The hourly minimum wage in the US is $7.25: Which One Do You Choose? The minimum wage is the lowest legal pay that businesses are permitted to give their employees. The goal of minimum wage laws is to stop employers from abusing their employees. The minimum wage should generate enough income to support a living wage, which is the sum required to pay for adequate housing, clothing, and food. As of January 2022, the federal minimum wage in the United States is $7.25 per hour. The minimum wage varies widely between cities and states. The federal or local minimum wage, whichever is higher, is paid to employees. As of January 1, 2022, California has the highest state rate, which is $15 ($14 for employers with fewer than 26 employees).
What the Minimum Wage Is For
The minimum wage hasn't kept up with inflation, despite the fact that its purpose is to safeguard workers from exploitation. According to the Economic Policy Institute, those who made the minimum wage in 2017 were paid about 27% less than their equivalents did nearly 50 years earlier. If the minimum wage had increased since 1968 at the same rate as the typical American worker's average wage, it would have reached $11.62 in 2017. Instead, at 40 hours per week over 52 weeks, the minimum wage comes out to $15,080 per year. That exceeds the single-person federal poverty line. but not for a two-person family. 4, If a worker was attempting to support a family on the federal minimum wage, they would be eligible for assistance. On a minimum wage, how much rent can Americans afford? In most states, it might be enough to pay the rent for a studio apartment in a rural area or college town, but in some states and many large cities, minimum-wage workers may frequently share housing with others.The Minimum Wage's Past
The Fair Labor Standards Act (FLSA)established the first U.S. minimum wage in 1938. It was enacted as a part of the New Deal by President Franklin D. Roosevelt to safeguard workers during the Great Depression. For many people, wages during the Depression were as low as pennies per day. Roosevelt established a $0.25/hour minimum wage. In order to stay in business during the Depression, businesses were forced to reduce pay and increase hours. Child labor is yet another serious issue. In a survey conducted by the Children's Bureau of the U.S. Department of Labor (DOL) at the time, 25% of the 449 American children polled reported working 60 or more hours per week. As a result of growing public interest in the topic, President Roosevelt convened a special session of Congress in 1937 to discuss issues in the run-up to setting the minimum wage. As Roosevelt said, "In times of business recession, the undercutting of wages and the stretching of hours of the lowest paid workers have a serious impact on purchasing power.”. The FLSA limited the workweek to 44 hours and prohibited abusive child labor in addition to setting the minimum wage. The United States Congress continued to increase the minimum wage. By 1956, it was $1/hour. However, the FLSA mostly applies to employees in interstate commerce. In 1961, Congress amended the Act to include employees of local transportation, construction, and gas stations as well as retail and service businesses. Five years later, employees of local and state governments as well as those working in service-related industries like hotels, farms, and laundromats were covered by the FLSA.Racial discrimination issues
Critics and academics have argued that racial inequality and minimum wage problems existed long before the first federal minimum wage was enacted. In 1931, the Davis-Bacon Act was passed by Congress, requiring contractors and subcontractors working on contracts with federal funding or assistance to pay their mechanics and laborers "prevailing wages." But those who oppose the act claim that it was passed specifically with the intention of giving white workers in white-only unions the upper hand over non-unionized black workers for the few jobs available during the Depression. The Davis-Bacon Act, according to the AFL-CIO, the largest federation of unions in the United States, was not intended to be "racist," but rather to "fight back against the worst practices the construction industry had and to make sure everyone who built our nation got fair wages”.Action and Legislation
The Fair Minimum Wage Act of 2007 was the most recent amendment to the FLSA. It established these planned increases:- Prior to July 24, 2007, $5.15 per hour.
- between July 24, 2007, and July 23, 2008.
- $6.55 per hour from July 24, 2008, to July 23, 2009.
- $7.25 per hour as of July 24, 2009, or later.
What Is the Minimum Wage Currently?
The federal minimum wage is still $7.25 an hour, even though some states have adopted their own $15 minimum-wage laws. President Joe Biden prioritized a federal mandate for the $15 minimum wage during the election season and has continued to do so since taking office. Just after Biden took office, Democratic lawmakers introduced the Raise the Wage Act of 2021, which would more than double the federal minimum wage to $15 by 2025. In 2019, a bill of a similar nature was approved by the House of Representatives but failed in the Republican-controlled Senate. Congress has continued to do nothing regarding the minimum wage issue, but President Biden issued an executive order raising the minimum wage for contract workers to $15.16.The case for a $15 minimum wage
In a survey conducted by the Pew Research Center in April 2021, the majority of American adults (62%) supported increasing the federal minimum wage to $15 per hour. The majority of Latinx and Asian Americans (roughly 75%), as well as black adults (89%), support the increase. The $15 minimum wage has five main advantages.Increasing Productivity
A worker's morale is higher if they can afford to live. If they have a decent standard of living, they are more productive.It lessens income disparity
The large disparity in how income is distributed among people, groups, populations, social classes, or nations, which is partly a result of structural racism or sexism, can be reduced while increasing the incentive to work. When the Raise the Wage Act was first proposed in 2019, Ben Zipperer of the Economic Policy Institute testified before the House of Representatives Committee on Education and Labor. He claimed that the $7.25 federal minimum wage "hurts women as well as black and Hispanic workers the most." Despite accounting for only 48% of the workforce in the United States, Zipperer noted that 56% of those who would benefit from a $15 minimum wage in 2024 are women. He continued by saying that 34 percent of Hispanic workers and 40 percent of all black workers would both see wage increases. According to a 2019 study from the National Women's Law Center, "for women working full time in states with a minimum wage of $10 per hour or more, the wage gap is 34 [percent]," demonstrating the potential value of even a small minimum-wage increase.Promoting economic growth
The cost of living is more accurately reflected by a higher minimum wage. Because they have more money to spend and are less likely to default on debts, workers who are able to earn more than the cost of living to contribute more to the economy. This raises consumer demand, boosts sales, and reduces consumer debt, medical debt, and evictions.It encourages learning and improvement
When employees have more time and money, they can use it to further their education, which will raise both their productivity and the labour market's attractiveness. The number of small businesses and innovation can both rise with a more educated workforce.It improves the retention of employees
Finally, minimum wage laws are advantageous to specific businesses. Workers are less likely to leave their current position in search of one that pays more, which lowers turnover and high retraining expenses.Objections to the $15 Minimum Wage
The National Federation of Independent Businesses (NFIB), among other small business organizations, is opposed to raising the minimum wage to $15. According to an NFIB poll from the beginning of 2021, a $15 per hour minimum wage "would be harmful to Main Street and its job opportunities," according to 92 percent of small businesses. Here are some additional details from the opposition's arguments.Employment In the Private Sector Declines
According to the NFIB Research Center, the Raise the Wage Act's $15 minimum wage would result in a loss of over 1.6 million jobs in the private sector. Over the long term, the United States would lose more than $2 trillion in real economic output.Labor costs are rising
Businesses' labor costs, which typically account for a sizable portion of their budgets, increase as a result of minimum wage laws. When the government mandates that businesses pay more per worker, businesses typically hire fewer workers to maintain the same level of total labor costs. The unemployment rate then rises as a result. Because they have to compete for fewer jobs, workers with incomes at or below the federal poverty line are the hardest hit. Some smaller businesses might not be able to function with fewer employees and might be forced to file for bankruptcy.Small Business and Industry Job Losses in
The Business Size Insight Module (BSIM), a multi-region economic forecasting and policy analysis model, predicts that by 2029, businesses with fewer than 100 employees will lose close to 700,000 jobs, or roughly 43% of all jobs lost in the private sector. Meanwhile, significant job losses are anticipated in important industries like retail, administration, and support services. For workers who are able to keep or find jobs in these industries, job loss cancels out wage increases.Labor-Intensive Industries are Punished
The minimum wage penalizes businesses that use a lot of labor. By default, it rewards people who work in capital-intensive industries. Over time, it has the potential to change the very foundation of the nation's economy.Upswing in Outsourcing
Legal minimum wages may lead to more job outsourcing. Businesses may decide to relocate their operations to regions with lower labor costs.It increases poverty and unemployment
Increased minimum-wage laws might not help the nation's poor. They benefit the workers who are employed but raise unemployment. According to a study of Seattle's minimum wage increase by the National Bureau of Economic Research, research demonstrates that experienced workers receive higher pay and more job opportunities, whereas less-experienced workers experience a loss of job opportunities.Living costs for living
Finally, some regions' cost of living may increase as a result of minimum wages. A higher minimum wage enables employees to increase their housing costs. Inflation could result from landlords' raising rents.Who is paid the minimum wage?
As per the Bureau of Labor Statistics, the hourly working proportion for making the federal minimum wage or less decreased from being 1.9 percent in 2019 to 1.5 percent in 2020. This data was first gathered in 1979 when the unemployment rate was 13.4%. In total, 1.1 million workers in 2020 received pay that was at or below the $7.25 federal minimum wage. People who make the minimum wage or less are typically young. Just under 20% of hourly workers were under the age of 25, but they accounted for about 48% of those earning the federal minimum wage or less. Among employees who were paid an hourly wage, 2% of women and 1% of men were paid the federal minimum wage or less. The majority of hourly-paid workers in service occupations make the federal minimum wage or less. Leisure and hospitality, at 8%, had the highest percentage of hourly workers making at or under the federal minimum wage.Who Earns Less Than the Minimum Wage?
Due to one of several exemptions, 1.1 million workers actually make less money than the minimum wage. Here are a few instances: A certificate from the DOL is available to employers who hire full-time students in retail or service businesses, agriculture, or colleges and universities, allowing the student to be paid 85 percent of the minimum wage. If their employer obtains a certificate from the DOL, high school students who are 16 years of age or older and enrolled in vocational education classes may be paid 75% of the minimum wage. The FLSA was amended in 1996 to allow employers to pay workers under 20 no less than $4.25/hour during the first 90 days of employment. If their disability reduces their productivity, workers with disabilities may be eligible for a special minimum wage. Employees who receive tips are paid $2.13 per hour if their total hourly compensation and tips equal the federal minimum wage. If not, the employer is required to make up the difference, though this is not always the case. Unless it engages in interstate commerce, is a hospital, school, or a government organization, a business with annual revenue of less than $500,000 is permitted to pay less than the federal minimum wage. For these worker categories, check your state's minimum wage regulations. If the amount is higher, the state minimum wage will take precedence over the federal minimum wage law. The DOL's Wage and Hour Division carries out the country's minimum wage law's enforcement. The FLSA Handy Reference Guide offers details on the minimum wage, overtime pay, and other regulations that apply to all categories of workers.Minimum Wage in Each State
Starting in 2022, 26 states have declared that their minimum wages will increase. There is no state minimum wage in Alabama, Louisiana, Mississippi, South Carolina, or Tennessee. The minimum wage in Georgia and Wyoming is less than $7.25. In those states, the federal minimum wage of $7.25 is in effect. In California, the highest minimum wage is $15 for companies with 26 or more employees and $14 for all other companies. It will rise to $15 in 2023 and then be adjusted yearly using a predetermined formula and the number of employees. With a limit of $13 or more per hour in at least some areas as of 2022, Massachusetts, Connecticut, Oregon, New Jersey, New York, and Washington are the only other states with such a restriction. Some cities, including San Francisco, New York City, and the District of Columbia, also impose local laws requiring a minimum wage of $15 per hour or more. Alaska, Florida, Minnesota, Montana, Ohio, South Dakota, and Vermont are the seven states where wages are automatically raised in accordance with the cost of living. The most recent minimum wage regulations for each state are listed by the U.S. Department of Labor. Additionally, it gives a timeline of each state's minimum wage since 1968.Do other nations have a minimum wage?
There is a national minimum wage in many nations. Most of them evaluate it yearly and make adjustments based on the cost of living. Despite having a higher cost of living than most other nations in the world, the U.S. minimum wage is lower. Depending on age in the UK, For instance, 8.91 pounds per hour for those who are over the age of 23, or about $1231. In Ireland, people ages 20 and older earn 10.50 euros per hour, or roughly $12, while younger workers earn, on average, 7.35 euros per hour. Twenty-one of the 27 nations that make up the European Union had national minimum wages as of July 2021. Every employee must abide by the rules. In Bulgaria, the average monthly wage is 332 euros, while in Luxembourg it is 2,202 euros. These are roughly the same as the range of $376 to $2,495 in the United States in January 2022. The minimum wage in several EU nations, including the Netherlands, Ireland, France, Germany, Belgium, and Luxembourg, is higher than in the United States. Depending on the province, the daily minimum wage ranges from 313 to 336 Baht. This ranged from approximately $9.29 to $9.97 per day in January 2022.United States of America: "US
Depending on age and employment status, $20.33/hour in January 2022 will be equivalent to roughly $14.62 USD/hour. With Trade Partners of the United States Without a Minimum Wage Instead of a federal minimum wage, each province and territory in Canada determines its own rate. As of January 2022, they ranged from a low of C $11.75/hour (U.S. $9.29/hour) in New Brunswick to C $16.00/hour (U.S. $12.66/hour) in Nunavut. The Zona Libre de la Frontera Norte, which pays the highest wages, has a Mexican commission that determines the minimum wage (ZLFN). This amount works out to $9.10 per day or 185.56 pesos. For the remainder of the nation, the minimum wage is 123.22 pesos or $6.04 per day. Due to the wide regional differences in the cost of living, China does not have a national minimum wage. Instead, each province determines its own level while receiving general direction from the federal government. Beijing has the highest hourly wage at 25.3 RMB/US $3.90.38, while Shanghai's minimum monthly wage is the highest in the nation at 2,590 RMB/month or $400/month. In Indian cities like Delhi, the minimum wage for an unskilled worker is 618 rupees ($8.33) per day. No country has a set minimum wage.Questions and Answers (FAQs)
How many individuals work for the minimum wage?
In 2020, 1.1 million Americans, or 1.5 percent of all hourly wage earners, earned the minimum wage or less.Can a family survive on the minimum wage?
At the minimum wage, a worker who puts in 40 hours per week would make $15,080 before taxes. For a family of two or more, that is below the federal poverty line. Additionally, it is less expensive than the $1,621 monthly or $19,452 annual average cost of a one-bedroom apartment in the United States in 2020.The minimum wage hasn't changed for how long?
Since July 1, 2009, the federal minimum wage has been $7.25 per hour. To maintain their purchasing power at 2009 levels, workers would have had to be paid $9.57 in December 2021 due to inflation.