Since its establishment in 1938, the federal minimum wage has served as a baseline for compensating workers across the United States. Intended to provide a minimum standard of living to prevent labour exploitation and poverty, this wage floor has seen periodic adjustments to reflect changes in the economy and cost of living.
However, the most recent update to the federal minimum wage occurred on July 24, 2009, when it was set at $7.25 per hour. This adjustment marked an increase from the previous rate of $6.55 per hour, a change enacted during the first year of former President Barack Obama’s administration.
Federal Minimum Wage Increase
Over the last 15 years, this rate has remained unchanged for the longest period without an increase since the inception of the minimum wage. This stagnation occurs despite considerable economic shifts, including inflation and changes in the cost of living.
For instance, according to the U.S. Bureau of Labor Statistics, the purchasing power of a dollar has significantly declined since 2009, effectively diminishing the real income of minimum wage earners.
As of 2023, approximately 869,000 workers in the U.S. were paid at or below the federal minimum wage, with over two-thirds of these workers being women. This highlights a critical aspect of the workforce that is disproportionately affected by these wage policies.
Discrepancies and Exceptions in Wage Laws
While the federal minimum wage is $7.25, not all workers necessarily earn this amount. Various exceptions exist within the law, such as:
- Tipped Employees: These workers can be paid as little as $2.13 per hour in direct wages, provided their total earnings with tips meet the federal minimum.
- Youth Workers and Students: Certain provisions allow employers to pay workers under 20 years old a lower wage for the first 90 consecutive days of employment. Full-time students may also be paid less under specific work-study programs.
- Workers with Disabilities: Special certificates can permit wages below the minimum for some disabled workers, depending on their job capacity.
State and Local Wage Policies
There is significant variation at the state and local levels:
- Higher State Minimum Wages: Thirty states and Washington, D.C., have set minimum wages above the federal rate.
- City Ordinances: Over 60 cities and towns, including New York City and Los Angeles, have established their own minimum wages, which exceed both state and federal standards.
- Recent Increases: For example, Chicago’s minimum wage recently increased to $16.20 per hour.
Federal Employee Wage Increases
In 2022, a significant policy shift occurred regarding the wages of federal workers and contractors in the United States. The Biden administration led this initiative, which aimed to enhance the financial stability of employees working directly or indirectly for the federal government.
Because of California $20 Minimum Wage Rule, QSRS Cut 10,000 Jobs
Federal Workers: The minimum wage for federal employees was raised to $15 per hour. This increase directly affects civil servants and other non-contractual employees who are paid directly by the federal government.
Federal Contractors: Similarly, individuals working under federal contracts also saw their minimum wage increased to $15 per hour. This move was designed to ensure that companies contracting with the federal government provide a living wage to their workers, thereby setting a higher standard that aligns with the administration’s goals for economic fairness and worker prosperity.
Legislative Efforts to Raise the Federal Minimum Wage
Raise the Wage Act of 2023 was introduced in the Senate as a pivotal piece of legislation aimed at incrementally increasing the federal minimum wage to $17 per hour over five years. The proposal also includes provisions to adjust the wage annually to keep pace with inflation and median wage growth, ensuring the minimum wage remains economically relevant.
Despite its introduction, the Raise the Wage Act of 2023 has not advanced significantly in the Senate. This stagnation reflects a broader partisan divide on economic policies, particularly on issues impacting labor markets and business operations.
Many Republicans and some moderate Democrats have expressed concerns about the potential adverse effects of a significant minimum wage increase on small businesses. They argue that such increases could lead to higher unemployment rates, as small businesses might reduce their workforce or hours to manage increased labor costs.