Minimum wage in the United States

History of the federal minimum wage in real and nominal dollars. Current and future increases under the Fair Minimum Wage Act of 2007 are shown in dark blue.

As of July 24, 2009, the federal minimum wage in the United States is $7.25 per hour. Many states and municipalities have minimum wages higher than this (see List of U.S. minimum wages), but some U.S. territories (such as American Samoa) are exempt. Some types of labor are also exempt, and tipped labor must be paid a minimum of $2.13 per hour, as long as the hourly wage plus tipped income result in a minimum of $7.25 per hour.

The last increase on July 24, 2009 was the last of three steps of the Fair Minimum Wage Act of 2007. It was signed into law on May 25, 2007 as a rider to the U.S. Troop Readiness, Veterans' Care, Katrina Recovery, and Iraq Accountability Appropriations Act, 2007. The bill also contains almost $5 billion in tax cuts for small businesses.

Among those paid by the hour in 2007, 267,000 were reported as earning exactly the prevailing Federal minimum wage. Nearly 1.5 million were reported as earning wages below the minimum. Together, these 1.7 million workers with wages at or below the minimum made up 2.3 percent of all hourly-paid workers, or 0.56 percent of the population of the United States.

Earlier U.S. minimum wages laws

In 1912, Massachusetts organized a commission to recommend non-compulsory minimum wages for women and children. Within eight years, at least thirteen U.S. states and the District of Columbia would pass minimum wage laws. The Lochner era United States Supreme Court consistently invalidated compulsory minimum wage laws. Such laws, said the court, were unconstitutional for interfering with the ability of employers to freely negotiate appropriate wage contracts with employees.

The first attempt at establishing a national minimum wage came in 1933, when a $0.25 per hour standard was set as part of the National Industrial Recovery Act. However, in the 1935 court case Schechter Poultry Corp. v. United States (295 U.S. 495), the United States Supreme Court declared the act unconstitutional, and the minimum wage was abolished.

The minimum wage was re-established in the United States in 1938 (pursuant to the Fair Labor Standards Act), once again at $0.25 per hour ($3.58 in 2006 dollars). It had its highest purchasing value ever in 1968, when it was $1.60 per hour ($9.12 in 2005 dollars). From January 1981 to April 1990, the minimum wage was frozen at $3.35 per hour, then a record-setting wage freeze. From September 1, 1997 through July 23, 2007 - a period of nearly ten years - the federal minimum wage remained constant at $5.15 per hour, breaking the old record.

Minimum Wage by U.S. state and U.S. territory (American Samoa, Guam, Puerto Rico, Virgin Islands), as of July 24, 2009.

  States with minimum wage rates higher than the Federal rate

  States and territories with minimum wage rates the same as the Federal rate

  States with no minimum wage law

  States and territories with minimum wage rates lower than the Federal rate

Congress then gave states the power to set their minimum wages above the federal level. As of July 24, 2007, thirty states had done so. Community organizing efforts initiated by ACORN were responsible for the increases in some states such as Florida, Nevada, and Ohio. Some government entities, such as counties and cities, observe minimum wages that are higher than the state as a whole. One notable example of this is Santa Fe, New Mexico, whose $9.50 per hour minimum wage was the highest in the nation, until San Francisco increased its minimum wage to $10.36 in 2009. while New Mexico has a minimum wage of $6.50. Another device to increase wages, living wage ordinances, generally apply only to businesses that are under contract to the local government itself.

On November 7, 2006, voters in six states (Arizona, Colorado, Missouri, Montana, Nevada, and Ohio) approved statewide increases in the state minimum wage. The amounts of these increases ranged from $1 to $1.70 per hour and all increases are designed to annually index to inflation.

Many politicians in the United States advocate linking the minimum wage to the Consumer Price Index, thereby producing small annual increases rather than the larger hikes that tend to be adopted when legislation to do so is passed. So far, Ohio, Oregon, Missouri, Vermont and Washington have linked their minimum wages to the consumer price index.

Minimum wage jobs rarely include health insurance coverage, although that is changing in some parts of the United States where the cost of living is high, such as California.

Economists' analysis

Comparison of wages to unemployment among teenagers in the United States. In the data shown here, a lower average hourly wage was correlated with higher unemployment among teenage workers relative to adult workers.

According to a paper by Fuller and Geide-Stevenson, 45.6% of American economists in the year 2000 agree that a minimum wage increases unemployment among unskilled and young workers, while 27.9% agree with this statement but with provisos. As a policy question in 2006, the minimum wage has to some extent split the economics profession with just under half believing it should be eliminated and a slightly smaller percentage believing it should be increased, leaving rather few in the middle.

Some idea of the empirical problems of this debate can be seen by looking at recent trends in the United States. The minimum wage fell about 29% in real terms between 1979 and 2003. For the median worker, real hourly earnings have increased since 1979, however for the lowest deciles, there have been significant falls in the real wage without much fall in the rate of unemployment. Some argue that a declining minimum wage might reduce youth unemployment (since these workers are likely to have fewer skills than older workers).

Overall, there is no consensus between economists about the effects of minimum wages on youth employment, although empirical evidence suggests that this group is most vulnerable to high minimum wages.

Jobs affected by the Minimum Wage

The jobs that are most likely to be directly affected by the Minimum Wage are the ones that pay a wage close to the minimum.

According to http://www.bls.gov/oes/2006/may/oes_nat.htm, the four lowest-paid occupational sectors in May 2006 (when the Federal Minimum Wage was $5.15 per hour) were the following:

Sector	Workers Employed	Median Wage	Mean Wage	Mean Annual	Notes
Food Preparation and Serving Related Occupations	11,029,280	$7.90	$8.86	$18,430
Farming, Fishing, and Forestry Occupations	450,040	$8.63	$10.49	$21,810
Personal Care and Service Occupations	3,249,760	$9.17	$11.02	$22,920
Building and Grounds Cleaning and Maintenance Occupations	4,396,250	$9.75	$10.86	$22,580

Two years later, in May 2008, when the Federal Minimum Wage was $5.85 per hour and was about to increase to $6.55 per hour in July 2008, these same sectors were still the lowest-paying, but their situation (according to http://www.bls.gov/oes/2008/may/oes_nat.htm) was:

Sector	Workers Employed	Median Wage	Mean Wage	Mean Annual	Notes
Food Preparation and Serving Related Occupations	11,438,550	$8.59	$9.72	$20,220
Farming, Fishing, and Forestry Occupations	438,490	$9.34	$11.32	$23,560
Personal Care and Service Occupations	3,437,520	$9.82	$11.59	$24,120
Building and Grounds Cleaning and Maintenance Occupations	4,429,870	$10.52	$11.72	$24,370

In 2006, workers in the following 13 individual occupations received, on average, a median hourly wage of less than $8.00 per hour:

Occupation	Workers Employed	Median Wage	Mean Wage	Mean Annual	Notes
Gaming Dealers	82,960	$7.08	$8.18	$17,010
Waiters and Waitresses	2,312,930	$7.14	$8.27	$17,190
Combined Food Preparation and Serving Workers, Including Fast Food	2,461,890	$7.24	$7.66	$15,930
Dining Room and Cafeteria Attendants and Bartender Helpers	401,790	$7.36	$7.84	$16,320
Cooks, Fast Food	612,020	$7.41	$7.67	$15,960
Dishwashers	502,770	$7.57	$7.78	$16,190
Ushers, Lobby Attendants, and Ticket Takers	101,530	$7.64	$8.41	$17,500
Counter Attendants, Cafeteria, Food Concession, and Coffee Shop	524,410	$7.76	$8.15	$16,950
Hosts and Hostesses, Restaurant, Lounge, and Coffee Shop	340,390	$7.78	$8.10	$16,860
Shampooers	15,580	$7.78	$8.20	$17,050
Amusement and Recreation Attendants	235,670	$7.83	$8.43	$17,530
Bartenders	485,120	$7.86	$8.91	$18,540
Farmworkers and Laborers, Crop, Nursery, and Greenhouse	230,780	$7.95	$8.48	$17,630

In 2008, only two occupations paid a median wage less than $8.00 per hour:

Occupation	Workers Employed	Median Wage	Mean Wage	Mean Annual	Notes
Gaming Dealers	91,130	$7.84	$9.56	$19,890
Combined Food Preparation and Serving Workers, Including Fast Food	2,708,840	$7.90	$8.36	$17,400

See also

• List of U.S. minimum wages
• Fair Labor Standards Act

External links

• DOL WHD: State Labor Laws: Minimum Wages for Tipped Employees. From the United States Department of Labor. Employment Standards Administration. Wage and Hour Division.
• The Minimum Wage: Information, Opinion, Research
• U.S. Minimum Wage History. Wealth and Poverty - Anth 484 [1], Oregon State University.