A Quick Guide To Minimum Wage

minimum wage guide by stateBy Beth Braccio Hering, Special to CareerBuilder

Everyone from news reporters to government officials tosses around the term "minimum wage," but how much do you actually know about it? Here is a breakdown of some key elements:

The jobs

On July 24, 2009, the current federal minimum wage of $7.25 per hour went into effect. This does not mean that every job in the nation has to pay at least this amount, only those covered by the minimum wage law. The law applies to:

  • Employees of enterprises that have annual gross volume of sales or business done of at least $500,000.

  • Employees of smaller firms if the employees are engaged in interstate commerce or in the production of goods for commerce, such as employees who work in transportation or communications or who regularly use the mail or telephones for interstate communications.

  • Guards, janitors and maintenance employees who perform duties that are closely related and directly essential to such interstate activities.

  • Employees of federal, state or local government agencies, hospitals and schools.

  • Most domestic workers.

Even when an employee is covered by the minimum wage law, certain exceptions may allow an employer to pay less. Such cases may involve:

  • Workers with disabilities.
  • Full-time students.
  • People under age 20 in their first 90 consecutive calendar days of employment.
  • Tipped employees.
  • Student-learners, such as participants in vocational education.

The states

Businesses unaffected by the federal minimum wage law are still often subject to state laws regarding pay. As the following list shows, many states choose to keep their minimum hourly wage the same as the federal amount. (In cases where a job falls under both federal and state minimum wage laws, employees receive the higher of the two rates.)

Minimum wage by state, from lowest to highest (according to the Labor Department):

Why the differences? "That particular state may believe [a higher minimum wage] is in the best interest of its citizens -- increasing their incomes and standard of living, and, of course, their ability to pay higher or more state taxes," explains Martin J. Saunders, an attorney in the Canonsburg, Pa., office of Steptoe & Johnson PLLC. "Other states believe that the federal law sets a high enough minimum wage that subjects of this nature should be uniform throughout all the states and that a higher minimum than required by federal law will make both that state and its residents less competitive with other states as it increases the cost of employers to do business in that state. State minimum wages lower than the federal may be the result of a conscious decision . . . or simply a failure to amend the state law to increase its minimum wage when the federal government increased the federal minimum wage."

The issue

According to the Bureau of Labor Statistics, 4.4 million American workers earned wages at or below $7.25 per hour in 2010. The percentage of workers earning the minimum wage did not vary much across the major race and ethnicity groups or by gender. About 6 percent of white hourly-paid workers earned the federal minimum wage or less, compared with about 7 percent of blacks, 5 percent of Asians and 6 percent of Hispanics. Likewise, about 7 percent of hourly-paid women and 5 percent of hourly-paid men had wages at or below minimum.

A federal minimum wage was created as part of the Fair Labor Standards Act of 1938. The rate has gone up through the years, but it does not increase automatically. In order for it to go up, Congress must pass a bill and the president must sign it into law. States have their own policies for determining minimum wage. Ten states have minimum wages that are linked to a consumer price index, so the figure generally changes each year.

Today, people still debate what should be considered an acceptable hourly wage, how changes to it might affect businesses and how much the government should be involved in the issue. Notes Saunders, "As with all legislation, what ultimately is enacted into law is the result of lobbying and compromise."

Beth Braccio Hering researches and writes about job search strategy, career management, hiring trends and workplace issues for CareerBuilder. Follow @CareerBuilder on Twitter.

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