Minimum wage refers to the lowest hourly rate that an employer is legally permitted to pay a non-exempt employee. In the United States, this rate is governed by the Fair Labor Standards Act (FLSA).
As of the current federal regulation, the minimum wage is $7.25 per hour. However, individual states may set their own minimum wage laws. If a state's minimum wage is higher than the federal rate, employers in that state must follow the higher standard. Conversely, if a state's minimum wage is lower, the federal minimum wage prevails, and employers must comply with the federal rate.
Which U.S. States Have the Highest and Lowest Minimum Wages?
- Highest: As of July 1, 2020, Washington, D.C. holds the highest minimum wage at $15.00 per hour, followed by Washington State ($13.50) and California ($13.00).
- Lowest: Georgia has the lowest state minimum wage at $5.15 per hour, but because this is lower than the federal rate, Georgia employers must still pay the federal minimum of $7.25.
For the most up-to-date wage data by state, employers should consult the U.S. Department of Labor or their respective state labor departments.
How Often Does Minimum Wage Increase?
The federal minimum wage does not increase automatically. Any changes require legislation passed by Congress and signed by the President.
- The last federal minimum wage increase occurred in 2009.
- States, however, can enact increases independently through legislation, ballot initiatives, or state constitutional amendments.
Employers must stay informed about both federal and state updates to ensure compliance.
Who Is Exempt from Minimum Wage Laws?
Certain categories of workers are exempt from the federal minimum wage. These include:
- Commission-based sales employees
- Agricultural (farm) workers
- Workers at seasonal or recreational establishments
- Executive, administrative, and professional employees paid on a salary basis
- Casual babysitters
- Companions for the elderly
- Workers with qualifying disabilities
- Federal criminal investigators
- Fishing industry employees
- Full-time students in specific programs
- Newspaper delivery personnel
- Employees of small-circulation newspapers
- Sea men on foreign vessels
- Switchboard operators for small telephone companies
Employers should consult both federal and state wage regulations to determine applicable exemptions and ensure lawful compensation practices.
Minimum Wage for Tipped Employees
Employers may pay tipped employees a lower base wage of $2.13 per hour if the following conditions are met:
- The employee earns more than $30 per month in tips regularly
- The employee keeps all tips received
- The combination of tips and the $2.13 wage equals at least the applicable minimum wage (federal or state)
If the total earnings (tips + base wage) do not meet the required minimum wage, the employer must make up the difference.
Some states require a higher minimum wage for tipped employees or may disallow tip credits altogether. Employers should check state-specific laws before setting pay for tipped staff.
Minimum Wage for Young Workers
For employees under the age of 20, employers are permitted to pay a training wage of $4.25 per hour during the first 90 consecutive calendar days of employment. After 90 days, or if the employee turns 20, employers must begin paying the standard federal or state minimum wage, whichever is higher.
