Minimum Wage

Background

Grocery store cashier, lifeguard, shampooer—these jobs might seem different on paper, but there’s one thing they all have in common: They often pay minimum wage.

In the US, the “minimum wage” is the smallest amount a business can pay an employee per hour by federal law. Currently, it’s $7.25—but that's just the federal mandate. States can set their own minimum wage laws, too (more on that later).

Proponents of raising the minimum wage argue that doing so would lower the poverty rate, whereas opponents worry it could lead to inflation and job cuts.

How It Works

When a state has a different minimum wage than the federal one, all employees covered by the Fair Labor Standards Act (which is most workers) will earn the higher of those two rates.

For instance, as of 2024, Georgia’s state minimum wage is technically $5.15 per hour. But if you work a minimum wage job in Georgia, you’d most likely still be paid $7.25. The same goes for cities and other municipalities that have their own minimum wage laws.

Employees working for extremely small businesses that don’t do any interstate commerce and, therefore, aren’t covered by the FLSA would be one very rare exception. There are also federal minimum wage exceptions for tipped workers (learn more here).

State legislators who set lower minimum wages than the federal one know that the higher rate will override the lower number in the vast majority of cases. Some states have political reasons for keeping their lower minimum wages, like state lawmakers who want to signal their ideologies. 

In some countries, the minimum wage is tied to inflation, meaning that as inflation goes up, so does the minimum wage (find out how it works elsewhere). But in the US, the minimum wage can only be raised via Congressional action.

History

The first federal minimum wage was set at 25 cents per hour when President Franklin D. Roosevelt signed the FLSA in 1938 (learn more about minimum wage’s early history). 

The minimum wage was instituted in response to both striking workers and people left impoverished amid the Great Depression. President Roosevelt argued that having a minimum wage would help stabilize the post-depression economy. 

But it wasn’t applicable to workers in all industries. In fact, it only applied to about 20% of workers at the time—specifically, workers engaged in interstate commerce or the production of goods for interstate commerce. At the time, they were deemed most in need of regulation.

However, by 1968, the government was able to extend the federal minimum wage regulations in the US to apply to roughly 80% of private sector workers.

Congress has raised the federal minimum wage 22 times since its inception (see every increase here). The most recent time was in 2009 when amendments to the FLSA increased the minimum wage from $6.55 per hour to $7.25. 

Minimum Wage Today

As of 2021, nearly 1.6 million Americans made the federal minimum wage of $7.25 per hour. 

The debate over raising the minimum wage remains fierce, with some politicians like Senator Bernie Sanders (I-VT) arguing that the minimum wage should be raised to $17 per hour by 2028. 

Without federal action on the issue, some states have taken the matter into their own hands. When the state of Washington raised its minimum wage from $15.74 to $16.28 per hour in 2024, it became the state with the highest state minimum wage.