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US Minimum Wage Basics: Federal, State, and Tipped Rates

Minimum wage sounds like it should be one simple number, but in practice it is a patchwork of federal, state, city, and job-specific rules layered on top of each other.

The federal minimum wage is a floor, not a fixed national rate

The federal minimum wage has been $7.25 per hour since July 24, 2009, the longest period without an increase since the law was first passed in 1938. It is only a floor: according to the US Department of Labor's state table, 30 states plus the District of Columbia set a basic minimum above $7.25, and the rest follow the federal figure.

Employers must pay whichever applicable rate is highest

When federal, state, and city minimum wages differ for the same job, the employer generally must pay the highest rate that applies to that specific location, not simply the federal minimum.

A separate, lower cash wage applies to many tipped workers

Federal law allows employers to pay a direct cash wage as low as $2.13 per hour to workers who regularly receive tips. The employer may count up to $5.12 per hour of tips as a tip credit toward the $7.25 minimum, and it must make up the difference if cash wages plus tips fall short. The employer also has to tell the employee about the tip credit beforehand.

Some states do not allow a tip credit at all

A number of states require tipped employees to be paid the full state minimum wage in cash before tips are even factored in, eliminating the federal tip-credit approach entirely within that state.

A lower youth minimum wage exists for some new young workers

Federal law permits employers to pay employees under 20 years old a reduced "youth minimum wage" for their first 90 consecutive calendar days of employment, after which the standard minimum wage applies.

Several other narrow exemptions exist

Certain categories β€” including some student workers under specific certificate programs, some small-scale agricultural work, and a legacy subminimum wage program for some workers with disabilities β€” are subject to different federal minimum wage rules than the general workforce.

The federal rate does not adjust automatically for inflation

Unlike a number of states that index their minimum wage to inflation and raise it automatically each year, the federal minimum wage only changes when Congress passes new legislation, which is why it can stay flat for many years at a time.

Minimum wage and overtime pay are related but distinct rules

The same federal law that sets the minimum wage, the Fair Labor Standards Act, also sets overtime pay requirements β€” but a worker's eligibility for overtime depends on separate criteria around job duties and salary level, not simply on their hourly rate.

State and city minimums range widely

As of the Department of Labor's listing in 2026, Washington State had the highest state rate at $17.13, followed by New York ($17.00 in New York City, Nassau, Suffolk and Westchester counties, $16.00 elsewhere), Connecticut ($16.94) and California ($16.90). The District of Columbia is reported to have moved from $17.95 to $18.40 on July 1, 2026. Several cities, including some in California and Washington, set rates above their state minimum, and many states raise their rate every January or July, so a figure you saw last year may be out of date.

What a minimum wage means over a year

At $7.25 an hour and a 40-hour week for 52 weeks, gross pay comes to $15,080 a year before any taxes. At $17 an hour the same schedule yields $35,360. This simple multiplication is a useful way to compare job offers, but it ignores unpaid time, unpaid breaks, and schedules that fall short of 40 hours, which is how many hourly workers actually earn.

States handle the tip credit in three broad ways

Some states follow the federal $2.13 cash wage. Some set a higher cash wage with a smaller tip credit. A number of states allow no tip credit at all, so tipped workers earn the full state minimum before tips. Because of this, the same server or bartender job can have a very different guaranteed base pay across a state line.

Wage rules also cover how and when you must be paid

The minimum wage applies to all hours worked, including required pre-shift meetings, mandatory training and time spent on tasks the employer expects. Employers cannot pay below the minimum by calling the pay a commission or a flat fee if the hourly result is lower, and illegal deductions that push net hourly pay below the minimum for uniforms or tools can violate the law in many circumstances.

Where to confirm your own rate

The Department of Labor publishes a table of state minimum wage laws, and each state's labor department posts its current rate and any local rates. Posters displayed at the workplace should list the rate that applies. If your pay seems lower than the posted rate, a first step is a written request to payroll, and a complaint to the state labor agency or the federal Wage and Hour Division is the usual next step.

Why the federal number lags behind so many local ones

Because raising the federal minimum wage requires an act of Congress, while many states and cities can adjust their own minimums through their own legislatures or automatic inflation indexing, a large and growing number of workers today are actually covered by a state or city minimum well above the federal $7.25 floor.

The patchwork nature of tipped wages

Tip credit rules vary so much by state β€” from the federal minimum cash wage of $2.13 to states requiring the full minimum wage in cash regardless of tips β€” that the same tipped job can have a very different guaranteed base pay depending purely on which state it is located in.

Who is and is not covered

The Fair Labor Standards Act covers most private employers above certain revenue thresholds and nearly all government employers, and state laws often extend minimum wage protection to workers the federal law misses, such as employees of very small businesses. Some exemptions depend on the job: certain seasonal amusement workers, some farm workers on small farms, and some outside salespeople may fall outside the federal minimum. Because exemptions turn on specific facts, a job title alone does not settle the question.

Common situations where people are underpaid

Typical problems include working off the clock before a shift, tip credit being applied without the required notice, deductions for breakage or cash shortages that bring pay under the minimum, and being paid a flat day rate that works out to less than the hourly minimum once all hours are counted. Keeping your own record of hours, even in a phone note, is useful if you ever need to raise a question with an employer or an agency. This is general information, not legal advice; a state labor agency or a legal aid office can look at your specific facts.

Frequently Asked Questions

What is the current federal minimum wage?

The federal minimum wage has been $7.25 per hour since July 24, 2009, though many states and cities set their own higher minimum wage that employers in those areas must follow instead.

Can a tipped employee really be paid $2.13 an hour?

Under federal law, yes, as a direct cash wage β€” but the employer must ensure the employee's cash wage plus tips reaches at least the full minimum wage, and must make up any shortfall; some states do not allow this tip credit at all and require the full minimum wage in cash.

Does minimum wage go up automatically with inflation?

Not at the federal level β€” the federal minimum wage only changes through new legislation. A number of states, however, do index their own minimum wage to inflation and adjust it automatically each year.

Is everyone entitled to at least minimum wage?

Nearly everyone, but not universally β€” narrow federal exemptions exist for some categories like certain student workers, some agricultural workers, and a small legacy subminimum wage program for some workers with disabilities.

If my state minimum is higher than the federal one, which do I get?

You are entitled to the higher rate. If a city or county sets a rate above the state figure, the local rate applies inside that city. Employers are expected to pay the highest rate that covers the work location.

Does the youth minimum wage mean teenagers can be paid $4.25 forever?

No. Federal law allows a rate of $4.25 per hour only for employees under 20 during their first 90 consecutive calendar days with an employer, and it cannot be used to displace other workers. After 90 days or at age 20, the regular minimum applies, and many states do not allow the lower youth rate at all.