Questions & Answers
The current federal minimum wage is $7.25 per hour, which translates to only $15,080 for a full-time, year-round worker.
The federal minimum wage was signed into law by President Franklin Delano Roosevelt as part of the Fair Labor Standards Act of 1938, at the height of the Great Depression.
Its stated purpose was to keep America’s workers out of poverty and increase consumer purchasing power in order to stimulate the economy.
Raising the minimum wage at the federal level requires an act of Congress. Raising the minimum wage in states or localities typically requires state or local legislation or a ballot initiative.
Some jurisdictions, however, may have alternative mechanisms written into their laws, such as New York State’s wage board.
An estimated 35 million workers—more than 1 in 4 working men and women in the U.S.—would get a badly needed raise.
That’s 19.6 million women (30 percent of wage-earning women) and 15.5 million men, according to the Economic Policy Institute’s analysis of a recent proposal to raise the federal minimum wage to $12 by 2020.
Around 35 percent of African-American workers and 38 percent of Hispanic workers would benefit. Nearly 9 in 10 affected workers are 20 years old or older, and more than 1 in 4 are parents.
Twenty-nine states and the District of Columbia have raised their minimum wages above the federal rate of $7.25 per hour.
Our Wages by State map tells you the minimum wage for every state.
Five states—Alabama, Louisiana, Mississippi, South Carolina, and Tennessee—have no state minimum wage laws at all, so employers there are still required to pay the federal minimum wage. In all states, employers are required to pay the state minimum wage or the federal minimum wage—whichever is higher.
The federal minimum wage was last raised on July 24, 2009, when it rose from $6.55 to $7.25 per hour, the last step of a three-step increase approved by Congress in 2007. Before 2007, the minimum wage had been stuck at $5.15 per hour for 10 years.
Frustrated by inaction at the federal level, the states and, increasingly, many cities and counties have moved to raise the wage floor. Twenty-five states have raised their minimum wage since the last federal increase—some through legislation or ballot initiatives, and others through having adopted “indexing” provisions that authorize small automatic increases most years to keep pace with the rising cost of living.
The strongest momentum in recent years, however, has been at the local level. Altogether, more than 40 cities and counties have raised the minimum wage locally since 2012, and at least 34 since 2014. See our Wages by State map for details.
The value of the minimum wage has fallen sharply over the past 40 years. In 1968, for example, the federal minimum wage was $1.60 per hour, which translates to approximately $11.06 in 2016 dollars.
Indexing the minimum wage to inflation means adjusting it automatically to keep pace with the rising cost of living so that minimum wage workers do not lose purchasing power each year.
Sixteen states plus the District of Columbia have adopted laws to index their minimum wages to rise automatically with the cost of living.
Ten states currently index minimum wage increases each year: Arizona, Colorado, Florida, Missouri, Montana, Nevada, New Jersey, Ohio, South Dakota, and Washington.
Six more states, plus the District of Columbia, will index minimum wage increases annually beginning in future years: Alaska (2017), Minnesota (2018), Michigan (2019), Vermont (2019), D.C. (2021), Oregon (2023), and California (2024).
The remaining states and the federal government, however, have not yet indexed their minimum wages.
Minimum wage increases stimulate the economy by increasing consumer spending without adding to state and federal budget deficits.
Consumer spending drives 70 percent of the economy, and increasing demand is key for jumpstarting and maintaining production and hiring. A raise in the minimum wage puts money into the pockets of low-income consumers, who immediately spend it at local businesses.
The Economic Policy Institute estimates that the Raise the Wage Act, which would raise the federal minimum wage to $12 per hour by 2020, would result in wage increases totaling more than $79 billion for roughly 35 million workers in communities across the country. Raising the minimum wage helps strengthen the economy without increasing taxpayer costs.
Six of the top 10 growth occupations projected by the U.S. Bureau of Labor Statistics for the next decade are low-wage jobs, including home health aides, customer service representatives, food preparation and service workers, personal and home care aides, retail salespersons, and office clerks. Raising the minimum wage would boost pay scales in these types of jobs, where millions of working men and women now spend their careers.
Raising wages reduces costly employee turnover and increases productivity. When the minimum wage goes up, employers can reap such benefits without being placed at a competitive disadvantage, because all companies in their field are required to do the same.
Research has documented how, especially in low-wage industries, raising wages reduces turnover, because workers who are paid more stay with their current employer longer.
A study of the effect of a wage increase for workers at the San Francisco Airport, for example, found that annual turnover among security screeners plunged from 95 percent to 19 percent after their hourly wage rose from $6.45 to $10 per hour.
This reduced labor market churn yields significant savings for employers by reducing recruitment, re-training, and re-staffing costs, which studies and trade association analyses have found to be significant, even in low-wage sectors.
Federal law and most states’ laws allow employers to pay a lower minimum wage to workers who typically receive tips from customers. These lower minimum wage rates are variously known as the tipped wage, subminimum wage, or base wage.
The term “tip credit” refers to the wage credit that employers are allowed to take under these laws, which is equal to the full minimum wage minus the base wage. (Under current federal law, for example, employers are allowed to take maximum tip credit of $5.12—the difference between the full $7.25 minimum wage and the $2.13 tipped wage.)
Although subminimum tipped credit laws allow employers to pay a reduced minimum wage, they also require them to “top off” those workers if their base wage plus tips fall short of the applicable minimum wage.
Originally, the federal tipped-worker minimum wage was 60 percent of the full minimum wage. Since 1991, however, it’s been stuck at just $2.13 per hour. Because it hasn’t been increased at all in the decades since then, its relative value has plummeted to less than 30 percent of the minimum wage.
Twenty-six states plus the District of Columbia provide stronger protections for tipped workers by requiring that tipped workers be paid above the federal rate. Illinois, for example, guarantees tipped workers 60 percent of the minimum wage, and New York and Connecticut guarantee approximately 70 percent. In seven states—Alaska, California, Minnesota, Montana, Nevada, Oregon, and Washington—tipped workers are guaranteed the full minimum wage—a best practice that has reduced poverty among tipped workers in those states. The remaining 17 states, however, provide far less protection, as they follow the shamefully low $2.13 federal rate.
Tipped workers make up a significant part of our low-wage workforce. The largest numbers are employed in food service, such as waitresses, waiters, bussers, bartenders, and food delivery workers. Others work as parking attendants, car wash workers, nail salon workers, baggage porters, and bellhops, for example.
Although technically, employers must make up the difference if a worker does not receive enough tips to bring him or her up to the full minimum wage, that requirement seldom kicks in because most tipped workers make slightly more than the minimum wage after tips are included. As a practical matter, the tipped-worker minimum wage is what employers pay their tipped workers, and at the federal level it has not increased since 1991.
Tracking tips is complex because tips fluctuate widely, are often paid in cash, and are frequently “pooled” or shared among staff. Under such conditions, even law-abiding employers can have trouble keeping track, and less ethical employers can take advantage to illegally keep a portion of the tips for themselves.
Although business lobbyists sometimes suggest that tipped workers don’t need a minimum wage because they earn decent incomes after tips are included, this simply isn’t the case for the vast majority of tipped workers. While a relatively small number of waiters, waitresses, and bartenders at high-end restaurants in major cities earn high incomes, the restaurant industry overall is one of the nation’s lowest-wage sectors. And the overwhelming majority of waiters, waitresses, and tipped workers in other industries (like car wash attendants and nail salon workers) earn very low wages. As a result, the family poverty rate for waitresses and waiters is nearly three times the average for all workers.
The bulk of rigorous research examining hundreds of case studies of minimum wage increases at the state and local levels finds that raising the minimum wage boosts incomes for low-paid workers without reducing overall employment or job growth to any significant degree.
The minority of researchers reaching different conclusions rely on flawed or less precise methodologies that fail to take advantage of the most recent advancements in economic research.
This is supported by two leading meta-studies, which survey and pool the data from more than four decades of research. Meta-studies represent the most reliable and sophisticated approach to studying the employment impact of raising the minimum wage, as they aggregate data from dozens of studies containing thousands of different estimates of the employment impacts of minimum wage increases.
The first meta-study, by Hristos Doucouliagos and T.D. Stanley (2009), reviews 1,492 different findings from 64 different studies and shows that there is “little or no significant impact of minimum wage increases on employment,” as noted in a widely cited 2013 report by the Center for Economic and Policy Research.
The second meta-study, by Dale Belman and Paul Wolfson (2014), reviews more than 70 studies and 439 distinct estimates to come to a very similar conclusion: “[I]t appears that if negative effects on employment are present, they are too small to be statistically detectable. Such effects would be too modest to have meaningful consequences in the dynamically changing labor markets of the United States,” and too small to merit policy or political controversy.
In addition to these meta-studies, two individual studies have developed state-of-the-art research methods to enable economists to better isolate and analyze the actual impact of minimum wage increases; they confirm that raising the minimum wage does not reduce employment.
The first, published by economists at the University of Massachusetts, University of North Carolina, and University of California (2010), compared employment data among every pair of neighboring U.S. counties that straddle a state border and had differing minimum wage levels at any time between 1990 and 2006. It found that minimum wage increases did not cost jobs. The second companion study (2011), found that these results hold true even during periods of recession and high unemployment.
Contrary to stereotypes, workers whose pay scales are affected by the minimum wage are overwhelmingly adults, including many who are supporting families.
Adults age 20 or older make up 9 in 10 workers who would receive a raise if the federal minimum wage were raised to $12 per hour by 2020, according to an analysis of Census data by the Economic Policy Institute.
Since the Great Recession, more and more Americans are spending their careers in low-wage jobs, where the minimum wage helps set pay scales. The median age of home health care workers, for example, who are mostly female and who constitute one of the nation’s fastest-growing low-wage occupations, is 45.
No. A University of California study found that even minimum wage increases implemented during times of high unemployment—such as the recessions of 1990-1991, 2001 and 2007-2009—did not result in job losses for teens or slow employment growth.
Check out that study here.
Critics like to suggest that the last increase in the federal minimum wage in 2009 caused a spike in teen unemployment. But as a 2011 NELP report demonstrated, teen unemployment rises faster than adult joblessness during every recession—whether or not the minimum wage goes up. This is because, with less experience and fewer skills than adults, teens are more likely to be unemployed, in general. They also exit and enter jobs more frequently than adults, and so are more likely to be unemployed at any given point in time. In addition, over the past decade and a half, teens have been facing greater competition for jobs from adult workers, especially older low-income workers, whose lack of economic security requires them to keep working beyond retirement age.
No. Most minimum wage employers are service-sector businesses that are tied to a state because that is where their customers are—businesses like fast food, retail stores, and home health care services, for example.
Indeed, a New York Times profile of businesses on either side of the Washington/Idaho border (at a time when Washington’s minimum wage was nearly $3 higher than Idaho’s) found that businesses in Washington were flourishing, despite predictions that the higher minimum wage would send jobs and businesses fleeing across the state line. A similar recounting can be found in a report on Bloomberg.
In addition, a 2010 study by economists at the University of Massachusetts, University of North Carolina, and University of California provides further evidence. The study compared employment data among every pair of neighboring U.S. counties that straddle a state border and had differing minimum wage levels at any time between 1990 and 2006, and found that minimum wage increases did not cost jobs.
No. While opponents frequently make this claim, research and experience demonstrate otherwise. In fact, many of the loudest minimum wage opponents are the country’s largest and most profitable companies.
A 2012 NELP report found that two-thirds of all low-wage workers are employed by large companies rather than small businesses, and that the vast majority of the largest low-wage employers in the country are earning strong profits and can afford higher wages.
It’s also important to remember that because the minimum wage has lost so much value over the last several decades, employers today are actually being allowed to pay less—in real dollars—than they were paying in the late 1960s.
Many employers and small businesses, in fact, support minimum wage increases. For more, visit Business for a Fair Minimum Wage, Small Business Majority, and Main Street Alliance.