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What Is the Minimum Wage?

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





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The federal minimum wage that is $7.25 per hour hasn't changed since 2009, despite a steady rise in the costs of living, which has increased into a soaring inflation over the last year.
Thirty states and Washington, D.C., have minimum wage rates that are higher than the federal minimum wage.
Minimum wage and time
The minimum wage has not kept pace with inflation when looking at the nominal wage (not adjusted to inflation) in comparison to their spending capacity in 2022 numbers (adjusted for inflation).
Because the minimum wage in the federal government has not changed since 2009, its actual purchasing power has drastically decreased. The lower purchasing power means that it's much more difficult for people to live on a minimum wage.
State minimum wages
The minimum wage varies by state. Five states do not have minimum wage laws, but that federal minimum wage still applies; those are Alabama, Louisiana, Mississippi, South Carolina and Tennessee. In some states there is a minimum wage that is higher, based on whether a specific city or region within the state has an upper minimum wage.
Does raising the minimum wage cause inflation?
No. Federal minimum wages are determined by the federal government and does not directly correspond with inflation. The current conditions of inflation were not due to this minimum wage. It 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 can earn higher in the event that the state minimum wage is greater.
According to the Department of Labor, workers who are not covered under the FLSA who earn less than minimum wage, are:
Employees of specific seasonal amusement or leisure establishments.
The employees of certain small newspapers or newspaper delivery workers.
Seamen employed on foreign vessels or employees involved in fishing activities.
Certain farmworkers.
Casual babysitters.
Assistance for older individuals or those with disabilities.
Professional, administrative, and executive employees.

These workers are exempt from overtime pay. (Learn more about who is and isn't -- eligible for overtime pay on the .)
Does the minimum wage count tips?
Tipped employees include those who rely on tips from customers to supplement their wages. The average tipped employee receives more than $30 per month in tips, according to the Department of Labor.
The employees who receive tips must earn an hourly basic wage that is $2.13 an hour. This is known as cash wage. The cash wage is then paired with tips in order to meet the federal minimum wage of $7.25 an hour. Those tips are considered a "tip credit," which allows employers to pay workers less than what is the minimum federal wage.
Employers can credit as much as $5.12 per hour of tips against a worker's earnings. If an employee's wages (at least $2.13 an hour) plus tips is less than $7.25 for an hour the employer is required to make the gap.
The minimum wage for tipping and the maximum tip credits vary by city, state, and even by.
Washington, D.C., has the most tipped workers' minimum wage of all workers in the country. In the election of 2022, Washington, D.C. residents were able to vote to incrementally increase their minimum wages to tipped employees every year up to July 1st 2027. Then the minimum wage for tipped workers will be adjusted to match the same minimum wage as the minimum wage for nontipped workers that year. The current minimum wage amounts to $5.35 per hour for workers who are tipped and $16.10 to nontipped employees.
Tipped minimum wages by state
What states are raising minimum wages?
Each year, 14 states and Washington, D.C., automatically set minimum wage increases in accordance with the rate of inflation, usually tied with the U.S. Bureau of Labor Statistics' , or CPI. If the index isn't changing, neither will the wage. And some states have annual caps on inflation increases, like California (3.5%), Minnesota (2.5%) and Vermont (5 percent).
States which bind increases in minimum wage to inflation adjustments their salaries as of January. 1, unless otherwise specified, as per 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 is set to index wages in line with inflation starting January. 1in 2024.
Increases in minimum wage
What is the median household income within the U.S.?
A median income for a household for a single person 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 typically earn less than men. In 2020, women earned 83 cents for every dollar men earned, as per Census Bureau. Census Bureau.
Between women and men who worked full-time year-round in 2019 (the most recent data from the Census Bureau's American Community Survey), the national median earnings wage gap was $10,150 and men earned a median of $53,544 and women earning a median wage of $43,394.
The wage gap widens when you consider every state. The states with the largest average wage gaps between men and women are:
Wyoming: $21,676.
Utah: $17,303.
District of Columbia: $16,032.
Louisiana: $14,926.
Washington: $14,609.

The states that have the smallest average wage gaps between males and females are:
Vermont: $4,600.
Nevada: $6,013.
Hawaii: $7,022.
California: $7,162.
Maryland: $7,594.

Which is the most significant gender pay gap in your state?
A gender pay gap exists for women who have less education levels. In the case of workers who have less than having a high school degree women earned the equivalent of 66 cents for every dollar waged by men, according to the U.S. Government Accountability Office.
Here is the most recent median earnings variations in terms of degree, based on race and gender, which was 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



Median earnings of master's degree graduates



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.








What is the racial wage gap?
The wage disparities are stark when they are broken down according to race or ethnicity, Department of Labor data shows. If you compare the amount earned for white people:
Hispanic/Latino workers earn an average of 73 cents.
Black workers make an average of 76 cents.
Native American/American Indian workers earn an average of 77 cents.
Multiracial workers make an average of 81 cents.
Asian-Pacific Islander workers earn $1.12.

What is the gender wage gap?
Pay gap between men and women is made worse further due to the racial wage disparity, according to data by the Government Accountability Office. If you compare the amount of money earned by white males:
Hispanic/Latina women earn 58 cents.
Black women make 63 cents.
Women who are white make 79 cents.
Asian women earn 97 cents.

What's the LGBTQ+ gender or gender gap in pay?
Gender and gender identity among LGBTQ+ workers also tends to impact income, according to an analysis of 2021 salary data by The Human Rights Campaign. LGBTQ+ workers tend to earn 90 cents per dollar a typical worker (as in, full-time private and public sector nonfarm workers). According to the Human Rights Campaign data, when compared to every dollar made by the average worker:
Men in those in the LGBTQ+ community make 96 cents.
Women from that LGBTQ+ community earn 87 cents.
The gender fluid, nonbinary, genderqueer and two-spirit workers make 70 cents.
Transmen earn 70 cents.
Trans women make 60 cents.



About the author: Anna Helhoski is a writer, and NerdWallet's expert regarding student loans. Her writing has been featured in The Associated Press, The New York Times, The Washington Post and USA Today.







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