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How Much is Minimum Wage?

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The labor laws in the United States can be, at times, very confusing. Ever wonder why waiters at a restaurant can be paid as little as $2.13 while the federal minimum wage is over three times higher? How much is the minimum wage? Why is overtime pay 1.5x regular pay for nonexempt employees but not required for exempt employees? What does exempt actually mean?

All those questions and more are governed by the Fair Labor Standards Act of 1938 (FLSA) which has, over the years, been amended several times to reflect changing times, most notably the include anti-discrimination laws and to raise the minimum wage. The most recent change was the Fair Minimum Wage Act of 2007, signed by President Bush, which raised the federal minimum wage in increments to where it stands today.

We’ve updated the figures below for 2012. Federal minimum wage remains at $7.25 an hour.

Federal Minimum Wage

As of Jan. 1, 2010, the federal minimum wage is $7.25 an hour. This was the final increase in a series of increases written into the Fair Minimum Wage Act of 2007.

In recent years the rates have been far lower – $5.86 in 2008 and $5.15 in 2007.

Workers Who Receive Tips

As for wait staff, the reason they can be paid as little as $2.13 by their employer has to do with a clause in the law governing minimum wage, the Fair Labor Standards Act. The employer of a tipped employee only needs to pay $2.13 an hour in direct wages if that, plus their tips, equals the minimum wage. In addition, the employee must retain all tips and they must receive, customarily and regularly, more than $30 a month in tips. If the tips plus the direct wages don’t exceed the minimum wave, the employer must make up the difference.

That’s the federal standard, state standards may be higher. Here is a state-by-state breakdown for tipped employees by the DOL. As you can see, several states don’t permit an employer to take a tip credit and thus they must pay the full minimum wage rate, as is the case in Alaska, California, Montana, Nevada, Oregon, and Washington. Other states have varying tip credit amounts and rules defining a tipped employee.

State Minimum Wage

Seventeen states, and one district, have minimum wage laws that put the state minimum wage above the $7.25 an hour Federal minimum wage. Those states are:

  • Alaska- $7.75
  • Arizona – $7.65
  • California – $8.00
  • Colorado – $7.64
  • Connecticut – $8.25
  • Washington D.C. – $8.25
  • Florida – $7.67
  • Illinois – $8.25
  • Maine – $7.50
  • Massachusetts – $8.00
  • Michigan – $7.40
  • Montana – $7.65
  • Nevada – $8.25
  • New Mexico – $7.50
  • Ohio – $7.70
  • Oregon – $8.80
  • Rhode Island – $7.40
  • Vermont – $8.46
  • Washington – $9.04

The remaining states have rates that are the same as the federal, no minimum wage law (AL, LA, MS, SC, TN), or rates below the federal minimum wage rate (AR, GA, MN, WY).

As for the other two questions in the opening paragraph, overtime pay is also governed by the FLSA and you can read this OT factsheet for more information. I was surprised to learn that the FLSA doesn’t require overtime pay for work on weekends, holidays, or regular days of rest.

Finally, an exempt employee is someone exempt from certain parts of the FLSA and usually applies to employees who receive an annual salary. If you’re an exempt employee, your employer is not required to pay overtime (sorry).

That about covers the major points about minimum wage, the laws that govern them, and why tipped employees can be paid as little as $2.13 an hour. If you have any more questions, leave them in the comments and I hope to address them!

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39 Responses to “How Much is Minimum Wage?”

  1. L says:

    I just recently learned that there is also a federal minimum salary for exempt/salaried employees. $455 a week or $23,660

    When I first started my current job I was not payed that so I had to file a complaint with the Department of Labor. I don’t think many people realize that there is a federal minimum for exempt employees too.

  2. cdiver says:

    Exemption sucks….

    • Ryan says:

      …unless you can get your work done in 35 hours a week and still get paid for 40…

    • ziglet19 says:

      I don’t mind it, I find it usually balances out. Sometimes I have to work extra, but sometimes I can cut out an hour or two early and still get paid for the full week. I suppose it really depends on your employer and your workload.

  3. jsbrendog says:

    i remember working in CT when i was in college when I would go home for vacations and being amazed at my $7.15 an hour when friends working 15 min away in NY only got $6.35

  4. cubiclegeoff says:

    Is there a clause allowing for states to have a lower minimum wage than federal? It seems weird that that is allowed.

    • cdiver says:

      I agree, what is the point of it being a federal Law? Maybe its just not enforced.

    • zapeta says:

      They can have a lower minimum wage by state law, but where federal and state laws have different minimum wages the higher wage applies. In Georgia, the minimum wage is $5.15 an hour but employers would be required to pay the higher federal minimum wage of $7.25.

      • cubiclegeoff says:

        Seems pointless to have it on the books that state minimum wage is less than federal, but federal is always the base. They might as well just say that the state minimum wage is always the federal minimum wage.

        • Well, if the feds ever eliminate the minimum wage law, the workers in those states would still have a minimum. Without the state law as a backup, they wouldn’t.

          Not that I’m suggesting that this will ever happen.

    • mikestreb says:

      If the state’s minimum wage law sets minimum wage lower than the federal minimum wage, then the employers are required to pay the federal wage. Federal sets the benchmark, but some states want a higher minimum wage, so they create their own law setting it higher. Essentially, the employer is required to pay the higher of Federal or State min wage.

    • ziglet19 says:

      I was wondering the same thing too, when I read this. Does seems silly for the state’s to have a lower minimum wage, when they have to pay the federal rate anyways. But I guess, as Kosmo says, if the federal rate ever gets eliminated, the state wage would then become effective. Weird.

    • Texas Wahoo says:

      The State minimum wage laws were inacted before there was a federal minimum wage law, or when the federal minimum wage law was lower. Not all states amend their laws every time the federal government does, since the federal law trumps anyway.

  5. mikestreb says:

    I live in Ohio and run a small business. Ohio minimum wage law states that if the employer grosses less than $267,000, they can pay the federal minimum wage rate of $7.25. Not a big difference, but with small businesses struggling, every little bit helps.

  6. mikestreb says:

    I wonder why Oregon’s minimum wage is so high? I wouldn’t think of Oregon having a high cost of living.

    • cubiclegeoff says:

      Oregon has their minimum wage pegged to inflation so it changes regularly and is often higher than the federal minimum wage and others which are not pegged to inflation. This is why it is higher since inflation since they passed their minimum wage law has increased more than the federal minimum wage.

  7. David says:

    They should get rid of minimum wage laws which causes high unemployment. The crooks in Washington need to understand the laws of supply and demand..

    • billsnider says:

      You sound like someone who is not in touch with the real life world

      Bill Snider

    • cubiclegeoff says:

      The problem with this is that people tend to be self-centered, and same with businesses, and supply and demand is over the larger picture, not just for an individual business, location, or person.

    • the_watcher says:

      The laws of supply and demand are evil if not regulated; they are easily subject to greed. If business is not regulated, the richer employer will always win out over the employee. The result is a feudal state with few lords and many peasants. Feudalism is totally against what the founders of the U.S. had in mind. Power to the people y’all! Support the middle class and send greed to the garbage!

  8. eric says:

    Ah…I remember my first job when I was paid minimum wage. I thought I was making bank as a teenager lol.

    • cdiver says:

      Actually you were if you look at it from a cash flow point of view. All assets and no real liabilities, or few if any.

  9. govenar says:

    I’m curious, how much do waiters end up making after tips? (It seems like in a nice restaurant they can easily get a ton of money in tips… but I don’t know how much of the tip the waiter actually gets to keep)

    • cubiclegeoff says:

      It probably depends. At a high-end restaurant, they’d do much better than a low-end one. Some places allow the waiters to keep all of the tip, some have to put it in a pool and split it.

  10. I always remember it being $5 when I was in high school and that wasn’t that long ago. It’s nice to see that they finally started to pay younger workers more money as I hated only getting paid so little.

    • waiting again says:

      Most states pay 2.13 an hour for servers. You ‘tip out’ anywhere from 3-6% of your sales, no matter how much you actually received in tips.

  11. Barbara says:

    Where can I get a copy of salary listing per hr/wk/mth/yr. It’s like a break down of how much a person would make per hr/per wk/per mth/per yr.
    I had one many years ago but lost it. It was sort of set up like this

    Salary for the State of TX
    hr weekly monthly yrly
    12.00 480.00 1,700 24,000
    (this is just an example) Thank you.

  12. Ericred says:

    every thing was good until the Boss stop paying Health Insurance and cut hours.
    That was one big hits on me also losing my part time job painting interoir of home.
    Yep lost to cheaper lobor. And that was good money! I work 2 week and 600 after tax & INS at fulltime. Part time 600 3 days.
    we are getting just like California start with rent boss pays more rent, gas, electric and Insurance! Then make works do more cut full time to 30% then cut full and make management full working and now top boss has to work on the floor to! Well I would give up how need live and feed family. we need do so thing about it and it us at the bottom. because the top wants the whole Pie!

  13. leelee says:

    thanks 4 the help


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