Minimum Wage

Minimum Wage is the legally mandated lowest hourly rate that employers must pay employees for their labor. It is established by federal, state, or local governments to protect workers from exploitation and ensure a baseline standard of living. In the U.S., the federal minimum wage is set by the Fair Labor Standards Act (FLSA), but many states and municipalities have their own minimum wage laws that exceed the federal level. Employers are required to follow the rate that is most favorable to the employee.

Key Facts

• Federal Law: The current federal minimum wage is $7.25 per hour (as of 2025, unchanged since 2009).
• State Variation: Many states and cities have higher minimum wages than the federal rate.
• Tipped Employees: Can be paid a lower base wage, but total earnings must meet the standard minimum wage when tips are included.
• Annual Adjustments: Some jurisdictions tie increases to inflation or cost-of-living indices.
• Exemptions: Certain workers (for example, students, disabled employees, independent contractors) may be exempt or subject to different rules.

1. What is the purpose of a minimum wage?

To ensure workers receive fair pay for their labor and reduce poverty and exploitation.

2. How is the minimum wage determined in the U.S.?

It is set by federal law under the FLSA, but states and localities can establish higher rates.

3. Can employers pay less than the minimum wage?

Only under specific exemptions (for example, tipped workers, student workers), and they must follow applicable laws.

4. Does the minimum wage change over time?

Yes, in many states and cities it can increase annually based on legislation or inflation adjustments.

5. What happens if an employer doesn’t comply with minimum wage laws?

They may face legal penalties, back pay obligations, fines, and potential lawsuits from employees.