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What Is Minimum Wage?
Minimum wage or “the pay floor” is the lowest hourly pay an employer can pay to his/her employees or workers. The act empowering the minimum wage is the “Fair Labour Standard Act” or FLSA, which was enacted to make certain that the workers’ labour is paid with and valued at a fair price relative to the work and the prevailing economic conditions. FLSA defines workers under several categories and the “non-exempt employees” must be paid the minimum wage or a higher rate than that per hour. FLSA also provides the necessary legal authority to state governments to change the minimum wage requirements.
Why Is There A Minimum Wage?
Minimum wage is there to ensure that workers are paid a fair price for the services they provide for their employers. As people are more willing to offer their work, or labour (a more technical term) employers have no shortage of workers.
In economics, it called an excess in the supply. and when there is more supply of labour than demand for labour from the employers, the labour market gets super competitive and, in the process, wages could probably go down.
This is why the government introduced a minimum wage, and it’s the main reason it called the pay floor. Floor means it cannot go down after that limit.
In addition, persistently low wages over a long period of time could bring down the overall standard of living in a state or in the nation. Therefore, it is crucial that laws like FLSA exists to prevent companies from lowering the hourly minimum wages to dangerously low levels.
Another thing to consider is the cost of living. Cost of living changes yearly depending on the inflation rate and other macroeconomic conditions.
What Is The Current Minimum Wage?
The prevailing federal minimum wage is $7.25 per hour and that is the general pay floor in the United States. Although it hasn’t been changed since 2009, the state minimum wage levels have changed. In fact, some states have a minimum wage of nearly twice as much as the federal minimum wage rate. In the following parts, we will explore what these states are and what states have the lowest minimum wage rates.
Top 10 States With The Highest Minimum Wage
- Washington D.C: $14
- California: $12
- Oregon: $11.25
- New York: $11.10
- Colorado: $11.10
- Maine: $11
- Massachusetts: $11
- Arizona: $11
- Connecticut: $10.10
- Hawaii: $10.10
Top 10 States With The Lowest Minimum Wage
As we now know, the lowest the minimum wage can go is $7.25 per hour (Federal regulation). Yet below is the list of states that have the lowest minimum wages in the USA.
- Mississippi: $7.25
- New Mexico: $7.25
- North Carolina: $7.25
- South Carolina: $7.25
- North Dakota: $7.25
- Oklahoma: $7.25
- Pennsylvania: $7.25
- Texas: $7.25
- Utah: $7.25
- Virginia: $7.25
- Wisconsin: $7.25
- Wyoming: $7.25
Keep In Mind…
What should be remembered about these top 10 lists and the state-wise minimum wage rate is that in certain states,
- It could be changed annually based on the “Cost of Living”. It Cost of living is a statistical calculation which provides a general idea about the price level, inflation and currency’s purchasing power.
- Most of the states have a higher minimum wage rate than the federal rate.
- Some states do not have a state minimum wage rate and use the federal wage rate (i.e.: State of Tennessee). While some states have a minimum wage rate below the federal rate, but as the federal law rules above the state rule, they use the federal rate (i.e.: Wyoming’s state minimum is $5.15 if the federal rate is not applied).
- Some states have a general minimum wage rate and then it has been separated depending on the nature of the employer. (i.e.: Small and medium employers and large corporations) In Minnesota, Large Employers need to pay $9.86 while Small Employers pay $8.06.
- Usually, the “Gross Annual Sales” it the benchmark to decide which employers are large and which are small.
Are All Employees Entitled To A Minimum Wage?
Certainly no. The Fair Labour Standard Act does not cover every employee and some employees are exempt from minimum wage requirements.
Following are the types of employees who are exempt from the minimum wage requirement under FLSA Exemption.
- Executive-level employees
- Administrative level employees
- Professional and Outside sale employees
Fair Labour Standard Act – A Quick Out Look
FLSA is a US law that is aimed at protecting employees from unfair wage practices in industries. The act covers areas such as,
- The working times or “on the clock” time and not paid hours.
- Exempted and Non-exempted employees.
- Payments for overtime work in excess of 40 hours a week.
- Providing a reference guide to comply with the act’s rules and standards.
- Defining important legal terms and providing nation-wide accepted definitions such as “Minimum wage”, “Employer”, “Employee”, ‘Except and Non-exempt”, “over-time”.
Question & answer
Many states are raising the minimum wage in 2019. Under the “Raise The Wage Act”, the nation-wide minimum wage rate per hour is scheduled to be increased annually in par with the cost of living and inflation. Apart from this, many states gradually increase the minimum wage over time.
Federal minimum wage for the year 2019 is $7.25 since 2009.
Washington D.C has the highest minimum wage. $14 per hour.
Lowest is the federal minimum wage and it cannot go lower than that. However, Wyoming’s state minimum wage is $5.15, but Federal law prevents it by overriding the state law.