What Is the Minimum Wage?

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What Is the Minimum Wage?
Minimum wages, tipped minimums, median wages and pay gaps vary according to the state.
Written by Anna Helhoski Senior Writer | Economic news, consumer finance trends and debt for students loan and debt Anna Helhoski is a senior journalist who covers economic news and current trends in consumer finance at NerdWallet. She is also an expert for student loans. Her work was published by NerdWallet in 2014. Her work has been featured in The Associated Press, The New York Times, The Washington Post and USA Today. She has previously covered local news from the New York metro area for The Daily Voice, Daily Voice and New York state politics for The Legislative Gazette. She has a bachelor's degree in journalism from Purchase College, State University of New York.





January 23, 2023


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Federal minimum wages at $7.25 per hour has not changed since 2009, despite a steady increase to the cost of living, that has led to a dramatic increase in inflation over the past year.
Thirty states and Washington, D.C., have minimum wage levels that are higher than the federal minimum wage.
Minimum wage in time
The minimum wage hasn't been able to keep pace with inflation when looking at nominal wages (not adjusted to inflation) against their spending power in 2022 figures (adjusted to account for inflation).
Because the minimum wage in the federal government has not changed in 2009, its true purchasing power has decreased dramatically. A decrease in purchasing power makes it even more difficult for workers to survive on a minimum wage.
State minimum wage
The minimum wage is different for each state. Five states do not have minimum wage laws, however that federal minimum wage still is in effect. These are Alabama, Louisiana, Mississippi, South Carolina and Tennessee. In certain states there is a minimum wage that is higher, contingent on the state's minimum wage laws. or region within that state has an upper minimum.
Does raising the minimum wage cause inflation?
No. The federal minimum wage is set by the government , and is not directly linked to 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 or near the minimum wage?
The workers who are covered by the Fair Labor Standards Act must be paid at least the federal minimum wage and may earn more if the state minimum wage is higher.
As per the Department of Labor, workers who are not covered under the FLSA and who can be paid less than minimum wage, are:
Workers of certain amusement parks or recreation establishments.
The employees of certain smaller newspapers, or delivery employees.
Seamen employed on foreign vessels or employees engaged in fishing operations.
Certain farmworkers.
Casual babysitters.
Assistance for older persons or people with disabilities.
Professional, executive and administrative employees.

These workers are also exempt from overtime pay. (Learn more about who is -- and isn't to receive overtime pay on the .)
Does minimum wage include tips?
Tipped employees include those who depend on tips from customers to supplement their wages. An employee who is tipped typically earns more than $30 in monthly tips, as per the Department of Labor.
Employees who are tippy must earn an hourly basic wage that is $2.13 for an hour. It is also known as cash wage. The cash wage is then paired with tips to reach the minimum wage in the federal government that is $7.25 an hour. These tips are referred to as a "tip credit," that allows companies to compensate their employees less than what is the minimum federal wage.
Employers can credit the maximum of $5.12 per hour in tips to a worker's earnings. If an employee's wages (at minimum $2.13 for an hour) including tips is below $7.25 an hour the employer must make the extra.
The amount of tipping required and the minimum tip credits are determined by the state and even city.
Washington, D.C., has the most tipped workers' minimum wage of all workers in the country. As of the 2022 election, Washington, D.C. residents voted to gradually increase their minimum wages to tipped workers each year until July 1st 2027. Then the minimum wage for tipped employees will be set to match the same minimum wage as the minimum wage for nontipped workers that year. The current minimum wage for tipped workers is $5.35 an hour to workers who are tipped and $16.10 for nontipped workers.
State-mandated minimum wage is tipped.
What states are raising minimum wages?
Every year, 14 states, plus Washington, D.C., automatically determine minimum wage increases in line with the rise of inflation. These increases are usually linked in conjunction with U.S. Bureau of Labor Statistics CPI, also known as CPI. If the index isn't changing then neither do the wages. And some states 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 adjustments their salaries as of January. 1, unless otherwise listed, according to the . These 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 will be indexed to wages in line with inflation starting January. 1, 2024.
Increases in minimum wage
What is the median household income within the U.S.?
A median income for a household for a single individual is $70,784, according data from the latest U.S. Census Bureau population survey data for 2021.
Median incomes for the states.
>> MORE:
What is the gender pay gap?
Women consistently bring home less money than men: In 2020 the women earned 83 cents on the amount men earned in accordance with the Census Bureau.
For women and men who worked full-time year-round in 2019 (the most recent data available from the Census Bureau's American Community Survey), the national median earnings wage gap was $10,150, with men earning an average of $53,544 and women earning a median of $43,394.
The wage gap widens when you consider each state. The states that have the largest average wage gaps between men and women include:
Wyoming: $21,676.
Utah: $17,303.
District of Columbia: $16,032.
Louisiana: $14,926.
Washington: $14,609.

The states that have the smallest median wage gap between women and men are:
Vermont: $4,600.
Nevada: $6,013.
Hawaii: $7,022.
California: $7,162.
Maryland: $7,594.

How big is your gender pay gap in your area?
A gender pay gap also exists for women who have less education levels. For those with less than an associate's degree women earned 66 cents for every dollar earned by men according to the U.S. Government Accountability Office.
Here is the most recent median earnings differences by degree, in accordance with gender and race, compiled through the National Center for Education Statistics.
Gender



Associate degree median earnings



Median earnings for bachelor's degrees



Median earnings for master's degrees



Men


$48,390.


$63,950.


$84,010.


Women


$34,780.


$50,000.


$60,930.








Race



Associate degree median earnings



Median earnings of a bachelor's degree



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.








Which is your racial wage disparity?
Wage inequities are stark when they are broken down according to races or ethnicity Department of Labor data shows. If you compare every dollar earned by white workers:
Hispanic/Latino workers make 73 cents.
Black workers earn an average of 76 cents.
The Native American/American Indian workforce earns the equivalent of 77 cents.
Multiracial workers make 81 cents.
Asian-Pacific Islander workers earn $1.12.

What is the gender racial wage gap?
This gender wage gap is made worse further by the racial wage gap, according to data by the Government Accountability Office. When compared with every dollar earned by white males:
Women of Hispanic/Latina earn the equivalent of 58 cents.
Black women make 63 cents.
Women who are white earn 79 cents.
Asian women earn 97 cents.

What's this LGBTQ+ gender or gender identity pay gap?
Gender and gender identity among LGBTQ+ workers also tends to affect the amount of money they earn, as per an analysis of 2021 salaries by the Human Rights Campaign. LGBTQ+ workers typically earn 90 cents for every dollar earned by a typical worker (as infull-time, full-time, private and public sector workers who are not farmers). According to Human Rights Campaign data, when compared to every dollar that a typical worker earns:
Men from the LGBTQ+ community make 96 cents.
Women who belong to those in the LGBTQ+ community earn 87 cents.
Genderfluid, genderqueer, nonbinary and two-spirit workers make 70 cents.
Transmen earn 70 cents.
Trans women make 60 cents.



The author's bio: Anna Helhoski is a writer and NerdWallet's authority in the field of student loans. Her work has appeared in The Associated Press, The New York Times, The Washington Post and USA Today.







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