What is the minimum wage?
The minimum wage is the lowest an employer can pay an employee for work performed. The federal minimum wage applies to employees working for companies with revenues of $500,000 or more. Those making less than $500,000 in revenue may also be eligible if they conduct commerce or communicate regularly over state lines.
Since 1938, the federal wage has been increased manually 22 times because it doesn’t automatically adjust to accommodate cost of living. As of August 2009, the wage increased to $7.25 per hour. Since 2009, cost of living has gone up by 20 percent, which has prompted an adjustment.
Who is eligible for federal minimum wage?
Anyone over the age of 20 is eligible for minimum wage, but there are caveats. Companies with tipped staff or student employees under 20 years old must follow a subminimum wage rate. For tipped employees, such as restaurant servers, the minimum wage is $2.13 because it’s expected they will increase their income from customer tips.
In the case of full-time students (and “student learners“), employers require a certificate from the Department of Labor. This certificate states that students currently in school or enrolled in a vocational program can receive no less than 85% (and 75% for student learners) of the minimum wage, depending on their student status. Once they’ve graduated, they can earn at least the full minimum wage.
Why states have different minimum wages
When it comes to understanding why some states offer more competitive rates than the federal government, there are some factors that influence the differences between state and federal minimum wage rates. The federal minimum doesn’t equate to a living wage in states such as New York or California, for example, so it’s logical to change it. In some states, the higher federal minimum makes it more favorable than what the state would have offered.
Certain local governments aren’t allowed to come up with their own minimum because the state has cost-of-living differentials for localities that handle the different variations.
Breakdown of minimum wage by state
| State | Current Minimum Wage | Wage Increase Timeline |
| Alabama | none | |
| Alaska | $10.34 | |
| American Samoa | varies | |
| Arizona | $12.15 | |
| Arkansas | $11.00 | |
| California | $13.00 | Increase by $1 per year for two years until $15 |
| Colorado | $12.32 | |
| Connecticut | $12.00 | Increase by $1 per year for three years until $15 |
| Delaware | $9.25 | |
| D.C. | $15.00 | |
| Florida | $8.65 | |
| Georgia | $7.25 | |
| Guam | $8.75 | |
| Hawaii | $10.10 | |
| Idaho | $7.25 | |
| Illinois | $11.00 | Increase by $1 per year until for five years $15 |
| Indiana | $7.25 | |
| Iowa | $7.25 | |
| Kansas | $7.25 | |
| Kentucky | $7.25 | |
| Louisiana | none | |
| Maine | $12.15 | |
| Maryland | $11.75 | $15 effective January 2025 |
| Massachusetts | $13.50 | $15 effective January 2023 |
| Michigan | $9.65 | Increase by $0.23 per year until it reaches $12.05 in 2030 |
| Minnesota | $10.00/$8.15 | |
| Mississippi | none | |
| Missouri | $10.30 | $12 effective January 2023 |
| Montana | $8.75 | |
| Nebraska | $9 | |
| Nevada | $9.00/$8.00 | $12.00/$11.00 effective July 2024 |
| New Hampshire | $7.25 | |
| New Jersey | $12.00 | $15 effective January 2024 |
| New Mexico | $10.50 | $12.00 effective January 2023 |
| New York | $12.50 | Rate adjusted annually for inflation until $15.00 |
| North Carolina | $7.25 | |
| North Dakota | $7.25 | |
| Northern Mariana Islands | $7.25 | |
| Ohio | $8.80/$7.25 | |
| Oklahoma | $7.25/$2 | |
| Oregon | $12.00 | $13.50 effective July 2022 |
| Pennsylvania | $7.25 | |
| Puerto Rico | $7.25/$5.08 | |
| Rhode Island | $11.50 | |
| South Carolina | none | |
| South Dakota | $9.45 | |
| Tennessee | none | |
| Texas | $7.25 | |
| Utah | $7.25 | |
| Vermont | $11.75 | |
| Virgin Islands | $10.50 | |
| Virginia | $7.25 | |
| Washington | $13.69 | |
| West Virginia | $8.75 | |
| Wisconsin | $7.25 | |
| Wyoming | $7.25 |
As of July 2021, the increase to a $15 minimum wage was still being debated in Congress. According to the National Conference of State Legislatures, about 29 states are going to slowly increase their minimum wage rate to reflect the cost-of-living changes that were already voted on by constituents. Those that have no minimum listed still abide by the federal minimum wage.
States such as Ohio and Minnesota show different rates because the minimums are based on employer revenue thresholds or whether employees have benefits.
American Samoa sets rates according to the industry and has automatic yearly increases of $0.50 until its wage rate reaches the federal minimum.
Minimum wage FAQs
Which state has the highest minimum wage?
If Washington D.C. were a state, its $15 minimum wage would make it the highest. Washington state has a minimum wage of $13.69.
What is the minimum wage for employees who receive tips?
The federal minimum cash wage for tipped employees is $2.13. Oklahoma, Alabama, Georgia, Indiana, Kansas, Kentucky, Louisiana, Mississippi, Nebraska, North Carolina, Puerto Rico, South Carolina, Tennessee, Texas, Utah, Virginia and Wyoming all adhere to this minimum. Other states pay tipped workers more, with California being the highest. Its threshold relies on the number of workers employers have. Those with 25 or fewer employees pay a cash minimum of $13 per hour, while those with 26 or more pay $14.
Is the federal minimum wage going up?
As of July 2021, the bill to change the minimum wage to $15 is still in Congress. In the meantime, many states have already taken steps to raise their minimum wages.
What happens if the state minimum wage is higher than the federal minimum wage?
Between the federal and state minimum wages, the higher rate takes precedence. Currently, all states with a set minimum wage reflect the federal minimum of $7.25, or are higher.
In California, for example, the state minimum wage is $13 for employers with less than 26 employees. You must pay them the state’s minimum, since it’s greater than the federal minimum.
