Federal vs. State, Exceptions, and FAQs

What Is Minimum Wage?

A minimum wage is the ground wage consistent with hour {{that a}} worker may be paid, as mandated via federal law. It is a legally mandated value flooring on hourly wages, beneath which nonexempt staff may not be presented a task or agree to artwork.

Figuring out Minimum Wage

Minimum-wage rules were first presented in Australia and New Zealand in an attempt to raise the income of unskilled staff. Most present complex economies, along with many developing economies, enforce a national minimum wage. Exceptions include Italy, Sweden, Norway, and Singapore.

The principle minimum-wage law in the us appeared in 1912 when Massachusetts set a minimum hourly price for girls and children under age 18.

In 1938, the federal government established a minimum wage of $0.25 under the Truthful Exhausting paintings Necessities Act (FLSA). Adjusting for inflation, that wage is worth $4.94 in this day and age.

As of 2022, the federal minimum wage price in the us is $7.25 consistent with hour, till the worker falls into a category in particular exempted from FLSA.

The government periodically assesses the federal minimum wage level with changes in inflation or the cost of living and the rate has no longer higher since July 2009. The Truthful Minimum Wage Act of 2007 ordered the minimum wage to be raised from $5.15 in 3 increments, rising to $5.85, $6.55, and then after all to $7.25.

History of the Minimum Wage

The principle minimum wage rules date to the overdue 1800s when sweatshop laborious paintings was no longer bizarre in newly industrialized countries. Minimum wages were a central name for for the new union movement, along with shorter hours and better operating necessities.

The principle national minimum wage was enacted via New Zealand in 1894, followed via the United Kingdom in 1909.

In the us, minimum wages were advocated every via laborious paintings organizers and consumer groups, alternatively they faced hard scenarios from business interests. Quite a lot of states attempted to head minimum wage rules, alternatively they have got been rebuffed via a 1923 Final Courtroom docket solution that declared minimum wage rules to be unconstitutional.

It wasn’t until the New Deal that congress after all enacted a federal minimum wage law. The Truthful Exhausting paintings Necessities Act, passed in 1938, set the minimum wage at $0.25 consistent with hour. Even if it’ll seem low via in this day and age’s necessities, that wage provided a relatively relaxed living for Melancholy-era families.

Federal Minimum Wage vs. State Minimum Wages

Even though the us enforces a federal minimum wage, explicit particular person states, cities, and localities would possibly move different minimum-wage must haves as long as the stipulated hourly wage is not lower than the federal minimum wage. An employer who is subject to the federal and state minimum wage must haves must pay the higher of the two.

States normally set a minimum wage that is reflective of the worth of living throughout the space. For example, the state of Massachusetts has a minimum wage of $14.25 consistent with hour, increasing to $15 in 2023, while Montana has a minimum wage price of $9.20.

As of 2022, minimum-wage fees exceeded the federal price in 30 of the 50 states. At $15.20 consistent with hour, the District of Columbia has the most efficient minimum wage. The second perfect is $15, paid in parts of New York and thru employers with more than 25 workforce in California; the third perfect is $14,49, the minimum wage in Washington State.

The map beneath shows the minimum wage set at each and every state level. Some states have set their minimum wage higher than the federal minimum wage, others have matched the federal price, and a select few don’t have a minimum-wage requirement. Inside the latter case, the federal minimum wage of $7.25 will practice.

Some states have explicit exceptions to their minimum wage regulations:

• Georgia and Wyoming every have a minimum wage of merely $5.15. However, workforce coated under the FLSA are subject to the federal minimum wage of $7.25.
• In Minnesota, small employers with annual product sales of less than $500,000 pay a minimum wage of $8.42—somewhat than the average state minimum of $10.33.
• In Nevada, the minimum wage is in recent years $1 less than the required minimum if neatly being benefits are included. As of Jul. 1, 2024, a $12 minimum wage for all workforce will alternate the prevailing two-tier machine, provided a measure on the Nov. 8, 2022, ballot passes. The measure is in recent years passing with 83% of the votes in.
• In Oklahoma, the minimum wage is $2 for employers with fewer than 10 full-time workforce at any single location and employers with $100,000 or a lot much less in annual gross sales.

State Minimum Wages vs. Municipal Minimum Wages

In some circumstances, cities and municipalities inside of a state would possibly set the following minimum wage for voters who‘re residing inside of areas with higher costs of living. During the state of Illinois, where the minimum wage is $12, town of Chicago has a minimum wage of $14–$15 needless to say industries enacted in January 2022.

Minimum-Wage Exceptions

Certain categories of staff have perpetually been exempt from being coated via minimum-wage rules.

Tipped Staff

Low-wage laborers in the us may also be exempt from the minimum wage if a big portion of their income is derived from guidelines. A lower minimum wage of $2.13 consistent with hour would possibly practice to tipped workforce who regularly download more than $30 in guidelines monthly—or if all the guidelines retained at the side of the hourly wage price are similar to or greater than the federal minimum wage. Where the employee’s common guidelines and hourly price fall beneath the minimum wage, the employer is predicted to compensate the employee for the shortfall.

Students

A full-time student operating for a faculty, retail store, or supplier establishment cannot be paid less than 85% of the minimum wage. Even if students would possibly artwork up to 8 hours consistent with day, they are able to’t artwork more than 20 hours each and every week when college is in session. Students in a technical or vocational program cannot be paid less than 75% of the minimum wage in every single place their vigorous enrollment on this device.

Body of workers Underneath 20 Years Earlier

Staff under 20 years of age may be paid $4.25 consistent with hour via federal law until they move a three-month probationary length. After that, the employer must convert their pay development to the federal minimum-wage price.

Staff With Physically or Mental Disabilities

Staff with physically or mental disabilities may also be paid less than the federal minimum wage, in keeping with the FLSA. Disabilities that can have an effect on production capacity include blindness, cerebral palsy, alcohol and drug dependancy, mental illness, and developmental disabilities.

The $15 Minimum Wage

Minimum-wage rules were designed to complete the exploitation of workforces and ensure that a country’s operating population does no longer fall beneath the poverty line. The Truthful Exhausting paintings Necessities Act (FLSA) established the minimum wage affecting full-time and part-time staff throughout the private sector and federal, state, and local governments.

In 2022, debate surrounds the established order of a $15 minimum wage. President Joe Biden’s American Rescue Plan attempted to boost it. However, the Biden control perfect succeeded in raising the minimum hourly wage of government workforce to $15.

Arguments for a $15 Minimum Wage

Proponents argue that an increase throughout the minimum wage helps meet the target of a living wage, where workforce earn enough income for a plentiful way of living.

Moreover they claim a boost will build up worker productivity, reduces income inequality, spurs monetary expansion, and improves employee retention.

Arguments Towards a $15 Minimum Wage

Critics argue that companies, no longer the government, will have to decide how so much workforce will have to be paid and {{that a}} minimum wage does no longer all the time boost the spending power of a population and can instead lead to higher unemployment.

A small industry in the price for low-wage laborious paintings may have a large have an effect on on employer name for, they’re pronouncing, leading to increasing unemployment among low-wage staff. Minimum-wage rules may additionally lead to procedure outsourcing, wherein companies would possibly decide to move their facilities to countries where laborious paintings costs are lower, critics practice.

Minimum Wage vs. Residing Wage

The minimum wage is each and every so regularly contrasted with the living wage, an hourly salary that can allow somebody to live with ease if they are operating full-time. While the minimum wage is established via law, a living wage is calculated in keeping with elements related to affordable rents, worth of living, transportation, and childcare costs.

Actually, the federal minimum wage was so much closer to a living wage when it was first established in 1938. The buying power of a minimum wage worker peaked in 1968, in keeping with the Seattle Events. After that, inflation and price will build up ended in the real source of revenue of a minimum wage worker to fall, while productivity higher.

The Bottom Line

The Truthful Exhausting paintings Necessities Act (FLSA) is the federal law that established the minimum wage, which is $7.25 consistent with hour in 2022. The government periodically assesses the federal minimum wage level. However, the rate has no longer higher since July 2009. Explicit particular person states, cities, and localities would possibly move different minimum wage must haves as long as the rate is higher than the federal minimum wage price.