What Is the Minimum Wage?
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What is the minimum wage?
Minimum wages, minimum tipped median wages, and pay gaps differ by state.
By Anna Helhoski Senior Writer | Consumer finance, economic news, trends as well as student loan debt Anna Helhoski is a senior writer who writes about economic news and developments in consumer finance at NerdWallet. Also, she’s an authority for student loans. The company was founded by NerdWallet at the beginning of 2014. Her work was featured on The Associated Press, The New York Times, The Washington Post and USA Today. She has previously covered local news from the New York metro area for the Daily Voice and New York state politics for The Legislative Gazette. She has a bachelor’s degree of journalism at Purchase College, State University of New York.
January 23, 2023
Written by Rick VanderKnyff Senior Assigning Editor | Los Angeles Times; University of California, San Diego; Microsoft Rick VanderKnyff leads NerdWallet’s efforts to promote news as well as oversees the team that is responsible to expand NerdWallet content to include additional topics in personal finance.
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A federal minimum of $7.25 per hour has not changed since 2009, despite a steady rise in the costs of living, which has increased into a soaring inflation in the last year.
Thirty states and Washington, D.C., have minimum wage levels that are higher than the federal minimum wage.
Minimum wage in time
The minimum wage has not been able to keep pace with inflation when you look at nominal wages (not adjusted for inflation) against their spending power in 2022 figures (adjusted to account for inflation).
Because the minimum wage in the federal government has not changed in 2009, its true purchasing power has drastically decreased. A decrease in purchasing power makes it even more difficult for workers to live on a minimum wage.
State minimum wages
The minimum wage varies by state. Five states have no minimum wage laws, however the federal minimum wage is applicable to them. They include Alabama, Louisiana, Mississippi, South Carolina and Tennessee. In some states, the minimum wage is higher, contingent on whether a specific city or region within that state sets an upper minimum wage.
Does raising the minimum wage result in inflation?
No. Federal minimum wages are determined by the federal government and does not directly correspond with inflation. The current situation of inflation was not caused by an increase in the federal minimum wage. The minimum wage hasn’t changed since 2009.
Do all workers earn at or near what is considered to be the minimum amount?
All workers covered by the Fair Labor Standards Act must be paid at least the federal minimum wage. They can earn higher if the state minimum wage is greater.
According to the Department of Labor, workers who are not covered under the FLSA, who may earn less than minimum wage, include:
The employees of specific seasonal amusement or recreation establishments.
The employees of certain tiny newspapers as well as newspaper delivery staff.
Seamen on foreign vessels, or those employed in fishing operations.
Certain farmworkers.
Casual babysitters.
Support for elderly persons or people with disabilities.
Professional, executive and administrative employees.
Those workers are exempt from overtime pay. (Learn more about who is — and isn’t — eligible for overtime pay on the .)
Does the minimum wage include tips?
Tipped employees include those who depend on tips from customers to boost their earnings. The average tipped employee receives more than $30 per month in tips, as per the Department of Labor.
Employees who are tippy must earn an hourly minimum wage of $2.13 an hour. This is referred to as a cash wage. The cash wage is then paired with tips in order to meet the minimum wage for federal employees that is $7.25 per hour. Tips are also referred to as «tip credit» which allows employers to pay their employees less than that federal minimum wage.
Employers are able to take as much as $5.12 per hour in tips against a worker’s earnings. If an employee’s wages (at at least $2.13 for an hour) plus tips are less than $7.25 an hour their employer is required to make the gap.
Minimum tipped wages and maximum tip credits are determined by the city, state, and even by.
Washington, D.C., has the most tipped workers’ minimum wage of all workers in the United States. In the election of 2022, Washington, D.C. residents voted to gradually increase the minimum wage for workers who are tipped each year until July 1st 2027. At that point the minimum wage for tipped employees will be adjusted to be the same minimum as the nontipped minimum wage this year. The minimum wage currently is $5.35 per hour for tipped workers , and $16.10 to nontipped employees.
State-mandated minimum wage is tipped.
Which states are increasing their minimum wage levels?
Each year, 14 states and Washington, D.C., automatically set minimum wage increases according to the growth of inflation. They are typically tied to the U.S. Bureau of Labor Statistics’, or CPI. If the CPI doesn’t change so does the minimum wage. And some states have annual caps on inflation increases, like California (3.5%), Minnesota (2.5%) and Vermont (5 5 percent).
States where minimum wage increases are tied to inflation adjust their salaries as of Jan. 1, unless otherwise specified, as per the . These states include:
Alaska.
Arizona.
California.
Colorado.
District of Columbia (adjusts July 1).
Maine.
Minnesota.
Montana.
New Jersey.
New York (adjusts Dec. 31).
Ohio.
Oregon (adjusts the 1st of July).
South Dakota.
Vermont.
Washington.
Connecticut is scheduled to index wages to inflation beginning January. 1in 2024.
Increases in minimum wage
What is the median household income within the U.S.?
The median household income of a single person is $70,784, according the most recent U.S. Census Bureau population survey data for 2021.
State median income
>> MORE:
What is the gender pay disparity?
Women consistently bring home less money than men: In 2020, women made 83 cents to the amount men earned, as per the Census Bureau.
Among men and women who were employed full-time, year-round in 2019 (the most recent data from the Census Bureau’s American Community Survey), the median wage difference was $10,150 which was a difference of $10,150 for men who earned the median of $53,544 while women earning a median of $43,394.
The wage gap is widening as you examine every state. The states that have the largest mean wage disparity between women and men include:
Wyoming: $21,676.
Utah: $17,303.
District of Columbia: $16,032.
Louisiana: $14,926.
Washington: $14,609.
The states with the smallest median wage gap between males and females are:
Vermont: $4,600.
Nevada: $6,013.
Hawaii: $7,022.
California: $7,162.
Maryland: $7,594.
What is the gender pay gap in your state?
The gender pay gap is present for women with lower levels of education. In the case of workers who have less than having a high school degree the average wage for women was the equivalent of 66 cents for every dollar earned by men, according to the U.S. Government Accountability Office.
Here are the most current median earnings variations in terms of degree, based on gender and race, compiled by the National Center for Education Statistics.
Gender
Associate degree median earnings
Median earnings for bachelor’s degrees
Master’s degree median earnings
Men
$48,390.
$63,950.
$84,010.
Women
$34,780.
$50,000.
$60,930.
Race
Associate degree median earnings
Median earnings of a bachelor’s degree
Master’s degree median earnings
Asian
$39,130.
$59,910.
$85,000.
Black
$35,850.
$44,300.
$53,540.
Hispanic
$38,890.
$45,160.
$59,370.
White
$44,500.
$59,600.
$69,560.
How do you define the race-based wage gap?
Wage inequities are stark when they are broken down by race or ethnicity, Department of Labor data illustrates. When you look at the amount made from white employees:
Latino/Hispanic workers earn the equivalent of 73 cents.
Black workers earn an average of 76 cents.
Native American Indians earn an average of 77 cents.
Multiracial workers make the equivalent of 81 cents.
Asian-Pacific Islander workers earn $1.12.
What is the gender-based racial wage gap?
The gender pay gap is exacerbated further by the racial gap in wage according to the data of the Government Accountability Office. If you compare the amount of money earned by white men:
Latina/Hispanic women earn the equivalent of 58 cents.
Black women earn 63 cents.
White women make 79 cents.
Asian women earn 97 cents.
How can we measure the LGBTQ+ gender or gender pay gap?
Gender identity and gender gender among LGBTQworkers can also be found to influence income, according to an analysis of salaries by The Human Rights Campaign. LGBTQ+ workers typically earn 90 cents per dollar earned by a typical worker (as as full-time private and public sector nonfarm workers). According to Human Rights Campaign data, when compared with every dollar made by the average worker:
Men who belong to the LGBTQ+ community earn 96 cents.
Women from those in the LGBTQ+ community earn 87 cents.
The gender fluid, nonbinary, genderqueer and two-spirit workers earn 70 cents.
Transmen earn 70 cents.
Trans women make 60 cents.
Author bios: Anna Helhoski is a writer and NerdWallet’s authority in the field of student loans. Her work has appeared in The Associated Press, The New York Times, The Washington Post and USA Today.
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