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Congressional Research Service (CRS)

 

State Minimum Wages: An Overview

David H. Bradley, Specialist in Labor Economics

November 18, 2014

http://fas.org/sgp/crs/misc/R43792.pdf

[full-text, 37 pages]

 

Summary

The Fair Labor Standards Act (FLSA), enacted in 1938, is the federal legislation that establishes

the general minimum wage that must be paid to all covered workers. While the FLSA mandates

broad minimum wage coverage, states have the option of establishing minimum wage rates that

are different from those set in it. Under the provisions of the FLSA, an individual is generally

covered by the higher of the state or federal minimum wage.

 

As of January 1, 2015, 29 states and the District of Columbia will have minimum wage rates

above the federal rate of $7.25 per hour, with rates ranging from $0.25 to $2.25 above the federal

rate. Two states will have minimum wage rates below the federal rate and five states have no state

minimum wage requirement. The remaining 14 states have minimum wage rates equal to the

federal rate.

 

In any given year, the exact number of states with a minimum wage rate above the federal rate

may vary, depending on the interaction between the federal rate and the mechanisms in place to

adjust the state minimum wage. Adjusting minimum wage rates is typically done in one of two

ways: (1) 10 states have legislatively scheduled rate increases that may include one or several

increments; (2) 11 states use a measure of inflation to index the value of the minimum wage to

the general change in prices. In addition to the 11 states currently using an inflation adjustment,

four states and DC have chosen a hybrid approach that provides a series of scheduled rate

increases, followed by inflation indexation for future minimum wage changes. Thus, a total of 15

states and DC currently, or will in a future year, index state minimum wage rates to a measure of

inflation. The remaining 25 states, some of which have minimum wage rates above the federal

rate, do not have an adjustment mechanism in place.

 

Because the federal and state minimum wage rates change at various times and in various

increments, the share of the labor force for which the federal rate is the binding wage floor has

changed over time. Since 1981, there have been three series of increases in the federal minimum

wage rate—1990-1991, 1996-1997, and 2007-2009. During that same period, there have been

numerous changes in state minimum wage policies. As a result of those interactions, the share of

the U.S. civilian labor force for which the federal minimum wage is the floor has fluctuated but

generally declined, and is about 39% as of the beginning of 2015.

 

Contents

Introduction ...................................................................................................................................... 1

FLSA Minimum Wage Coverage ..................................................................................................... 1

Enterprise Coverage .................................................................................................................. 2

Individual Coverage .................................................................................................................. 2

Minimum Wage Policies in the States ............................................................................................. 2

Rates and Mechanisms of Adjustment ............................................................................................. 3

Rates .......................................................................................................................................... 3

Mechanisms for Future Adjustments ......................................................................................... 5

Legislatively Scheduled Increases....................................................................................... 5

Indexing to Inflation ............................................................................................................ 5

Reference to the Federal Rate ............................................................................................. 6

Trends in State Minimum Wages ..................................................................................................... 7

 

Figures

Figure 1. State Minimum Wage Rates ............................................................................................. 4

Figure 2. The Share of the U.S. Labor Force Residing in States in Which the Federal Minimum Wage is Higher Than the State Minimum Wage .............. 9

 

Tables

Table 1. Summary of States with Enacted Minimum Wage Rates Above $7.25 ............................. 6

Table A-1. Selected State Minimum Wage Policies ....................................................................... 12

 

Appendixes

Appendix. Selected Characteristics of State Minimum Wage Policies .......................................... 11

 

Contacts

Author Contact Information........................................................................................................... 34

Acknowledgments ......................................................................................................................... 34

 

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