The federal minimum wage for nonexempt employees in the United States is $7.25 as of 2023. It’s meant to be a living wage but this isn’t the case in practice. The hourly rate hasn’t kept up with the cost of living since the late 1960s. The earnings of a minimum wage worker with a family of four fall well below the poverty line.
Thirty states and the District of Columbia have minimum wage rates higher than $7.25 as of October 2023, however.
Key Takeaways
- The federal minimum wage has stagnated at $7.25 an hour since 2009.
- Working for minimum wage does not give most people a living wage.
- Many states and cities have a higher minimum wage in place, more than double in some cases, but workers still struggle to make ends meet.
- Proponents of raising the minimum wage maintain that doing so helps incomes keep pace with increasing costs of living and will lift millions out of poverty.
- Opponents believe that higher wages would force businesses to hire fewer people, slash growth plans, and/or raise their prices, which will hurt the economy.
What Is the U.S. Federal Minimum Wage?
The federal minimum wage has been $7.25 an hour or $15,080 a year since 2009. Many economists believe that this is woefully inadequate and unjust. The minimum wage peaked at an inflation-adjusted value of $10.15 in 2018 dollars in 1968, which was worth 28.6% more than the federal minimum wage in 2018.
History of the Federal Minimum Wage
The minimum wage has been a political issue since its inception. President Franklin Delano Roosevelt said in 1933, five years before the first minimum wage became law, that “…by living wages, I mean more than a bare subsistence level—I mean the wages of a decent living.” The first U.S. minimum wage was implemented in 1938 as part of the Fair Labor Standards Act.
President Barack Obama signed an executive order to increase the minimum wage of some federal workers to $10.10, reasoning that the overall federal rate should also be raised to that amount. This campaign stalled in Congress but federal inaction prompted many states to legislate their own minimum wage increases.
The U.S. House of Representatives and the Senate both referred the Raise the Wage Act of 2021 to committee in early 2021. The bill is aimed to gradually increase the federal minimum wage to $15 an hour by 2025. It was last introduced in 2019 but it didn’t make it out of committee. The debate about whether to lift the federal minimum wage rages on as a result.
A movement to increase the minimum wage has been largely worker-driven since about 2010. Fast-food and retail workers have staged nationwide walkouts in grassroots efforts to effect change. Home care workers, labor organizations, and women’s groups have also joined the fight.
Minimum Wage by State
Thirty states, the District of Columbia, Guam, and the Virgin Islands paid more than the federal wage floor at the close of 2023.
Individual cities have also taken action. The minimum wage in New York City was $15 at the close of 2022, more than double the federal minimum.
Tom Wolf, Pennsylvania’s governor at the time, amended a previous executive order in January 2022 to raise the minimum wage for state government workers to $15 ahead of schedule.
The federal minimum wage applies to most workers in states with no minimum wage or a lower one.
Florida residents voted to increase the state’s minimum wage incrementally in November 2020, beginning at $10 per hour on Sept. 30, 2021 until it reaches $15 per hour in September 2026.
Raising their minimum wage was on the November 2022 midterm elections ballot in two states, Nebraska and Nevada. Nebraska’s Initiative 433 called for a minimum wage of $15 in 2026, up from $9 an hour and with annual cost-of-living increases after that. It passed by a 17-point margin. A two-tiered minimum wage of $10.50 for employers who do not offer health insurance and $9.50 for those that do was replaced by a single $12 an hour minimum wage for all employees effective in 2024 when Question 2 was passed by voters in Nevada.
Voters in the District of Columbia passed a measure in the November 2022 election that will increase the minimum wage for tipped workers, set at $5.05, until it matches the minimum wage for non-tipped workers by 2027.
Can a Family Survive on Minimum Wage?
Full-time employees earning the federal minimum annually pocket just $15,080 in 2023 if they work 40 hours each of the 52 weeks in a year. This places them well below the $19,720 poverty line in 2023 for families of two. A full-time minimum wage earner with a family of four falls $14,920 below the 2023 poverty line of $30,000.
Pay Isn’t the Only Problem
Many companies don’t offer full-time hours, even when workers want them. Fluctuating work schedules, split shifts, and the dreaded “clopening” of closing the store at night, then reporting back to work early the next morning to open it, make it difficult for employees to work second jobs, attend college classes, or arrange childcare.
Minimum wage employees are also vulnerable to pay reduction from wage theft, which includes lack of overtime pay, erased time cards, and any unpaid time that employees spend while at work, such as going through lengthy security bag checks.
The vulnerabilities of hourly wage earners were further highlighted during the COVID-19 pandemic. Employees at grocery stores and some large retailers, as well as delivery workers, were forced to work on the frontlines at the height of the outbreak without being offered paid sick leave or health insurance by their employers.
Some retailers temporarily boosted pay or offered bonuses but workers, including those at Whole Foods, Instacart, and Amazon, maintained that this wasn’t enough to put their health at risk. They staged walkouts in March 2020 to demand safer working conditions when much of the U.S. was under varying degrees of lockdown.
The Typical Minimum Wage Worker
According to the U.S. Bureau of Labor Statistics (BLS), 78.7 million workers were paid hourly in 2022, representing 55.6%, more than half, of all wage and salary workers in the U.S. Of that group, 141,000 earned $7.25 per hour. Nearly three out of four workers earning the minimum wage or less in 2022 were employed in service jobs, mainly food preparation and serving-related jobs.
About 2% and 1% respectively of hourly-paid women and men were paid at or below the federal minimum in 2022, according to the BLS. The BLS stated that about 1% of hourly-paid White, Asian, and Latinx workers earned the minimum wage or less. About 2% of hourly-paid Black workers earned the minimum wage or less.
Almost 40 million workers would have seen an increase in pay if the Raise the Wage Act had passed and the minimum federal rate had been raised to $15 by the end of 2024, according to the Economic Policy Institute. Workers who would have benefited include:
- 38.6 million adults ages 18 and older
- 23.8 million full-time workers
- 23 million women
- 11.2 million parents
- 5.4 million single parents
- The parents of 14.4 million children
Arguments for and Against Raising the Minimum Wage
Business groups such as the National Retail Federation (NRF) and the National Federation of Independent Businesses (NFIB) opposed the minimum wage increase in the Raise the Wage Act, arguing that it was a one-size-fits-all approach. It would force businesses to hire fewer people, slash growth plans, and/or raise prices. They believed that the Act would negatively affect early-career and low-wage workers as well as cause harm to the economy in a variety of other ways.
The nonpartisan Congressional Budget Office (CBO) concluded in a report published in February 2021 that it would benefit up to 27 million workers when the minimum wage reaches $15 in 2025. This is significantly fewer than the Economic Policy Institute’s estimate but would cost an estimated 1.4 million jobs. The CBO also concluded that 0.9 million people would see their annual incomes rise above the poverty level.
Only five states had not adopted a state minimum wage as of October 2023: Alabama, Louisiana, Mississippi, South Carolina, and Tennessee.
Groups such as Small Business Majority, Main Street Alliance, and Business for a Fair Minimum Wage support a higher wage, believing that it will inspire employee loyalty and boost workplace morale. This would lead to more satisfied customers and an increase in consumer spending.
Some large U.S. employers that pay an hourly wage have established company-wide minimum wages since 2020. They include big retailers such as:
- Amazon: $15 an hour
- Target: $15 to $24 an hour
- Costco: $16 an hour
What Is the Minimum Wage?
The federal minimum wage is $7.25 an hour as of 2023 but many states, cities, and municipalities have a minimum wage that is higher than the federal minimum. Many companies have also implemented minimum wages higher than the federal minimum wage.
What Is the Minimum Wage in California?
The minimum wage in California is $15.50 per hour for all employers. Some cities and counties have higher minimum rates.
What Is the Minimum Wage in Florida?
The minimum wage in Florida was $12 as of October 2023. The minimum hourly wage in the Sunshine State is set to increase a dollar on Sept. 30 each year until it reaches $15 in 2026. The state will revert to adjusting its minimum hourly wage based on inflation after that point.
The Bottom Line
The minimum wage in the United States is no longer a living wage. Many states are paying more than this amount but minimum wage earners continue to struggle to make ends meet.
The federal minimum wage hasn’t kept up with the cost of living in more than half a century at $7.25 per hour. But there’s a growing movement among workers, policy analysts, state and city governments, and even some employers to raise it.