Minimum Wage in the United States
Updated: Dec 13, 2021
Minimum wage legislation has been a contentious issue in the United States for decades. In the UK, all workers are entitled to the national minimum wage, but the situation in the US is very different. There have been countless stories about American hospitality workers earning as little as $2.13 per hour and relying on tips from customers to effectively pay their wages.
This cheat sheet will look at existing minimum wage legislation in the US and current discussions about increasing the minimum wage for millions of Americans.
Current laws on the minimum wage
In 1938, President Franklin D. Roosevelt first created a national minimum wage as part of his recovery plan after the Great Depression. He wanted to lift American workers out of poverty, but left out a large segment of the workforce. The newly-introduced law excluded domestic, agricultural and restaurant staff from earning the minimum wage: industries in which many workers were African-American.
Today, the federal minimum wage stands at $7.25 per hour, but millions of workers in the domestic and restaurant industries are still not eligible to earn this. Current laws allow employers to pay tipped staff as low as $2.13 per hour, provided that their wage plus tips is at least equal to the minimum wage – employers must make up the difference if not. Minimum wage laws can vary by state too, with some states paying much more generously than the federal minimum, such as California at $13.
Current discussions to increase minimum wage
Discussions concerning raising the minimum wage have been ongoing for many years, and it is often a big issue during presidential election campaigns. Candidates such as Bernie Sanders and Elizabeth Warren have been particularly vocal about increasing the federal minimum wage. Sanders has campaigned for the federal minimum wage to be raised to $15, and President Biden has adopted this policy idea with hopes to implement it by 2025, including its increase as part of his economic relief package.
However, the $15 minimum wage proposal was rejected, with many Republicans having blocked attempts to increase the minimum wage in recent years.
Supporters of increasing the minimum wage argue that:
The increase would put more money in workers’ pockets, giving them additional income to spend. This would create more economic activity which would benefit the economy.
More tax generated from higher wages means more money for the government to invest and spend on other projects.
Helps people keep up with increases in inflation. If workers’ wages are increasing in line with inflation, they have a lower risk of slipping into poverty.
Opponents of increasing the minimum wage argue that:
Businesses may pass the extra cost onto customers, meaning goods will become more expensive.
Businesses might make redundancies if they are unable to meet the extra cost, or stop hiring to keep costs low. Therefore, unemployment could rise and fewer jobs will be generated.
Companies could outsource jobs to countries where wages are much lower to keep their costs low. This could also increase unemployment levels in the US.
With more Americans struggling to afford basic necessities and being pushed into poverty, there are growing calls for minimum wage laws to be updated. However, a lack of consensus between and within the main political parties makes this a challenging task. Nevertheless, it seems that the minimum wage will remain an important issue in American politics in the coming years.
For more resources on what's happening across the Atlantic, head to our dedicated US Politics section.