Federal State Minimum Wages
It is important that you are aware of what your minimum wage entitlement is. This is the minimum amount that your employer can legally pay you for the work that you do.
In the United States, your minimum wage may vary depending on where you live.
Since 2009, the federal minimum wage has been set at $7.25 an hour.
Some states choose to implement higher minimum wages, and some individual cities (such as New York City) have increased this even more.
Also, some professions may have their own criteria for minimum wage entitlement (especially if you work in a sector where your income may be reliant on tips).
To help you understand more about what you should be entitled to, this article will look at the federal minimum wage.
What Is the History of the Federal Minimum Wage?
The federal minimum wage came to fruition as part of the Fair Labor Standards Act (FLSA).
The Act was signed in 1938 by President Franklin Roosevelt in an attempt to protect those who had been severely affected by the Great Depression.
It guaranteed that workers would receive at least 25 cents an hour as well as banning child labor and limiting the working week to 44 hours.
Over the years, Congress has repeatedly raised the federal minimum wage as well as widening the eligibility for other sectors.
The most recent amendment to the FLSA took place in 2007 when incremental increases were improved to raise the federal minimum wage.
What Is the Current Federal Minimum Wage in the United States?
The federal minimum wage is designed to ensure that everyone can earn enough income to afford a decent standard of living. It should be enough to provide food, clothing and a home.
Thanks to the federal minimum wage, it is illegal for employers to exploit workers.
The current federal minimum wage is $7.25 an hour. This was set in 2009 and is unlikely to increase further.
The only way that the federal minimum wage can increase is if Congress passes a bill that is signed by the President of the United States.
There are concerns by members of Congress that any amends to the federal minimum wage could negatively hit small businesses.
In addition to the federal minimum wage, there is also a dedicated youth minimum wage program.
This promises to pay $4.25 for all workers under the age of 20 for their first 90 days of employment.
After the 90 days (which are calendar days, not working days) or when they turn 20 (whichever comes first), they are entitled to receive the $7.25 hourly rate as set out by the FSLA.
What Is the Minimum Wage for Tipped Workers?
If you are working in a job role that relies on tips, your employer may only be required to pay $2.13 an hour.
This is because the employee will make up the difference to reach $7.25 an hour through their tip money.
If the employee does not earn enough tips to equal the $7.25 federal minimum wage threshold, the employer will be expected to make up the difference.
How Does the Federal Minimum Wage Compare to Other Countries?
Almost every country in the world has its own variation of a minimum wage.
Let’s take a look at how the federal minimum wage compares to other countries:
|Country||Hourly Minimum Wage 2020||Value in US $|
Who Earns the Federal Minimum Wage?
The federal minimum wage is open to all workers who are protected by the FSLA.
As well as promising the $7.25 hourly rate, it also ensures that those who are eligible can receive overtime payments paid at 1.5 times the hourly rate for all hours worked over 40 hours per week.
More than 143 million people in the United States are protected by the federal minimum wage. This is regardless of whether they work full-time or part-time or whether they work for a public sector or private sector employer.
Federal minimum wage legislation is typically broken down into two distinct categories:
1. Enterprise Coverage
These are businesses with at least two employees. It includes businesses that may have sales or business exceeding $500,000 per annum.
Enterprise coverage also applies to those working in hospitals, medical centers, care homes, government agencies or schools.
2. Individual Coverage
Employees are also covered if their employer is involved in ‘interstate commerce’. This means businesses that work beyond state lines.
The Department of Labor defines this as:
‘Those who: produce goods (such as a worker assembling components in a factory or a secretary typing letters in an office) that will be sent out of state, regularly make telephone calls to persons located in other states, handle records of interstate transactions, travel to other states on their jobs, and do janitorial work in buildings where goods are produced for shipment outside the state.’
Additionally, those working in domestic services such as cleaners, cooks and babysitters are also covered through the ‘individual coverage’ aspect of the FSLA.
Is There Anyone Who Is Not Entitled to the Federal Minimum Wage?
Some people may not be entitled to receive the federal minimum wage. These people are generally classified as ‘exempt’ from the FSLA.
Typically, this means those who may be working in administrative or professional roles and earn a salary rather than an hourly rate.
Not only are these employees exempt from the hourly minimum wage, but they are also not entitled to any overtime payments as defined by the FLSA for hours worked over 40 hours per week.
The Department of Labor has declared that full-time students and student learners (those who are participating in a vocational course) are not eligible for the federal minimum wage.
Nor are those individuals who may have a physical or mental impairment which could impact their working ability.
These employees can earn a subminimum wage which is lower than the $7.25 hourly rate.
However, it should be noted that employers can only hire people on subminimum wage when they have received a certificate of authorization from the Wage and Hour division of the Department of Labor.
What Are My Rights if I Am Paid Lower Than the Federal Minimum Wage?
If you believe that you are being paid less than you are entitled to, you should speak to your HR advisor and ask for a copy of your contract.
If you are confident that you are being paid less than the federal minimum wage, you should contact your local office for the Wage and Hours division at the Department of Labor. They take full responsibility for enforcing payment of the minimum wage.
Why Does My State Have a Different Minimum Wage?
The federal minimum wage is relevant across the entire United States of America.
However, many states (such as New York State) have chosen to implement higher wage requirements to protect their residents and encourage higher standards of living.
Some individual cities have also moved beyond their state requirements and implemented local minimum wages.
Where any of these apply, employees are legally entitled to the highest possible minimum wage.
What State Has the Highest Minimum Wage?
New York State has the highest minimum wage entitlement in 2020.
The current NYS minimum wage is $11.80 but incremental wage increases are taking place throughout the state to raise this to $15 an hour.
What State Has the Lowest Minimum Wage?
Georgia and Wyoming have the lowest state minimum wage. For those who are not covered by the FLSA, they both recommend an hourly wage of $5.15.
What Is the Minimum Wage Breakdown by State in 2020?
As you can see from the table below, each state has its own minimum wage requirements:
|State||2020 Minimum Wage||The Difference in $ Above Federal Minimum Wage ($7.25)|
|Georgia||$5.15 (Employers subject to the Fair Labor Standards Act must pay the $7.25 Federal minimum wage)||–$2.10|
|Minnesota||$8.15 for small employers/$10 for large employers||+$0.90/+$2.75|
|New York||$11.80 for some areas/$15 for New York City||+$4.55/+$7.75|
|Wyoming||$5.15 (Employers subject to the Fair Labor Standards Act must pay the $7.25 Federal minimum wage)||–$2.10|
Please note, the table above may be subject to change as a result of local or federal law changes. We recommend that you should always check with your state labor office to check the local minimum wage legislation in your area.
What Are the Arguments For and Against Having a Federal Minimum Wage?
There are many positive benefits to having a national minimum wage:
- It has been proven to reduce inequality amongst workers and ensures that everyone has access to an adequate standard of living.
- It has raised attainment levels as there is an incentive for workers to find employment rather than relying on the welfare state.
- It can also improve the economy because if workers have disposable income, they are more likely to spend any spare dollars in local businesses leading to economic growth.
However, detractors who are against the concept of a federal minimum wage argue that:
- Because the wage is unfunded, it can cause significant hardship for smaller businesses.
- Enforcing a legal mandate to pay workers a set amount may force businesses to limit how many employees they can afford to hire**.
- Having a legal minimum wage could artificially increase housing costs or run the risk of companies outsourcing jobs to areas with lower wage caps.
Each year, individual states will look at their own minimum wage and decide whether to make incremental increases or not.
Some areas (such as New York State) are clear about their wish to raise minimum wages in line with inflation to ensure that residents have a good quality of life.
Other states believe that it should be down to the individual business to decide how much to pay an employee.
The Fair Labor Standards Act has had a far-reaching impact on US employment law since its inception in 1938.
Employee rights may continue to evolve and develop as different administrations campaign to increase the federal minimum wage, which has remained the same for over a decade.