What is the minimum wage? Minimum wage is the lowest amount that an employer is required to pay an hourly worker. The hourly minimum wage rate you will be paid depends on the state in which you work and the type of job you are working at.
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 US minimum wage is $7.25 per hour. However, some states and cities have set minimum wage rates that are higher than the federal minimum.
Review information on federal and state minimum wage rates, and a history of the minimum wage in the US for information on historical minimum wage rates.
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
The minimum wage rate for federal contractors is currently $10.95 per hour, and the minimum wage for tip workers is $7.65 per hour.
Effective January 30, 2022, federal agencies will incorporate a $15 minimum wage in new contract solicitations, and by March 30, 2022, all agencies will need to implement the minimum wage into new contracts. For tipped workers, the minimum wage will gradually increase until it reaches the minimum wage for all contractors in January 2024. The minimum wage rate will be indexed for inflation each year after 2022.
State Minimum Wage Rates
Some states pay a higher minimum wage than the federal minimum. For example, the minimum wage in Florida was $8.56 for 2020, with some cities having a rate higher than the minimum. Florida's minimum wage will be increasing to $10 in September 2021 and will increase $1 per hour each year until it reaches $15 in September 2026.
Here is a list of current state minimum wage rates (2021) you can use to get information on the minimum wage in your location.
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 $16.07 per hour minimum wage as of 2020.
Cities may also occasionally set different minimums for different types of worker. For example, as of January 1, 2021, Seattle mandates a minimum wage of $16.69 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 state 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 Employee Can Be Paid Less Than Minimum Wage
There are some employees that 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.
These 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.) that 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 to Minimum Wage – Tips
An employer of an employee who receives tips is 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.
If an employee's tips combined with the employer's direct wages of at least $2.13 an hour do not equal the federal minimum hourly wage, the employer must make up the difference.
Exceptions to Minimum Wage – 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 Classes of Workers Exempt From the Minimum Wage
- 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
Minimum Wage Compliance
If your employer is paying you less than the minimum wage, visit the Compliance Section of the US Department of Labor Employment Standards Administration Wage and Hour Division for information on how to proceed.