The United States minimum wage has been a topic of debate for decades. As the government continues to seek a way to reduce poverty and provide a living wage for the people of America, the new minimum wage limits for 2023 are set to be announced on January 1st
Although most people have opinions regarding minimum wage increases, many are unaware of how minimum wage is set in their state.
Fair Labor Standards Act and Minimum Wage Rates
In 1938, Franklin D. Roosevelt’s New Deal legislation created the Fair Labor Standards Act (FLSA) to set rules governing employee compensation, among other things. Basically, the FLSA governs overtime pay, child labor, and record-keeping. It also sets the federal minimum wage. This was established to create a minimum standard rate of pay for the majority of the workforce.
Over the years, the FLSA has been periodically amended to increase the minimum wage and extend coverage to more workers.
FLSA and Minimum Wage Basics
In the United States, the minimum wage is determined by individual states. Minimum wage rates vary from state to state, with some areas having a higher minimum wage than others. This is primarily to account for the cost of living discrepancies between different locations.
The federal minimum wage is $7.25 per hour and is set to increase annually with inflation. The federal law does not require states to increase their own minimum wages but most have done so to keep up with the cost of living and adequately provide for their residents.
Federal law also does not require employers to pay employees on commission or tips on top of their salary if they earn more than $30 per month in tips or commissions. Many employers, however, choose to do so voluntarily. This is done as an additional way of compensating employees who are providing good customer service or quality workmanship.
What’s New for 2023 State Minimum Wage Rates?
The minimum wage in the United States has been a topic of contention for years. This is unlikely to change. Regardless of personal opinions, however, employers are required to adhere to the regulated standards.
The federal minimum wage is $7.25 per hour, but many states have their own minimum wage rates. As of January 1, 2023, there are 18 states with higher minimum wages than the federal rate.
These include the following states that have announced new wage rates to begin in 2023:
- New Jersey
- New Mexico
- New York
- Rhode Island
- South Dakota
In situations where both the federal and state minimum wage rates apply, employers are required to pay the higher rate. Therefore, as of January 1, 2023, there will be a higher minimum wage in every state in the country.