The United States is made up of a patchwork of minimum wage laws, with 30 states and D.C. having a rate higher than the federal minimum of $7.25 per hour. This is according to the National Conference of State Legislatures. California's current rate of $16.50 ranks towards the top of the country and is only surpassed by the minimum wages of Washington and Washington D.C., while being matched by New York City and closely followed by rates in Connecticut and the Portland metro area. The federal minimum wage was first introduced under the Fair Labor Standards Act of 1938, which also established overtime and child labor standards for full-time and part-time workers.
Across the country, five U.S. states have not adopted a minimum wage - Alabama, Louisiana, Mississippi, South Carolina, and Tennessee. Another two, Georgia and Wyoming, have a minimum wage below the $7.25 federal minimum. In all seven of those states, the federal minimum of $7.25 per hour applies in accordance with the Fair Labor Standards Act, even though there are exceptions to its coverage. 13 more states have a minimum wage identical to the federal minimum wage, bringing the number of states where minimum wage workers earn only $7.25 per hour to 20. A handful of states, among them New Jersey, Georgia, Illinois and Ohio, also carve out exceptions for smaller employers, and there are several more exceptions from minimum wage depending on the state:
While some U.S. states have been increasing their minimum wage rates in recent years - some by quite a bit to battle real wage decline due to inflation - federal minimum wage states have been at a standstill since the last U.S. federal minimum wage increase in 2009. This is resulting in the gap between different U.S. minimum wages growing increasingly larger, with the ones currently closest to the nationwide rate of $7.25 being West Virginia's $8.75 and Montana's $10.55.
But there have also been headwinds for minimum wage. California voters last year rejected a ballot measure to increase the state's minimum wage from $16 to $18 an hour. The question was posed during the U.S. election on November 5, but the results were only finalized two weeks later due to the narrow margin of the measure's defeat. The result was an unexpected one in a blue state like California, but also fell in line with other election results from this year, like Californians voting to reverse parts of criminal justice reform and deciding not to ban forced prison labor.
While inflation has long come down from its 2021/2022 highs, when it peaked at 9 percent, it is still slightly elevated at 2.7 percent. More importantly, though, people are still struggling to cope with the lasting effects of the inflation crisis. According to a Statista Consumer Insights survey conducted in June and July 2025, 49 percent of U.S. adults said that the high cost of living was one of the biggest challenges they currently face, making it by far the most common answer.
It is a common misconception that prices come down when inflation cools, when in reality, a period of high inflation leaves a legacy of high prices. According to the Bureau of Labor Statistics, U.S. consumer prices have increased 22.7 percent since January 2021, with some categories seeing even steeper price increases than that. Food prices have increased by 25 percent, rents have increased by almost 27 percent, and transportation prices are up 28 percent. And yet, nominal wages have only grown 21.8 percent since January 2021, leaving many people worse off than they were almost five years ago.
The federal minimum wage in the United States has stood at $7.25 an hour since 2009. Today, this rate still applies across 20 U.S. states, most located in the country's South, Midwest, and Rocky Mountain region. In the remaining 30 states, minimum wages have risen and continue to do so, opening up a gap between these states and those applying the federal minimum wage.
According to the Bureau of Labor Statistics, 80.3 million workers age 16 and older earned an hourly wage in 2024, of which 843,000 earned federal minimum wage or below. This is down from a high of 4.4 million in 2010, as several states introduced higher minimum wages in the meantime, and some cities have also introduced their own minimum wages, diverging from state laws. Additionally, the fact that the minimum wage hasn't changed in so long means that going rates for lower-skilled workers have increased to somewhat above the prescribed minimum in many cases, aided by the post-COVID hiring crunch when employers had to offer more to find workers. Today, only around 1 percent of hourly workers earn the federal minimum, while almost a quarter of the U.S. workforce makes less that $17 an hour.
Those working in food preparation and serving are most often earning minimum wage or below. This is due to many states carving out exceptions for tipped workers (where technically, hourly wages and tips then have to reach the minimum). Low-skilled office support, as well as personal care and services work, also saw many make below minimum wage, as several more exceptions apply across states, for example, in small businesses, part-time youth and seasonal work, and more. Also, the Fair Labor Standards Act of 1938, which introduced federal minimum wage in the U.S., does not apply to all occupations, with some retail, service, office, and agricultural as well as domestic service employees exempt. Exceptions also apply for public servants in some instances.
Women in the United States were more likely to work for minimum wage or below, with the rates of female Black and Asian minimum wage workers especially high. While 0.8 percent of male hourly workers earned minimum wage or below last year, this number was 1.3 percent for women. Minimum wage jobs affected different races and ethnicities more equally. Texas is the state with the most workers at minimum wage or below (120,000), followed by Ohio (48,000), Pennsylvania (47,000), and Florida (46,000). In California and New York, there were 38,000 of these workers each year.
While the U.S. economy has come through the inflation crisis relatively unscathed, with robust growth, low unemployment, and high stock prices, many American families have not. Many Americans feel worse off now than they did a couple of years ago - and many actually are. The main problem with inflation is the fact that it hits consumers right where it hurts: the wallet. In times of high inflation, when prices increase faster than nominal wages, real wages go down, meaning that workers feel the purchasing power of their income decline.
During the inflation crisis of the past few years, this has been the case from April 2021 to April 2023, when average real hourly earnings declined for 25 consecutive months on a year-over-year basis. In May 2023, real wages began to rise again as nominal wage growth outpaced inflation once again, as it normally should. That doesn't mean that the effects of the inflation spike in 2021 and 2022 can no longer be felt, though. Looking at cumulative wage growth since January 2021 and comparing it to the cumulative increase of consumer prices shows that wages still haven't caught up with prices. As our chart shows, real wages have actually declined by 0.7 percent since January 2021, meaning that, adjusted for price increases, Americans are slightly worse off now than they were four and a half years ago.
The good news is that wages have consistently outpaced price increases for the past two years, meaning that real wages are rising again and will soon exceed pre-crisis levels. That is, unless inflation makes an unwanted comeback and labor market conditions continue to worsen, which would negatively affect nominal wage growth.
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