What Is the Minimum Wage?
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What is the minimum wage?
Minimum wages, minimum tipped as well as median wages and pay gaps are different by state.
By Anna Helhoski Senior Writer | Financial news, consumer finance trends and debt for students loan and debt Anna Helhoski is a senior writer who writes about economic news and trends in consumer finance for NerdWallet. She is also an expert regarding student loans. She joined NerdWallet as of the year 2014. Her work has been featured in The Associated Press, The New York Times, The Washington Post and USA Today. She previously covered local news in New York for the Daily Voice, as well as local news in New York metro area for the Daily Voice and New York state politics for The Legislative Gazette. She holds a bachelor’s degree in journalistic studies from Purchase College, State University of New York.
January 23, 2023
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Federal minimum wages of $7.25 per hour has not decreased since 2009 despite a steady increase to the cost of living that has led to a dramatic increase in inflation in the last year.
Thirty states as well as Washington, D.C., have minimum wage levels that are higher than the federal minimum.
Minimum wage over time
The minimum wage hasn’t kept pace with inflation when you look at the nominal wage (not adjusted for inflation) against their spending power in 2022 numbers (adjusted to account for inflation).
Because the federal minimum wage has not changed since 2009, its actual purchasing power has dwindled dramatically. The lower purchasing power means that it’s much more difficult for people to live on a minimum wage.
State minimum wage
The minimum wage varies by state. Five states have no minimum wage law, but Federal minimum wages applies; those include Alabama, Louisiana, Mississippi, South Carolina and Tennessee. In some states there is a minimum wage that is more, depending on whether a particular city or region within the state sets the higher minimum wage.
Do increases in the minimum wage create inflation?
No. The federal minimum wage is established by the 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 has not changed since 2009.
Are all workers paid at least an hourly wage?
All workers covered under the Fair Labor Standards Act must be paid at least the federal minimum wage. They could earn more in the event that the state minimum wage is higher.
According to the Department of Labor, workers not covered by the FLSA, who may make less than the minimum wage, are:
Workers of certain amusement parks or recreational establishments.
Employees of certain smaller newspapers, or delivery staff.
Seamen on foreign vessels or as employees engaged in fishing operations.
Certain farmworkers.
Casual babysitters.
Companions to older people or the infirm.
Executive, administrative and professional employees.
These workers are exempt from overtime pay. (Learn more about who is and who isn’t eligible to receive overtime pay on the .)
Does the minimum wage count tips?
The employees who are tipped depend on tips from customers to increase their income. An employee who is tipped typically earns more than $30 in monthly tips, as per the Department of Labor.
Tipped employees must receive a minimal wage rate of $2.13 an hour. This is known as cash wages. The cash wage is then paired with tips to reach the minimum wage in the federal government of $7.25 per hour. Tips are also referred to as «tip credit» which allows employers to pay employees below what is the minimum federal wage.
Employers can credit up to $5.12 per hour in tips against a worker’s earnings. If the wage of an employee (at minimum $2.13 for an hour) plus tips are less than $7.25 per hour, their employer is required to make the difference.
The minimum wage for tipping and the maximum tip credits differ by city, state, and even by.
Washington, D.C., has the most tipped workers’ minimum wage of all workers in the nation. As of the 2022 election, Washington, D.C., residents voted to gradually increase their minimum wages to tipped workers every year up to July 1 2027. Then, the tipped minimum will be set to match the same minimum wage as the nontipped minimum wage this year. The minimum wage currently is $5.35 each hour, for workers who are tipped and $16.10 on nontipped staff.
Minimum wage tips set by the state
What states are raising minimum wage levels?
Each each year 14 states plus Washington, D.C., automatically determine minimum wage increases according to the growth of inflation. These increases are usually linked with the U.S. Bureau of Labor Statistics CPI, also known as CPI. If the index isn’t changing so does the minimum wage. Some states also have annual limits on annual inflation increases. These include California (3.5 percent), Minnesota (2.5%) and Vermont (5 5 percent).
States that tie minimum wage increases to inflation adjust their salaries as of Jan. 1 unless they are otherwise stated, in accordance with the . Those 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 set to index wages in line with inflation starting January. 1st, 2024.
The minimum wage is increased
How much is the average household salary within the U.S.?
Median household earnings of a single person is $70,784, as per data from the latest U.S. Census Bureau population survey data for 2021.
State median incomes
>> MORE:
What is the gender pay gap?
Women are consistently earning less money than men: In 2020 the women earned 83 cents for the amount men earned, as per the Census Bureau.
Among men and women who were employed full-time, year-round in the year of 2019 (the most recent data available from the Census Bureau’s American Community Survey), the national median earnings difference was $10,150 and men earned a median of $53,544 and women earning a median of $43,394.
The wage gap is widening as you examine every state. The states with the highest mean wage disparity between men and women are:
Wyoming: $21,676.
Utah: $17,303.
District of Columbia: $16,032.
Louisiana: $14,926.
Washington: $14,609.
The states with the smallest median wage gaps between men and women include:
Vermont: $4,600.
Nevada: $6,013.
Hawaii: $7,022.
California: $7,162.
Maryland: $7,594.
How big is your gender pay gap in your state?
A gender pay gap is present for women with low levels of education. For those with less than a high school diploma, women earned 66 cents for every dollar waged by men as per the U.S. Government Accountability Office.
Here are the most current median earnings differentials in terms of degree, based on race and gender, which was compiled through the National Center for Education Statistics.
Gender
Associate degree median earnings
Median earnings of a bachelor’s degree
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 for bachelor’s degrees
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.
What is the racial wage gap?
The wage disparities are stark when they are broken down according to the race of the worker, or by ethnicity Department of Labor data illustrates. If you compare every dollar made for white people:
Hispanic/Latino employees earn 73 cents.
Black workers make the equivalent of 76 cents.
The Native American/American Indian workforce earns an average of 77 cents.
Multiracial workers make the equivalent of 81 cents.
Asian-Pacific Islander workers make $1.12.
What is the gender-based wage gap?
This gender wage gap is exacerbated further due to the racial wage disparity according to the data of the Government Accountability Office. If you compare the amount of money earned by white males:
Latina/Hispanic women make an average of 58 cents.
Black women earn 63 cents.
Women who are white make 79 cents.
Asian women earn 97 cents.
How can we measure this LGBTQ+ gender or gender identity pay gap?
Gender and gender identity among LGBTQ+ workers also tends to affect income, according to a 2021 analysis of salaries by The Human Rights Campaign. LGBTQ+ workers tend to earn 90 cents per dollar a typical worker (as as full-time private and public sector workers who are not farmers). According to Human Rights Campaign data, when compared with the amount made by the average worker:
Men from those in the LGBTQ+ community earn an average of 96 cents.
Women in that LGBTQ+ community earn 87 cents.
The gender fluid, nonbinary, genderqueer and two-spirit workers earn 70 cents.
Trans men earn 70 cents.
Trans women earn 60 cents.
Author bios: Anna Helhoski is a writer and is NerdWallet’s chief authority on student loans. Her writing has been featured in The Associated Press, The New York Times, The Washington Post and USA Today.
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