The federal minimum wage in the United States is $7.25 per hour, set by the Fair Labor Standards Act (FLSA). That rate has not changed since July 2009, making it the longest stretch without a federal increase since the minimum wage was first established in 1938. However, the rate you actually earn depends heavily on where you work, because most states now set their own minimums above the federal floor.
How the Federal Minimum Wage Works
The FLSA requires employers to pay at least $7.25 per hour to covered workers. “Covered” is broad: it applies to businesses with at least $500,000 in annual revenue and to employees of hospitals, schools, and government agencies regardless of revenue. It also covers any individual worker engaged in interstate commerce, which courts have interpreted broadly enough to include most jobs.
At $7.25 an hour, a full-time worker putting in 40 hours a week earns about $290 before taxes, or roughly $15,080 a year. That figure falls below the federal poverty line for a household of two.
When State and Federal Rates Differ
When a state sets its own minimum wage higher than $7.25, employers in that state must pay the higher amount. The rule is simple: whichever rate is more favorable to the worker applies. The majority of states now have minimums above the federal floor, with rates ranging from just above $7.25 to over $16 per hour depending on the state.
A handful of states have no state minimum wage law of their own or set a rate below $7.25. In those places, the federal rate of $7.25 still applies to any worker covered by the FLSA. Some states also tie their minimum wage to inflation through automatic annual adjustments, so the rate rises each year without new legislation. Others schedule step increases over several years to phase in a higher target.
Cities and counties in some states set their own local minimums on top of the state rate, creating a patchwork where your exact wage floor can depend on the municipality where you clock in.
Tipped Employees and the Tip Credit
If you work in a job where you regularly earn more than $30 a month in tips (servers, bartenders, valets, and similar roles), your employer can pay a lower base wage called the “cash wage.” The federal cash wage for tipped employees is just $2.13 per hour. The difference between that $2.13 and the full $7.25 minimum is called the “tip credit,” currently $5.12 per hour.
Here’s the key protection: your tips plus your cash wage must add up to at least $7.25 for every hour worked. If they don’t, your employer is legally required to make up the difference. So the minimum wage still applies to tipped workers; employers just get to count your tips toward meeting it.
Many states require a higher cash wage for tipped workers, and several have eliminated the tip credit entirely, meaning tipped employees earn the full state minimum wage before tips are added on top.
Who Is Exempt From Minimum Wage
Not every worker is guaranteed the federal minimum. The FLSA carves out several categories of exempt employees:
- Salaried executive, administrative, and professional employees who meet specific duties tests and earn above a salary threshold set by the Department of Labor. These are the most common exemptions and cover many office and management roles.
- Outside sales employees who primarily work away from the employer’s place of business making sales or obtaining orders.
- Certain computer professionals paid on a salary or fee basis above a set threshold.
- Farmworkers on small farms that used no more than 500 “man-days” of farm labor in any quarter of the prior year.
- Casual babysitters and companions for the elderly or infirm.
- Seasonal amusement or recreational workers, certain small newspaper employees, and workers in fishing operations.
Workers under 20 years old can also be paid a youth minimum wage of $4.25 per hour during their first 90 consecutive calendar days of employment, after which the full minimum wage kicks in.
What Minimum Wage Means for Your Paycheck
Minimum wage is a gross pay figure, meaning it’s the rate before any deductions. Your actual take-home pay will be lower after federal income tax withholding, Social Security and Medicare taxes (7.65% combined for most workers), and any state or local income taxes. At $7.25 an hour, those deductions can reduce weekly pay by $30 to $60 or more depending on your filing status and location.
If your state has a higher minimum, the math changes accordingly. A worker earning $15 per hour at 40 hours a week grosses $600 weekly, or about $31,200 a year, a meaningful difference from the federal floor.
How to Check Your Rate
Your applicable minimum wage depends on your state, your city, and sometimes your industry. The U.S. Department of Labor maintains an updated table of state minimum wage laws at dol.gov. Your state’s department of labor website will list any local or industry-specific rates. If you believe you’re being paid below the legal minimum, you can file a complaint with the DOL’s Wage and Hour Division, and there is no cost to do so.