The federal minimum wage for nonexempt employees 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 and continue to revise them—in 2022, 26 U.S. states are increasing their minimum wages—minimum-wage earners still struggle to pay bills, secure housing, and support a family.
- 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 US 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 1968, the minimum waged peaked at an inflation adjusted value of $10.15 in 2018 dollars, which was worth 28.6% more than the federal minimum wage in 2018.
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 early 2021, the U.S. House of Representatives and the Senate both referred the Raise the Wage act of 2021 to committee. The bill is aimed to gradually increase the federal minimum wage to $15 by 2025. It was last introduced in 2019 but did not make it out of committee and, as a result, the debate about whether to lift the federal minimum wage rages on today.
Over the last decade, a movement to increase the minimum wage has been largely worker-driven. 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, plus the District of Columbia, Guam, and the Virgin Islands currently pay more than the federal wage floor. Individual cities have also taken action. For example, the minimum wage in New York City is $15—more than double the federal minimum. At the start of 2022, 22 states raised their minimum wages for all workers. Three others did so during the course of the year. In addition, Pennsylvania governor Tom Wolf amended a previous executive order in January 2022 to raise the minimum wage for state government workers to $15 an hour ahead of schedule.
In states with no minimum wage or a lower one, the federal minimum wage applies to most workers.
In November 2020, Florida residents voted to increase the state’s minimum wage incrementally (beginning at $10 per hour on Sept. 30, 2021) until it reaches $15 per hour in September 2026.
Two states, Nebraska and Nevada, had raising their minimum wage on the November 2022 midterm elections ballot.
- Nebraska's Initiative 433, calling for a minimum wage of $15, up from the current $9 an hour in 2026, with annual cost-of-living increases after that, passed by a 17-point margin.
- In Nevada, if Question 2 passes, a two-tiered minimum wage of $10.50 for employers who do not offer health insurance and $9.50 for those that do will be replaced by a single $12 an hour minimum wage for all employees effective in 2024. At publication, the measure was winning 54.3% to 45.7% with 83% of the votes tallied.
Also in the November 2022 election, voters in the District of Columbia passed a measure that will increase the minimum wage for tipped workers, currently set at $5.05, until it matches the minimum wage for non-tipped workers by 2027.
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, then-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 $18,310 poverty line in 2022 for families of two. Meanwhile, a full-time minimum wage earner with a family of four falls $12,670 below the poverty line of $27,750.
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 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 have been 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 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
In 2020, 73.3 million workers were paid hourly, representing more than half (55.5%) of all wage and salary workers in the U.S., according to the U.S. Bureau of Labor Statistics (BLS). Of that group, 247,000 earned $7.25 per hour. Almost three-quarters of workers earning the minimum wage or less in 2020 were employed in service jobs, mainly food preparation and serving related jobs.
About 2% and 1% of hourly paid women and men, respectively, were paid at or below the federal minimum, according to the BLS. Meanwhile, in terms of race, the BLS claimed that about 1% of hourly paid White, Asian, and Latinx workers earned the minimum wage or less, while about 2% of hourly paid Black workers earned the minimum wage or less.
If the Raise the Wage Act had passed and the minimum federal rate were 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
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 that would force businesses to hire fewer people, slash growth plans, and/or raise their prices. In general, they believe that the act would negatively affect early-career and low-wage workers as well as causing harm to the economy in a variety of other ways.
In a report published in February 2021, the nonpartisan Congressional Budget Office (CBO) concluded that when the minimum wage reaches $15 in 2025, it would benefit up to 27 million workers—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.
As of Jan. 1, 2022, only five states have not adopted a state minimum wage and adhere to the federal minimum wage: 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 it 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 that pay an hourly wage have established company-wide minimum wages in recent years. They include big retailers such as Amazon ($15 an hour), Target ($15 an hour), Costco (an average of $24 an hour for hourly workers), and Walmart (an average total compensation of $18 an hour, including benefits).
What Is the Minimum Wage?
The current federal minimum wage is $7.25 an hour; however, many states, cities, and municipalities have a minimum wage that is higher than the federal minimum wage. 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 for businesses with 26 or more employees. For businesses with 25 employees or less, it is $14.
What Is the Minimum Wage in Florida?
The minimum wage in Florida is $10. Each year, on Sept. 30, the minimum hourly wage in the Sunshine State is set to increase a dollar until it reaches $15 in 2026. After that point, the state will revert back to adjusting its minimum hourly wage based on inflation.
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 wage hasn’t kept up with the cost of living in more than half a century. But there is a growing movement among workers, policy analysts, state and city governments, and even some employers to raise it.