What Is the Minimum Wage?

How Does the Minimum Wage Work?

The minimum wage was enacted in the United States in 1938 as part of the Fair Labor Standards Act (FLSA). The first minimum wage was 25 cents an hour. The current U.S. minimum wage is $7.25 per hour. However, some states and cities have set minimum wage rates that are higher than the federal minimum.

Employees, with some exceptions, must be paid at least the federal minimum wage. If they work in a state with a higher minimum wage, they will receive the higher amount.

Federal Minimum Wage Rates

Federal Minimum Wage

Effective July 24, 2009, the federal minimum wage is $7.25 an hour for covered non-exempt employees, meaning employees who are covered under the FLSA. Employers in covered employment categories cannot pay their employees less than $7.25 per hour.

Minimum Wage for Federal Contractors

As of January 1, 2023, the minimum wage for federal contractors is $16.20 per hour, and for tipped federal contractors, the minimum wage is $13.75 per hour.

State Minimum Wage Rates

Some states pay a higher minimum wage than the federal minimum. For example, Florida's minimum wage is $11 an hour effective September 30, 2022, and will increase by $1 per hour each year until it reaches $15 in September 2026.

Local Minimum Wage Rates

Finally, some cities have set higher minimum wages than both the state and federal minimums. Typically, higher local minimum wages are found in areas with a higher cost of living, such as San Francisco, which has a $16.99 per hour minimum wage as of 2022.

Cities may also occasionally set different minimums for different types of workers. For example, as of January 1, 2023, Seattle mandates a minimum wage of $18.69 for employees who work for companies with more than 500 workers globally. Seattle has varying rates based on the category of employer and whether the company pays for health insurance.

If an employee is subject to local, state, and federal minimum wage laws, the employee is entitled to the higher of the three minimum wages.

U.S. Minimum Wage History

The federal minimum wage originated in the Fair Labor Standards Act (FLSA), signed by President Franklin Roosevelt on June 25, 1938. The law established a minimum wage of 25 cents per hour for all employees who produced products shipped in interstate commerce.

Increases in the Minimum Wage

Until 1956, the federal minimum wage was still below a dollar, only rising to $1.15 by 1961. The minimum wage did not reach the current hourly rate of $7.25 until 2009. Since 1938, the federal minimum wage has been raised 22 times.

In order for the minimum wage to go up, either the federal government or a state or local legislature must pass a law that stipulates a change in the minimum wage. The last time the federal minimum wage was increased was in 2009.

Major U.S. Minimum Wage Increases

• 1939: $0.30
• 1945: $0.40
• 1950: $0.75
• 1956: $1.00
• 1961: $1.15
• 1963: $1.25
• 1967: $1.40
• 1968: $1.60
• 1974: $2.00
• 1975: $2.10
• 1976: $2.30
• 1978: $2.65
• 1979: $2.90
• 1980: $3.10
• 1981: $3.35
• 1990: $3.80
• 1991: $4.25
• 1996: $4.75
• 1997: $5.15
• 2007: $5.85
• 2008: $6.55
• 2009: $7.25

When Can Employees Be Paid Less Than Minimum Wage?

There are some employees who can be paid at rates below the hourly minimum wage. Those employees are permitted to be paid at a rate called a subminimum wage.

What Is Subminimum Wage?

What does subminimum wage mean? There are some employees who can be paid at hourly rates below the minimum wage, according to the Fair Labor Standards Act (FLSA). Workers in certain categories of employment can legally be paid less than the federal minimum wage, which is currently $7.25 an hour.

Subminimum wage employees include student-learners (vocational education students) and full-time students working in retail, service, agriculture, or higher education.

Employees who fall under this category also include those whose mental or physical disability (due to age, injury, etc.) impairs their earning or productive ability.

Employment at less than the minimum wage helps to preserve the jobs for workers in these categories. Subminimum wage employment is allowed only under certificates issued by the Wage and Hour Division.

Exceptions: Tipped Workers

An employer of an employee who receives tips is only required to pay $2.13 an hour in wages if that amount plus the tips received equals at least the federal minimum wage, the employee retains all tips, and the employee customarily and regularly receives more than $30 a month in tips.

Exceptions: Young Workers

A minimum wage of $4.25 per hour applies to young workers under the age of 20 during their first 90 consecutive calendar days of employment with an employer, as long as their work does not displace other workers.

After 90 consecutive days of employment or the employee reaches 20 years of age, whichever comes first, the employee must receive a minimum wage of $7.25 per hour.

Other Workers Exempt from the Minimum Wage

There are other classes of employees who are exempt from minimum wage requirements, including the following:

• Babysitters on a casual basis
• Companions for the elderly
• Federal criminal investigators
• Fishing workers
• Homeworkers making wreaths
• Newspaper delivery workers
• Newspaper employees of limited-circulation newspapers
• Seamen on foreign vessels
• Switchboard operators
• Farm workers employed on small farms
• Employees of certain seasonal amusement and recreational establishments
  

Frequently Asked Questions (FAQs)