As of July 24, 2009, the U.S. federal minimum wage is $7.25 an hour, the final step in a three-phase increase that began with a minimum wage of $5.85 in 2007 and a raise to $6.55 in 2008. The original minimum wage was 25 cents an hour in 1938. Minimum-wage laws apply to employees of businesses with gross sales of $500,000 or more annually, although other stipulations -- for young workers and those who work primarily for tips, for example -- also exist. Five states have no minimum-wage laws.
States without Minimum-Wage Laws
Five Southern states -- Alabama, Louisiana, Mississippi, South Carolina and Tennessee -- have no minimum-wage laws, according to the U.S. Department of Labor. States without their own minimum-wage laws, or those with minimum-wage thresholds equal to or lower than federal law, automatically are subject to the federal minimum wage of $7.25 an hour. Arkansas, for instance, has a minimum wage of $6.25, which is null and void so long as the federal standard remains higher. Georgia, Minnesota and Wyoming also have minimum-wage levels below federal standards. Workers who earn minimum wage make $290 a week, or $15,080 a year, based on eight-hour work days and a 260-day work year. The federal poverty level is $14,570 per year for a household of two.
States with Higher Minimum Wages
Many states have minimum wages equal to or greater than the federal level. States with higher minimum wages than the federal standard are Alaska at $7.75, Arizona at $7.35, California and Massachusetts at $8, Colorado at $7.36, Connecticut, Illinois and Washington, D.C at $8.25, Maine and New Mexico at $7.50, Michigan and Rhode Island at $7.40, Ohio at $7.40 for employers with 271,000 or more workers, Nevada at $8.25 for workers without employer-paid insurance, Oregon at $8.50, Vermont at $8.15 and Washington at $8.67 -- the highest minimum wage in the U.S. Minnesota’s minimum wage of $6.15 is superseded by federal law, but the state has a $5.25 minimum wage for employers not meeting the federal $500,000 gross income requirement. Other states have similar stipulations for small businesses.
Some states have their own requirements above and beyond federal law for workers who earn a majority of their income via tips. Federal law states that an employer must pay tipped workers at least $2.13 an hour, provided that employees’ wages and tips meet or exceed the federal minimum-wage level of $7.25. If an employee’s wages and tips fall below $7.25 an hour, the employer must make up the difference. Ohio has a minimum wage of $3.70 for such workers.
The federal government requires that workers be paid 1.5 times the minimum wage of $7.25 for all hours worked in excess of 40 hours per week. States can choose to increase the federal level but may not pay less than 1.5 times the minimum wage for overtime. If a state’s minimum wage is higher than $7.25 an hour, employers are required to pay 1.5 times the state’s minimum wage for overtime. For instance, California workers would be paid $12 an hour ($8 multiplied by 1.5) for overtime hours worked in excess of 40 hours a week.
Workers under the age of 20 may be paid $4.25 an hour during the first 90 consecutive days of employment, with a raise to $7.25 an hour once the employee reaches age 20 or completes his 90 consecutive days. There also are minimum-wage exceptions for students, handicapped people and other workforce populations.