What Is the Federal Minimum Wage?

federal minimum wage

This article is for educational purposes and does not constitute legal, financial, or tax advice. For specific advice applicable to your business, please contact a professional.

What is the federal minimum wage in 2023?

The federal minimum wage is a rule set by the Fair Labor Standards Act (FLSA) that tells employers the lowest hourly wage they can pay their employees. The current federal minimum wage is $7.25, and it has not changed since 2009.

Prior to that, federal minimum wage history showed few fluctuations, raising less than 50 cents to $1 per year since 1938.

Can states have a higher minimum wage than the federal standard?

Yes, individual states can implement their own minimum wage laws, meaning the minimum wage by state varies. When a state’s minimum wage doesn’t match the federal standard of $7.25 an hour, hourly workers must be paid the higher of the two amounts.

Cities or counties can also impose a minimum wage. In that case, an employer must pay the highest applicable minimum wage.

So if your business is located in San Francisco, California, you would pay employees a minimum wage of $16.99 per hour, which is the city minimum wage and the highest wage that applies. That is above the California minimum wage of $15 per hour and the federal minimum wage of $7.25 per hour.

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What is the minimum wage in each state?

Thirty states and D.C. have minimum wages above the federal minimum wage. These vary by state and, in many states, wages are set to incrementally increase over the next few years.

For the five states without a minimum wage law, the federal minimum wage applies. You can download a federal minimum wage poster in English (and nine other languages), along with minimum wage posters for any state in question. For more information on the minimum wage plans for each state, see the list below.

Who is covered by the federal minimum wage?

Generally, non-exempt employees are guaranteed to earn at least the federal minimum wage. Employees who are paid on an hourly basis are usually considered non-exempt, regardless of their hourly pay rate.

Employees generally classified as non-exempt include, but are not limited to, the following types of workers:

  • Clerical
  • Blue collar
  • Maintenance
  • Construction
  • Semiskilled workers
  • Technicians and laborers

Read more about the difference between exempt vs. non-exempt employees.

What about workers who make tips?

Generally, tipped employees are considered those who regularly take home more than $30 per month in tips. They may be paid less than the standard hourly minimum in some states, as long as tips bring their pay up to at least the applicable minimum wage.

Take a look at this Department of Labor Fact Sheet to see who qualifies as a tipped employee, but be sure to check local requirements as well.

Is the federal minimum wage increasing?

There are no current plans to raise the federal minimum wage.

The idea of increasing the minimum wage is a popular one among organized labor and anti-poverty groups, who are pushing for $15 an hour as the new standard. Supporters of the Raise the Wage Act, a bill that has been introduced to Congress since 2017, are advocating for gradual increases to the federal wage rate so it reaches $15 per hour by 2025.

A 2021 Pew Research Center survey of American voters found that support for a $15 minimum wage is at 62%, with 40% strongly in favor.

What are some of the arguments supporting the federal minimum wage increase?

  • Minimum wage hasn’t kept up with inflation and cost of living increases, leading many minimum wage workers (especially those with families of three or more people) to be impoverished.
  • People will have more money to spend and amplify the growth of the economy.
  • Government expenses for social programs aimed at the poor may be reduced, resulting in lower taxes for other Americans.
  • More revenue for the government would be generated from payroll taxes for Social Security.
  • According to the Economic Policy Institute (EPI), net worker productivity has increased since 1979 (61.8%), but hourly pay has barely increased since then (only 17.5% after adjusting for inflation). That means worker productivity has gone up 3.5 times as much as employee pay.

What are some of the arguments against the federal minimum wage increase?

  • Employers will be burdened, especially small companies, resulting in slower growth and decreased employment levels.
  • It provides an incentive for employers to invest in automated processes, technology, and machinery to increase productivity — this means less human resources.
  • Prices of products and services may be increased to offset higher labor costs.
  • Companies would have an increased incentive to outsource labor to countries where minimum wage rates are lower.

But minimum wages are increasing in states, right?

There are some states that have announced plans to reach a $15 minimum wage in the coming years, but there are many that haven’t. The best way to stay on top of minimum wage changes in your state is by bookmarking resources like the ones listed below in addition to the website for your state labor office.

Minimum wage by state

See what the minimum wage plans are in your state by navigating to our state-specific primers below:

If you have employees in different states, it’s important to use a payroll service that helps you pay and calculate taxes accordingly. Learn more about how Square Payroll can help you pay employees who work in multiple states, whether they’re remote workers, in-office, or a combination of both.

Whether you’re for or against a minimum wage increase, it’s important that you stay up to date on the topic for the health of your business. Talk to your lawyer or tax professional if you have any questions about the federal minimum wage in 2023 and how it impacts you and your employees.