The federal minimum wage in the United States is $7.25. It is 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.

In fact, the earnings of a minimum-wage worker with a family of four fall well below the poverty line. While many states and some cities have minimum wage rates much higher than $7.25, minimum-wage earners still struggle to pay bills, secure housing, and support a family.

Key Takeaways

  • The federal minimum wage has stagnated at $7.25 an hour since 2009. 
  • For most people, working for minimum wage does not give them a living wage.
  • Many states and cities have a higher minimum wage in place—in some cases more than double—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?  

Since 2009, the federal minimum wage has been $7.25, or $15,080 a year. Many economists believe this is woefully inadequate and unjust. Consider this: In order to simply have kept up with inflation since 1968, the minimum wage would have needed to climb to $10.15.

The minimum wage has been a political issue since its inception. During his presidency, 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. Although this campaign stalled in Congress, federal inaction prompted many states to legislate their own minimum wage increases.

In 2019, the U.S. House of Representatives passed an amended version of the Raise the Wage Act of 2019, which would have gradually increased the federal minimum wage to $15 by 2025. But the bill died in the Senate and as a result, the debate about whether to lift the minimum wage rages on.

Over the last decade, a minimum wage increase movement has been largely worker-driven. Fast-food and retail workers have staged nationwide walkouts in grassroots efforts to affect change. Home care workers, labor organizations, and women’s groups have also joined the fight. 

In 2020, 29 states, plus Washington D.C., currently pay more than the federal wage floor. Individual cities have also taken action. For example, the minimum wage in New York City and San Francisco is $15—more the double the federal minimum. At the start of 2020, 22 states raised the minimum wage, which increased pay for 6.8 million workers, according to the Economic Policy Institute.

In states with no minimum wage or a lower one, the federal minimum wage applies to most workers.

Can a Family Survive on Today's Minimum Wage?

The minimum wage is meant to be a living wage. In 1933, five years before the first minimum wage became law, President Franklin Delano Roosevelt said: “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.

Today, full-time employees earning the federal minimum annually pocket just $15,080 (if they work 40 hours, each of the 52 weeks in a year), placing them well below the $17,240 poverty line in 2020 for families of two. And minimum-wage earners with families of four fall more than $11,000 below the poverty line of $26,200. 

Pay Is Not 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” (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 child care.

Minimum-wage employees are also vulnerable to pay reduction from wage theft, which includes lack of overtime pay, erased time cards, and unpaid time employees spend, such as going through lengthy security bag-checks.

The vulnerabilities of hourly-wage earners have been further highlighted during the coronavirus pandemic. Workers at grocery stores, some large retailers, and delivery workers became essential workers on the front lines, many of whom don't have paid sick leave or health insurance provided by their employer. Some retailers temporarily boosted pay or offered bonuses. But workers, including those at Whole Foods, Instacart and Amazon.com, maintained this wasn't enough to put their health at risk. They staged walkouts to demand safer working conditions when much of the U.S. was under varying degrees of lockdown in March 2020.

The Typical Minimum Wage Worker

At the end of 2019, 82.3 million workers were paid hourly, representing more than half (58.1%) of all wage and salary workers in the U.S., according to the Bureau of Labor Statistics (BLS). Among those, 392,000 earned $7.25 per hour. Almost three-quarters of workers earning the minimum wage in 2019 were employed in service jobs, mainly food preparation and serving.

About 3% of women and 1% of men were paid at or below the federal minimum, according to the BLS. The percentage of hourly paid workers making the minimum wage—around 2 %—was about the same for White, Asian, Black, and Latino workers. 

If the Raise the Wage Act had passed and the minimum federal rate raised to $15 by the end of 2024, almost 40 million workers would have seen an increase in pay, 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

As of 2020, only five states have not adopted a state minimum wage and adhere to the federal minimum wage: South Carolina, Tennessee, Alabama, Louisiana, and Mississippi.

Arguments for and Against Raising the Minimum Wage

Business groups such as the National Retail Federation and National Federation of Independent Businesses opposed the minimum wage increase in the Raise the Wage Act, arguing that it was a one-size-fits-all approach that would force businesses to hire fewer people, slash growth plans, and/or raise their prices. Under their theory, this would depress consumer demand and cripple the economy.

In a report published in July 2019, the nonpartisan Congressional Budget Office (CBO) concluded that a $15 minimum minimum wage would benefit up to 27 million workers—significantly fewer than the Economic Policy Institute's estimate—but would cost an estimated 1.3 million jobs. The CBO also concluded that about the same number of people (1.3 million) would see their annual incomes rise above the poverty level.

Groups like Small Business Majority, Main Street Alliance and Business for a Fair Minimum Wage support a higher wage, which they believe will inspire employee loyalty and boost workplace morale, which leads to more satisfied customers and an increase in consumer spending.

Some large U.S. employers who pay an hourly wage have established company-wide minimum wages in recent years. They include big retailers Amazon.com ($15 an hour), Target ($15) Costco ($15), and Walmart ($11 or $12, depending on the location).  

The Bottom Line

The minimum wage in the United States is no longer a living wage. Even though many states are paying more than this amount, minimum wage earners continue to struggle to make ends meet.

At $7.25, the federal minimum hasn’t kept up with the cost of living in more than half a century. But there is a continuing growing movement among workers, policy analysts, state and city governments—and even some employers—to raise it.