Minimum wage jobs rarely include health insurance coverage, although that is changing in some parts of the United States where the cost of living is high, such as California.
|New York City||$4.00|
According to a paper written in 2000 by Fuller and Geide-Stevenson, 73.5% (27.9% of which agreed with provisos) of American economists agreed that a minimum wage increases unemployment among unskilled and young workers, while 26.5% disagreed with this statement.
Some idea of the empirical problems of this debate can be seen by looking at recent trends in the United States. The minimum wage fell about 29% in real terms between 1979 and 2003. For the median worker, real hourly earnings have increased since 1979; however, for the lowest deciles, there have been significant decreases in the real wage without much decrease in the rate of unemployment. Some argue that an increasing minimum wage might reduce youth employment (since these workers are likely to have fewer skills than older workers). Furthermore, some economics research has shown that restaurant prices rise in response to minimum wage increases.
Overall, there is no consensus between economists about the effects of minimum wages on youth employment.
Reasons for economic controversy
Classical economics argues that the quantity of labor demanded increases as the price of labor falls. Each firm must evaluate the potential to make a profit from each worker hired; if the workers cost less, then more profit can be made from hiring more workers at a lower price. Therefore, by setting a lower boundary to wages, a minimum wage law prevents firms from offering jobs below the minimum and increases unemployment. Some research suggests a 10 percent increase in the minimum wage lowers low-skill employment by 2 to 4 percent and total restaurant employment by 1 to 3 percent.
In Keynesian economics the perspective is different. Although employers and workers set their wages in nominal terms, they are unable to predict the exact purchasing power of those wages. The value of the real wage can only be known "ex post"—long after the workers have been paid. Neither unions nor government authorities know the real wage and can only approximate it by regulating the nominal wage. The real wage is the purchasing power of wages when adjusted for inflation, but inflation—the purchasing power of money and therefore of wages—depends on total levels of investment.
Investment, in its turn, depends upon consumption, and consumption depends upon the marginal propensity to consume (savings rate) across all income categories. In an "underconsumption" scenario, the transfer of income from entrepreneurs and rentiers (those with higher incomes) to the working class (via union wage agreements and minimum wages) can actually lead to an increase in total consumption and higher demand for goods—leading to increased employment.
However, the resulting higher price levels may spur several forms of political and institutional responses that blunt or negate this tendency. For one, inflation tends to transfer income from bond holders (rentiers) to wage earners. For another, entrepreneurs may, under the conditions of an oligopoly, be able to blunt the effect of rising wages by using their market power to raise prices fast enough to prevent real gains among workers. And finally, the central bank may intervene to defend price levels by increasing interest rates, which will tend to curb investment and decrease the demand for labor.
Without choosing from among these perspectives, it is sufficient to say that minimum wage increases are unlikely to have a simple linear effect on employment. The interconnection of price levels, central bank policy, wage agreements, and total aggregate demand creates a situation in which the conclusions drawn from macroeconomic analysis are highly influenced by the underlying assumptions of the interpreter.
Jobs affected by the minimum wage
The jobs that are most likely to be directly affected by the minimum wage are the ones that pay a wage close to the minimum.
According to the May 2006 National Occupational Employment and Wage Estimates, the four lowest-paid occupational sectors in May 2006 (when the federal minimum wage was $5.15 per hour) were the following:
|Sector||Workers Employed||Median Wage||Mean Wage||Mean Annual|
|Food Preparation and Serving Related Occupations||11,029,280||$7.90||$8.86||$18,430|
|Farming, Fishing, and Forestry Occupations||450,040||$8.63||$10.49||$21,810|
|Personal Care and Service Occupations||3,249,760||$9.17||$11.02||$22,920|
|Building and Grounds Cleaning and Maintenance Occupations||4,396,250||$9.75||$10.86||$22,580|
Two years later, in May 2008, when the federal minimum wage was $5.85 per hour and was about to increase to $6.55 per hour in July 2008, these same sectors were still the lowest-paying, but their situation (according to Bureau of Labor Statistics data) was:
|Sector||Workers Employed||Median Wage||Mean Wage||Mean Annual|
|Food Preparation and Serving Related Occupations||11,438,550||$8.59||$9.72||$20,220|
|Farming, Fishing, and Forestry Occupations||438,490||$9.34||$11.32||$23,560|
|Personal Care and Service Occupations||3,437,520||$9.82||$11.59||$24,120|
|Building and Grounds Cleaning and Maintenance Occupations||4,429,870||$10.52||$11.72||$24,370|
In 2006, workers in the following 13 individual occupations received, on average, a median hourly wage of less than $8.00 per hour:
|Occupation||Workers Employed||Median Wage||Mean Wage||Mean Annual|
|Waiters and Waitresses||2,312,930||$3.14||$4.27||$11,190|
|Combined Food Preparation and Serving Workers, Including Fast Food||2,461,890||$7.24||$7.66||$15,930|
|Dining Room and Cafeteria Attendants and Bartender Helpers||401,790||$7.36||$7.84||$16,320|
|Cooks, Fast Food||612,020||$7.41||$7.67||$15,960|
|Ushers, Lobby Attendants, and Ticket Takers||101,530||$7.64||$8.41||$17,500|
|Counter Attendants, Cafeteria, Food Concession, and Coffee Shop||524,410||$7.76||$8.15||$16,950|
|Hosts and Hostesses, Restaurant, Lounge, and Coffee Shop||340,390||$7.78||$8.10||$16,860|
|Amusement and Recreation Attendants||235,670||$7.83||$8.43||$17,530|
|Farmworkers and Laborers, Crop, Nursery, and Greenhouse||230,780||$7.95||$8.48||$17,630|
In 2008, only two occupations paid a median wage less than $8.00 per hour:
|Occupation||Workers Employed||Median Wage||Mean Wage||Mean Annual|
|Combined Food Preparation and Serving Workers, Including Fast Food||2,708,840||$7.90||$8.36||$17,400|
According to the May 2009 National Occupational Employment and Wage Estimates, the lowest-paid occupational sectors in May 2009 (when the federal minimum wage was $7.25 per hour) were the following:
|Sector||Workers Employed||Median Wage||Mean Wage||Mean Annual|
|Combined Food Preparation and Serving Workers, Including Fast Food||2,695,740||$8.28||$8.71||$18,120|
|Waiters and Waitresses||2,302,070||$8.50||$9.80||$20,380|
|Dining Room and Cafeteria Attendants and Bartender Helpers||402,020||$8.51||$9.09||$18,900|
|Cooks, Fast Food||539,520||$8.52||$8.76||$18,230|
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- Generally applies to employees who make over $30 in tips per month, unless otherwise noted.
- Applies to persons under age 20, for the first 90 days of employment (per FMWA), unless otherwise noted.
- No state minimum wage law. Federal rates apply, although some small businesses exempt from FMWA may not be covered.
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