Minimum Wage

What is 'Minimum Wage'

Minimum wage is the minimum amount of compensation an employee must receive for performing labor. Minimum wages are typically established by contract or legislation by the government. As such, it is illegal to pay an employee less than the minimum wage.

BREAKING DOWN 'Minimum Wage'

The minimum wage attempts to protect employees from exploitation, allowing them to afford the basic necessities of life. The minimum wage rate fluctuates between countries, and sometimes between states or provinces.

Minimum wages have drawn strong criticism from many economists, since it establishes a price floor on wages. Price floors can lead to a dead weight loss in the economy, which means that inefficiencies exist. In this case, the minimum wage might force companies to hire fewer employees, thus increasing unemployment.

As of July 2008, the U.S. federal minimum wage rate was $6.55/hour. However, in states where the state minimum wage is higher than the U.S. federal minimum wage, workers must be paid the higher minimum wage.

RELATED TERMS
  1. Wage Push Inflation

    A general increase in the cost of goods that is preceded by and ...
  2. Justified Wage

    A wage level for a job that is set by market dynamics and justified ...
  3. Living Wage

    A theoretical wage level that allows the earner to afford adequate ...
  4. Taxable Wage Base

    Also known as the Social Security Wage Base, this base is the ...
  5. Cash Wages

    Cash wages include any kind of compensation that comes in the ...
  6. Market Failure

    An economic term that encompasses a situation where, in any given ...
Related Articles
  1. Personal Finance

    Why Minimum Wage Is a Kingmaking Issue in Elections

    Minimum wage is an essential issue for presidential candidates in the lead-up to the 2016 election. We look at the reasons why.
  2. Personal Finance

    How Minimum Wage Impacts Unemployment

    We explain how the minimum wage affects unemployment, public assistance, and the economy overall.
  3. Personal Finance

    Can A Family Survive On The U.S. Minimum Wage? (WMT, COST)

    As the political debate roars on, the numbers are clear: Even two full-timers at U.S. minimum wage can't keep a family of four above the poverty line.
  4. Economics

    5 Developed Countries without Minimum Wages

    Find out about five developed nations that have no federally regulated minimum wage and how these countries use unions to ensure workers are paid their due.
  5. Economics

    Minimum Wages Can Raise Unemployment

    Learn why many economists feel that minimum wages, while intended to benefit low-wage workers, actually hurt them by increasing unemployment.
  6. Entrepreneurship

    How a Higher Minimum Wage Would Impact the Economy

    Doubling pay for hourly workers could have several knock-on effects to the economy. Here's a brief look at a big issue.
  7. Economics

    The Top 5 US Cities with Highest Minimum Wage

    Learn how awareness campaigns have led to huge minimum wage hikes in several large cities, and discover which U.S. cities have the highest minimum wages.
  8. Stock Analysis

    Why Walmart Raised Its Minimum Wage

    Read about the potential pros and cons of Walmart's promise to increase its minimum starting salary to $10 an hour.
  9. Options & Futures

    Why Wages Stick When The Economy Shifts

    Even economists can't agree on the impact (or even existence) of wage stickiness. So, how does it affect you?
  10. Stock Analysis

    What the Recent Minimum Wage Debate Means for McDonald’s Stock Price (MCD)

    Find out what effect a minimum wage increase will have on McDonald's stock price. Examine the results of the increase in McDonald's minimum wage.
RELATED FAQS
  1. Which states have the lowest minimum wage?

    Learn which two states share the lowest state minimum wage and are also the only two that sit below the required federal ... Read Answer >>
  2. Does raising the minimum wage increase inflation?

    Explore whether raising the minimum wage increases inflation. This is a polarizing topic that is inherently linked to unemployment. Read Answer >>
  3. How can minimum wages contribute to a market failure?

    See why minimum wage laws create a market failure among low-productivity workers by making it illegal for companies to hire ... Read Answer >>
  4. Will a hike in the minimum wage result in deadweight loss to businesses and labor?

    Learn the effects of a minimum wage hike on businesses and the market. Learn how deadweight loss is created by such hikes ... Read Answer >>
  5. What's the average hourly wage of waiters and bartenders before tips

    Learn how much per hour waiters, bartenders and other tipped employees make before tips under federal and state minimum wage ... Read Answer >>
  6. What is the minimum amount of money that I can invest in a mutual fund?

    Learn about investing in mutual funds even with a smaller initial investment; there are many funds available to investors ... Read Answer >>
Hot Definitions
  1. Law Of Demand

    A microeconomic law that states that, all other factors being equal, as the price of a good or service increases, consumer ...
  2. Cost Of Debt

    The effective rate that a company pays on its current debt. This can be measured in either before- or after-tax returns; ...
  3. Yield Curve

    A line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity ...
  4. Stop-Limit Order

    An order placed with a broker that combines the features of stop order with those of a limit order. A stop-limit order will ...
  5. Keynesian Economics

    An economic theory of total spending in the economy and its effects on output and inflation. Keynesian economics was developed ...
  6. Society for Worldwide Interbank Financial Telecommunications ...

    A member-owned cooperative that provides safe and secure financial transactions for its members. Established in 1973, the ...
Trading Center