The federal minimum wage, introduced in 1938, has long served as the baseline for worker compensation across the United States. Designed to ensure a minimum standard of living and prevent exploitation, this wage floor has been adjusted periodically to reflect economic changes and shifts in the cost of living.
The last increase to the federal minimum wage occurred on July 24, 2009, when it was raised to $7.25 per hour. This change marked an increase from the prior rate of $6.55 per hour, implemented during the first year of President Barack Obama’s administration.
Federal Minimum Wage Increase
Since that 2009 update, the federal minimum wage has remained unchanged, marking the longest period without an increase since its establishment. Despite shifts in the economy, including inflation and rising living costs, the rate has stayed stagnant.
According to the U.S. Bureau of Labor Statistics, the purchasing power of the dollar has significantly declined over the past 15 years. As a result, the real income of workers earning the federal minimum wage has decreased, while inflation continues to outpace the value of the $7.25 rate.
In 2023, around 869,000 workers in the U.S. were earning at or below the federal minimum wage. Of these workers, more than two-thirds were women, illustrating the significant impact this policy has on a vulnerable segment of the workforce.
Discrepancies and Exceptions in Wage Laws
Although the federal minimum wage is set at $7.25, various exceptions apply to specific categories of workers:
- Tipped Employees: These workers can be paid as little as $2.13 per hour in direct wages, as long as their tips bring them up to the federal minimum wage.
- Youth Workers and Students: Employers may pay workers under the age of 20 a lower wage for the first 90 consecutive days of employment. Full-time students working under certain work-study programs may also earn below the minimum wage.
- Workers with Disabilities: Special certificates can allow employers to pay disabled workers below the minimum wage, depending on their abilities and job functions.
State and Local Wage Policies
Wage policies can vary widely at the state and local levels:
- Higher State Minimum Wages: Thirty states, along with Washington, D.C., have enacted minimum wage rates higher than the federal standard.
- City Ordinances: Over 60 cities, including major metropolitan areas such as New York City and Los Angeles, have set local minimum wage rates that surpass both state and federal rates.
- Recent Increases: For example, Chicago recently raised its minimum wage to $16.20 per hour.
Federal Employee Wage Increases
In 2022, the Biden administration introduced a policy shift that significantly impacted federal employees and contractors. The policy raised the minimum wage for federal employees to $15 per hour. This increase applied to civil servants and other non-contracted employees working directly for the federal government.
Additionally, the minimum wage for workers employed by federal contractors was also raised to $15 per hour, ensuring that companies contracting with the federal government provide a living wage for their employees. This shift reflects the administration’s goals to improve economic fairness and enhance the financial stability of workers in government-related positions.
Legislative Efforts to Raise the Federal Minimum Wage
The Raise the Wage Act of 2023 was introduced in the Senate as a key legislative proposal aimed at gradually raising the federal minimum wage to $17 per hour over a five-year period. The bill also includes provisions to adjust the minimum wage annually, keeping it aligned with inflation and median wage growth.
However, the bill has not made significant progress in the Senate, largely due to partisan divisions over economic policies. Some lawmakers, particularly Republicans and moderate Democrats, have expressed concerns that such a substantial wage increase could negatively impact small businesses. These opponents argue that higher wages could lead to job cuts or reduced working hours, particularly for small business owners struggling with higher labor costs.
Conclusion
The federal minimum wage, established over 80 years ago, has not kept pace with the changing economic landscape. While some states and localities have raised their minimum wages, the federal rate has remained stagnant for more than 15 years. Legislative efforts to raise the federal minimum wage continue to face significant challenges, with the debate largely revolving around its potential impact on businesses and the economy.
