What is the Minimum Wage?
A minimum wage is the lowest legal, hourly pay rate that an employer must pay to an employee. The minimum wage was initially introduced to protect the rights of workers to a liveable wage in the United States. Minimum wages can be mandated by both the federal and state governments.
Although states have the liberty to set a separate wage limit, it must be above the federal government’s threshold. The federal minimum wage limit is $7.25/hour, and states can only set minimum wages higher than this. Several states have set a limit above the statutory limit, such as California’s minimum wage, which stands at $14.
The industries where the minimum wage by state rates do not apply include service and hospitality. The changes in norms are because they are tipped employees. Tipped employees make $2.13/hour, while the tips compensate for the balance.
American employers are directed to pay the amount that is either equal to or above the limit prescribed in their states. Employers have to comply with the limit, as prescribed. California tops the chart in terms of the highest minimum wage in the US.
Enforcement of Federal Minimum Wage
Back in 1938, US President Franklin D. Roosevelt signed the Fair Labor Standards Act (FLSA). The Act established the first-ever minimum federal wage at $0.25 per hour. The rough conversion of the wage following the present standards is $4.63.
Changes were introduced in 2009, where the current limit of $7.25 was set up. There have been no changes in the law since then, while the standard workweek is 40 hours.
The law was enforced to ensure reduced unfair compensation, protecting the rights and interests of employees. It was passed to help employees keep up with the rising cost of living. The minimum wage by state ensured that employees were provided with enough wages so they could afford their basic needs.
The minimum wage in the United States has remained constant since 2009, which diminishes the motive of its establishment. Though the purpose was to protect the employees and provide them with enough income in the face of rising inflation, the minimum wage by the state hasn’t been realigned.
States that Have No Minimum Wage Limit
Certain states in the US do not have a state-mandated minimum wage limit. Employers of the states with no drawn limit must comply with the federal minimum wage of $7.25 per hour. Here is the list of states that have no minimum wage by state limit law:
- South Carolina
State Wise Minimum Wage Statistics
Attempts to increase the minimum wage limit from $7.25 an hour to $15 have been on for a few years. While a few states have raised the bar somewhere close to $15, others follow the benchmark federal min wage.
Check out the statistics on minimum wage that prevail in the country:
- Around 29 states and the District of Columbia raised the bar above the floor wage. States have also introduced certain legislatures to safeguard the motive of the Act.
- 12 states of the US have the same limit as federal wage.
- Six states have no minimum wage by state policy at all, where only federal minimum wage rates apply.
- The remaining states have a limit below the federal government-stated threshold. Nevertheless, the general statutory limit applies in the states.
What States are Raising the Minimum Wage?
Here’s a list of minimum wage by each US state in 2020 and 2021. Although some states have tried to keep up with rising inflation, others have remained close to the federal mandates.
|State||Minimum Wage in 2020||Minimum Wage in 2021|
The figure below provides the statistics on the latest wages or new minimum wages.
Recent Changes in Minium Wages by States
More than 25 states in 2021 are set to increase their minimum wages for workers. The minimum wage by state differs, as does the year-on-year increase. We have listed some of the crucial changes addressed by states:
- California’s minimum wage in 2020 was $13, and it increased to $14 in 2021
- Colorado’s minimum wage increased by only 32 cents
- Michigan’s minimum wage and South Carolina’s minimum wage remain the same at $7.25. The minimum wage in Texas also remained the same in 2021.
- Oregon’s minimum wage increased by 75 cents, while the minimum wage in Nevada increased by 75 cents.
- The minimum wage in Florida increased from $8.56 to $10. At the same time, the minimum wage in Virginia increased by $2, similar to the increase in California’s minimum wage.
- Furthermore, the minimum wage in Arizona increased by 15 cents.
- Maryland’s minimum wage increased by 75 cents, while Massachusetts’s minimum wage increased by $1.25.
States which introduced massive hikes in their minimum wage by state limit are:
New York – $15
Pre and post-2020 wage situations in New York are not the same. Before, employers with less than 11 employees had a lower minimum wage rate than the ones with more than 11 employees. But now, all the employers must adhere to a minimum wage of $15/hour.
Washington, DC – $15
This is one district that has raised its minimum wage rates steadily every year since 2016. It was $11.5 in 2016 and it has risen $15 now.
Seattle – $13.5 – $16.39
Businesses with more than 501 employees have a minimum wage by state rate of $16.39 in Seattle. On the other hand, employers with less than 501 employees have to adhere to a minimum wage rate of $13.5.
Minimum Wage Rate Change
The Positive Impact of a Rise in the Minimum Wage
One of the prime factors that should contribute to an increase in the minimum wage is the rising inflationary pressure. The value of $7.25 in 2016 is not the same in 2021. Reportedly, there has been a 17% decline in the value of the prevailing federal limit of $7.25 in 10 years.
Raising the limit further would only make sense when we speak in terms of a hike in the cost of living.
From the times the wage limit has been stagnant at $7.25 per hour, full-time minimum federal wage workers are making 18% less to what they must be entitled to, proportionate to the higher cost of living.
Rise in Standard of Living
A rise in wage to $15 according to the Raise the Wage Act of 2021 would likely impact 32 million workers. The rise in wages would account for a rise in standards of living for 21% of the workforce in the US.
An increase in the minimum wage would mean an increased income of $3,300 for a minimum federal wage worker working year-round.
Positive Impact on BIPOC Workers
Another argument in favor of the rise is the potential of the hiked price rectifying certain pay disparity. BIPOC (Black, Indigenous, and People of Color) workers have been traditionally underpaid and are massively affected by the low wage limit. These classes of workers form the majority of the country’s workforce. Earnings of Black and Hispanic workers would rise by 31% and 26%, respectively.
No Adverse Impact on Jobs
Though study regarding the adverse effect of a hiked minimum wage is backed with claims, data shows otherwise. There has been evidence that supports the move and explains why there is no loss in the job or net wage gain. Therefore, support from the unemployed, people of color, and women is flowing in.
Liveable Wages to Boost the Economy
A rise in the wage limit would give enough room for low-wage workers to afford basic necessities. This rise to a liveable wage could also boost the economy with an increase in spending power. Minimum wage increases by the state could reduce poverty and homelessness
No one should have to work two jobs just to have a roof over their heads. The whole purpose of a minimum wage limit was to ensure a “liveable wage”. A liveable wage should be one where a person isn’t worked to the bone just to provide the basic necessities for their family.
Arguments Against an Increase in the Minimum Wage Limit
While the majority of states have set new minimum wage by state limits, states with no reported hike have their own reasons. Here are some reasons why some states do not support an increase in the minimum wage:
The rise in Potential Layoffs and Unemployment
Should there be a hike in the minimum wage, there is bound to be a rise in layoffs and unemployment. There are some studies that support this line of thought, such as the 2014 study from the Congressional Budget Office. The Congressional Budget Office indicated a loss of around 1.4 million jobs should the minimum wage by state increase to $15 by 2025. This would surmount to a drop in real income, as much as $9 billion, followed by an increase in the prices of goods and services across the country.
Small Businesses will be Disproportionately Affected
The bankruptcy of small-scale businesses that can’t afford to pay such high wages. The AAF or American Action Forum has laid down the effects of a hiked federal wage. Seattle’s continued endeavor to raise the wage is a visionary of what an increased wage limit might introduce to the economy. An increase in the limit of $11 to $13, back in 2016, portrayed a fall in work hours (specifically from the low-wage section) by as much as 9 percent. These adverse statistics are on account of only a $2 hike. With the proposed rate being double what it currently is, states might have to face large-scale unemployment.
Local Conditions Should Impact Minimum Wage Limits
Wages across states in the US vary as per the local conditions. There are arguments that any spike in the minimum wage limit must be locally dealt with rather than at the federal level.
We do think that a rise in the minimum wage will impact small businesses. But the fact remains that large companies have misused these wage limits for their own gain.
Perhaps a mid-way point can be to have a differential minimum wage basis the size of the business and the state it functions in.
Effect of the Shift in Minimum Wage by State on the Economy
As per federal standards, the cost of living and minimum wage is not aligned. The latest efforts to pass a new bill for the long-overdue law were made on July 18, 2019, by the US House of Representatives. the proposal was of an amended version of the Raise the Wage Act of 2019, which would, in effect, hike the minimum wage by the state to $15.
The Senate committee on health, education, labor, and pensions voted against the bill, and the bill failed. Ever since the bill died in the Senate, there have been debates and protests regarding a hike in the current minimum wage.
The rise of federal wage to $15 an hour is one of the policies Joe Biden aims to enforce. But only bilateral support can get such a contentious bill across.
Is the minimum wage a price floor?
Yes, the federal minimum wage by state is a price floor or the base wage every US employee is entitled to. Employers must abide by this law and pay at least the minimum wage, as the federal government prescribes.
What is the minimum wage in California?
California’s minimum wage or the CA min wage is $14.00 in the year 2021.
How much is minimum wage?
The federal minimum wage has been $7.25 per hour since 2009. On the other front, the server minimum wage is $2.13/hour, inclusive of the tips they receive, accounting for the wage limit altogether.
What is the federal minimum wage?
The federal minimum wage is the minimum entitlement to a worker in the United States. This limit is the minimum prescribed limit, while states can set a limit beyond it. However, states cannot set a minimum wage limit below the threshold of $7.25 per hour.
A federally mandated minimum wage is a contentious topic in a capitalist country like the United States. But the fact is that unemployment benefits in some states along with a $300 supplement are higher than average wages. But as some states roll back these weekly supplements, Americans will be back on the job market.
The question is, will they be happy earning a wage that doesn’t give them a comfortable life?