Americans have debated where to set the federal minimum wage for decades. President Joe Biden’s proposed stimulus plan aims to increase the federal minimum to $15 an hour, more than doubling the current wage of $7.25. Currently, wages vary by state, with some cities mandating more than double the federal minimum and other states with requirements below $7.25. Employees covered by both state and federal minimum wage laws are entitled to the higher of the two minimums.
How many people earn the federal minimum wage?
According to the Bureau of Labor Statistics (BLS) 1.6 million workers, or 1.9% of all hourly paid, non-self-employed workers, earned wages at or below the federal minimum wage in 2019. That year, 82.3 million people were paid hourly rates, making up 58.1% of all wage and salary workers in the United States.
Fewer Americans today make the federal minimum wage or less.
In 1980, when the federal minimum wage was $3.10 ($9.86 in 2019 dollars), 13% of hourly workers earned the federal minimum wage or less. Today, only 1.9% of hourly workers do. The number of federal minimum wage workers has decreased from 7.7 million in 1980 to 1.6 million in 2019. This is partly due to states establishing higher minimum wages than the federal level.
What is the federal minimum wage? When does it apply?
The federal minimum wage was established as part of the Fair Labor Standards Act in 1938. Since then, congressional amendments have periodically increased it —most recently in July 2009, when Congress set the minimum wage at $7.25 per hour. But the minimum only applies in the absence of stricter state mandates. At present, 29 states and Washington, DC have minimum wages above $7.25, which take precedence over the federal requirement.
Adjusted for inflation, the federal minimum wage was at its highest in 1979, when it was $2.90 an hour at the time, but equivalent to $10.47 in 2019 dollars. If a worker earning the federal minimum wage in 2019 worked 40 hours per week, every week of the year, they would earn just over $15,000 annually. That’s less than half of the US median annual wage of about $39,810, but more than the individual federal poverty threshold of about $13,011. Meanwhile, a worker earning the 1979 federal minimum wage, with the same hours, would make just under $21,800 in 2019 dollars.
Federal minimum wage law doesn’t cover all workers.
Not everyone is required to receive the federal minimum wage, which partly explains why the BLS measures workers “at or below” minimum wage. Various exclusions and exemptions can mean some workers may earn less than $7.25 per hour. For example, the federal minimum wage for tipped employees is $2.13 per hour so long as that amount plus tips received equals at least the federal minimum wage. Workers 20 years old or younger may earn $4.25 an hour for their first 90 consecutive days of employment. Plus, federal minimum wage law only applies to employees of enterprises with an annual gross volume of sales of at least $500,000 or certain types of smaller firms.
How does the minimum wage vary across states?
As of January 1, 2021, there were five states without minimum wage laws, two states with minimum wages below the federal minimum, 14 states with minimum wages at the federal level, and 29 states, plus Washington, DC, with minimum wages above the federal level, according to the Department of Labor. This is a significant change from 1980, when only two states, plus Washington, DC, had minimum wages above the federal level.
State minimum wages in 2021 range from $5.15 per hour in Georgia and Wyoming to $15 per hour in Washington, DC.
Some states have larger proportions of minimum wage workers than others.
Some states have more minimum wage earners than others. For example, in South Carolina, 5.4% of hourly workers, or 64,000 people, earn the federal minimum wage or less. In California, Minnesota, Montana, Oregon, and Washington state, less than 1% of hourly workers earn the federal minimum wage or less.
Where is the minimum wage $15 an hour?
In addition to Washington, DC — which introduced a $15 minimum wage in 2020 — nine states have passed laws or referenda to set a $15 minimum wage.
Some cities also have minimum wages of $15 or more already in place. In 2014, Seattle was the first city to institute a $15 minimum wage, which fully went into effect this year. In San Francisco, a $15 minimum wage went into effect in 2018.In July 2019, the US House of Representatives passed a bill to raise the federal minimum wage to $15 per hour, with the Congressional Budget Office (CBO) releasing a report the same month analyzing the potential impact. The CBO report estimates that changing the federal minimum wage to $15 would increase the wages of 17 million workers in 2025. However, the CBO estimates that 1.3 million individuals would become jobless (CBO estimates that this number could be anywhere between zero and 3.7 million). The report explains that this predicted decrease in employment is based in employers decreasing their workforce to compensate for increased wages.
Demographics of minimum wage workers
Young workers are more likely to earn the minimum wage compared to older workers. While 4.3% of hourly workers between 16 and 24 years old earn $7.25 per hour or less, 1.4% for hourly workers over the age of 25 are.
Women hourly workers are also more likely to earn the minimum wage or less — 2.6% of female hourly workers make the minimum wage or below, compared to 1.3% of male hourly workers.
About 2.4% of Black hourly workers earn the federal minimum wage or less, compared to about 2% among white, Asian, and Hispanic hourly workers.
Among hourly workers without a high school degree, 3.1% earn the minimum wage or less. That’s compared to 2% of high school graduates and 1.2% of workers with a bachelor’s degree or higher.
Among occupation types, food service workers represent the highest proportion of hourly workers earning the minimum wage, at 12.1%. Unlike other occupations, more than half of food service employees (servers, cooks, cashiers, etc.) are paid at an hourly rate. Personal care occupations, including manicurists, hairdressers, and cosmetologists, have the second largest proportion of hourly workers at or below minimum wage, at 3.2%.
Part-time workers, or those who work between zero and 34 hours per week, are more likely to be minimum wage earners than those who work full-time. Roughly 4.3% of part-time hourly workers earn the minimum wage or less, compared to 1.1% of full-time hourly workers.
The minimum wage and the living wage are not the same thing.
The minimum wage is established by Congress and enforced by the Department of Labor. The living wage is a subjective concept calculated by policymakers and advocacy groups that works backward to calculate a wage to cover the basic needs and expenses of individuals in particular areas. In cases where the minimum wage is less than the estimated living wage, the suggestion is that earnings from a full-time minimum-wage job are not enough to support someone without additional income or aid.
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