What Is the Minimum Wage in the United States, and Is It Fair?

August 15, 2008

If you’ve recently asked the question, what is the minimum wage in the United States?" you might be surprised to learn it went up again — from $5.85/hour to $6.55/hour — on July 24. (Editor’s note: as of 2015, minimum wage is $7.25 an hour.) After all, the federal minimum wage was $5.15 for a decade, until last year, when legislation mandated three increases over three years. In 2009, the minimum wage will rise again, to $7.25. In calculating the yearly earnings of a minimum-wage earner at the current rate, it comes out to about $13,100/year (before taxes). That hardly seems like a reasonable income, even if you’re living in a very low cost-of-living area. It also invites a few questions: Should there be a minimum wage law? Is the current law fair?

In considering questions about what is the minimum wage in the United States and whether it’s fair, it helps to understand that many angles frame the debate on the issue. One angle examines just who is earning the minimum wage. As of 2007, minimum-wage workers:

Tend to be young; almost half are under 25.
Are often unmarried. Never-married workers are several times more likely to earn minimum wage than married workers.
Are more likely to be part-time workers than full-time.
Often work in the leisure and hospitality industry.
Are found in the biggest numbers in Louisiana, Massachusetts, Mississippi, South Carolina and Texas.

What is the Minimum Wage in the United States: A Look at Individual States and Cost of Living

It’s also important to consider what individual states are doing and the cost of living. Twenty-nine states and the District of Columbia have set minimum wages higher than the federal rate. Tim McCormack, franchising president of Job Source USA, a staffing firm based in Omaha, Neb., says it’s important to link the minimum wage to the cost of living–if workers aren’t paid enough to afford living expenses, they’ll be less apt to perform at their best.

“It’s a big state issue, that’s why you have states that have taken it on themselves to set the minimum wage. The worker benefits from that,” McCormack says.

Do You Know What You're Worth?

But when it comes to the feds, should there be a minimum wage law? McCormack says there should be. Without one, he says, “there would be unscrupulous business people who pay as little as possible, and the worker in that situation would never have a chance to get out of poverty. A floor is a good thing.”

That said, McCormack notes that Job Source pays its workers more than minimum wage. Though the recent increase to $6.55 is an improvement, he says, it hasn’t kept pace with rising costs of living.

Janet Attard, president and CEO of BusinessKnowHow.com, a New York-based company that provides resources to small and home-based businesses, says a minimum-wage hike can be problematic for some small businesses when it cuts into already-low profit margins. They may not be able to raise prices to compensate for the increase, she says, and when wages rise, so does the employer’s share of social security and other payroll taxes.

Attard has four employees, and she pays all of them more than minimum wage — even part-time help in the summer.

“(L)ooking at the minimum wage from the point of view of a full-time worker, I can’t see how anyone could live on the federal minimum wage,” Attard says. “I doubt there’s any part of the country where even a single person could have more than an impoverished life style making only minimum wage for 40 hours a week.”

Should There be a Minimum Wage Law?

WhereIStand.com, a Web site that tracks public opinions on a variety of issues, has been following the minimum wage. The site tracks sentiments of its members and public figures, such as politicians. As of Aug. 14, 118 opinions are listed on the minimum wage issue, with the biggest number — 54 — saying there shouldn’t be a federal minimum wage; 31 of those are public figures’ opinions, including those of Phil Gramm, John McCain, and Trent Lott.

Geoff Decker, a New York-based editor of the site, says he believes when it comes to the minimum wage, public opinion isn’t always obvious. For example, someone might initially take the position of their chosen political party, but after considering different sides of the issue, he or she might reconsider. “Their instinct might not be what they truly believe,” he says.

Readers, should the feds set a minimum wage law?

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