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The 2000s in America

Minimum wage increase

by Angela Harmon

Definition: The lowest rate at which employers must legally pay their workers

The federal minimum wage rate in the United States was stagnant for ten years, from 1997 to 2007, at $5.15 per hour. A series of amendments enacted in 2007 raised the minimum wage rate over the next two years, bringing it to $7.25 per hour.

US president Franklin Delano Roosevelt signed the Fair Labor Standards Act of 1938, which guaranteed a federal minimum wage of twenty-five cents per hour to workers. He enacted this law to reduce the number of Americans living in poverty and to increase spending during the Great Depression. Some states set their own minimum wage rates, which are higher than the federal rate. Others pay workers the federal minimum wage. Regardless, all states must pay their workers the higher of either the state minimum wage or the federal minimum wage. They cannot pay workers less than these rates.

Through the years, amendments have raised federal minimum wage rates. In 1997, the federal minimum wage was set at $5.15 per hour. This rate remained unchanged for the next decade. After a heated debate between the Democratic Congress and President George W. Bush and the Republican Senate, the Fair Minimum Wage Act of 2007 was passed. Under the amendment, the minimum wage rate was increased to $5.85 per hour, effective July 24, 2007. The rate was increased to $6.55 per hour on July 24, 2008, and to $7.25 per hour on July 24, 2009.

The federal minimum wage rate for tipped workers is much lower than it is for nontipped workers. The minimum wage law allows employers to pay tipped workers a reduced minimum wage of $2.13 per hour because these types of workers typically make up the difference in tips. Sometimes, they can make slightly—and, in some cases, drastically—more than the minimum wage once tips are included. Such workers include restaurant servers, bartenders, valets, and hair stylists. Some states, however, require that tipped workers receive higher wages. The states of Alaska, California, Minnesota, Montana, Nevada, Oregon, and Washington require businesses to pay tipped workers the full federal minimum wage in addition to tips. Other states allow employers to pay the reduced minimum, which remained unchanged from the rate of $2.13 set in 1991.

Impact

Raising the minimum wage rate is thought to stimulate the economy because it can increase spending without increasing taxes. It increases the amount of money a person makes, which in turn increases the amount of money a person may be able to spend. The Federal Reserve Bank of Chicago reported in 2007 that a worker would spend about $3,000 for every $1 increase to the minimum wage rate.

Further Reading

1 

“History of Changes to the Minimum Wage Law.” Wage and Hour Division. United States Department of Labor, n.d. Web. 10 Dec. 2012.

2 

“Minimum Wage Question and Answer.” Raise the Minimum Wage. National Employment Law Project, n.d. Web. 10 Dec. 2012.

3 

Rampell, Catherine. “Who Is Affected by a Higher Minimum Wage?” Economix. New York Times, 24 July 2009. Web. 10 Dec. 2012.

Citation Types

Type
Format
MLA 9th
Harmon, Angela. "Minimum Wage Increase." The 2000s in America, edited by Craig Belanger, Salem Press, 2013. Salem Online, online.salempress.com/articleDetails.do?articleName=2000_0252.
APA 7th
Harmon, A. (2013). Minimum wage increase. In C. Belanger (Ed.), The 2000s in America. Salem Press.
CMOS 17th
Harmon, Angela. "Minimum Wage Increase." Edited by Craig Belanger. The 2000s in America. Hackensack: Salem Press, 2013. Accessed September 18, 2025. online.salempress.com.