what is minimum wage 
a minimum wage is the lowest wage that a worker may be paid per hour it s a price floor on hourly wages mandated by federal law nonexempt workers can t be offered a job or agree to work for less than this amount understanding minimum wageminimum wage laws were first introduced in australia and new zealand in an attempt to raise the income of unskilled workers most modern developed economies as well as many developing economies enforce a national minimum wage the first minimum wage law in the united states went into effect in 1912 when massachusetts set a minimum hourly rate for women and children under age 18 2the federal government established a minimum wage of 0 25 under the fair labor standards act flsa in 1938 3 that wage was worth 5 48 as of the fourth quarter of 2023 if you adjust it for inflation 4the federal minimum wage rate in the united states is 7 25 per hour as of 2024 unless the worker falls into a category that s specifically exempted from flsa 56the government periodically assesses the federal minimum wage level with changes in inflation or the cost of living and the rate has not increased since july 2009 the fair minimum wage act of 2007 ordered the minimum wage to be raised from 5 15 in three increments it rose to 5 85 6 55 and then finally to 7 25 7president joe biden campaigned on a promise to raise the federal minimum wage for government workers to 15 an hour the executive order was signed on april 27 2021 and was implemented on jan 30 2022 8history of the minimum wagethe first minimum wage laws came into effect in the late 1800s when sweatshop labor was common in newly industrialized countries minimum wages were a central demand for the new union movement along with shorter hours and better working conditions the first national minimum wage was enacted by new zealand in 1894 followed by the united kingdom in 1909 minimum wages were advocated by both labor organizers and consumer groups in the united states but they faced challenges from business interests several states attempted to pass minimum wage laws but they were rebuffed by a 1923 supreme court decision that declared minimum wage laws to be unconstitutional 9it wasn t until the new deal that congress finally enacted a federal minimum wage law the fair labor standards act that was passed in 1938 set the minimum wage at 0 25 per hour it may seem low but that wage provided a reasonably comfortable living for depression era families 10federal minimum wage vs state minimum wagesthe united states enforces a federal minimum wage but individual states cities and localities can enact different minimum wage requirements provided that the stipulated hourly wage is not lower than the federal minimum wage an employer who is subject to the federal and state minimum wage requirements must pay the higher of the two 5states usually set a minimum wage that is reflective of the cost of living in the region the state of massachusetts has a minimum wage of 15 as of jan 1 2024 and montana has a minimum wage rate of 10 30 as of that date 11minimum wage rates exceed the federal rate in 30 states and the district of columbia as of january 2024 the district of columbia has the highest minimum wage at 17 per hour the second highest is washington state at 16 28 new york and california are tied for third place at 16 11only five states have not adopted a state minimum wage as of jan 1 2024 alabama louisiana mississippi south carolina and tennessee 11this map shows the minimum wage set at each state level seven states have no state minimum and two georgia and wyoming have a minimum wage less than that provided for at the federal level in all cases the federal minimum wage of 7 25 applies 11some states have special exceptions to their minimum wage rules state minimum wages vs municipal minimum wagescities and municipalities within a state may set a higher minimum wage for residents who live in areas with higher costs of living the city of chicago has had a minimum wage of 15 or 15 80 depending on employer size as of july 2023 the illinois state minimum wage is 14 as of jan 1 2024 1415minimum wage exceptionscertain categories of workers are exempt from being covered by minimum wage laws low wage laborers in the united states can be exempt from the minimum wage if a sizable portion of their income is derived from tips a lower minimum wage of 2 13 per hour as of january 2024 may apply to tipped employees who regularly receive more than 30 in tips per month or if the total tips retained in addition to the hourly wage rate are equal to or greater than the federal minimum wage the employer is expected to compensate the employee for the shortfall if the employee s total tips and hourly rate fall below the minimum wage 16a full time student working for a university retail store or service establishment cannot be paid less than 85 of the minimum wage students can work up to eight hours per day but they can t work more than 20 hours per week when school is in session students in technical or vocational programs can t be paid less than 75 of the minimum wage throughout their active enrollment in the program 1718workers under the age of 20 may be paid 4 25 per hour by federal law until they pass a three month probationary period the employer must convert their pay structure to the federal minimum wage rate after that 19workers with physical or mental disabilities can be paid less than the federal minimum wage according to the terms of the flsa disabilities that can affect production capacity include blindness cerebral palsy alcohol and drug addiction mental illness and developmental disabilities 20the 15 minimum wageminimum wage laws were designed to end the exploitation of workforces and ensure that a country s working population doesn t fall below the poverty line the fair labor standards act flsa establishes the minimum wage affecting full time and part time workers in the private sector and federal state and local governments 21debate surrounds the establishment of a 15 federal minimum wage president joe biden s american rescue plan attempted to raise the minimum but the biden administration has so far only succeeded in raising the minimum hourly wage of government employees to 15 8proponents argue that an increase in the minimum wage helps meet the goal of a living wage where employees earn enough income for a satisfactory standard of living they also claim that a boost increases worker productivity reduces income inequality spurs economic growth and improves employee retention 2223many companies have increased their hourly rate to at least 15 per hour independent of a mandatory federal minimum wage increase they include bank of america amazon costco chipotle cvs and starbucks 24critics argue that companies not the government should decide how much their employees are paid and that a minimum wage doesn t always boost the spending power of a population and can instead lead to higher unemployment a small change in the price for low wage labor could have a large effect on employer demand they say leading to increasing unemployment among low wage workers 25 critics note that minimum wage laws may also lead to job outsourcing in which companies may decide to move their facilities to countries where labor costs are lower minimum wage vs living wagethe minimum wage is sometimes contrasted with the living wage an hourly salary that would allow someone to live comfortably if they are working full time the minimum wage is established by law but a living wage is calculated based on factors such as average rents costs of living transportation and childcare costs the federal minimum wage was much closer to a living wage when it was first established in 1938 the buying power of a minimum wage worker peaked in 1968 according to the seattle times 26 inflation and price increases after that point caused the real earnings of a minimum wage worker to fall as productivity increased 