Minimum wage is the lowest amount that an employer has to pay an employee and is stipulated on an hourly basis. Minimum wages are set through government legislation in the United States (U.S.), so that employers do not manipulate the workers and it assists the maintenance of a balance in the society. Jerold Waltman, in his book, "Minimum Wage Policy In Great Britain and The United States" writes, "Minimum wage in U.S. is intimately tied to social welfare." The federal minimum wage in the U.S. is established by and regulated under the Fair Labor Standards Act (FLSA) of 1938.

Standard Minimum Wage

The standard minimum wage according to FLSA is $7.25 per hour from 2009. According to the FLSA, every state is not required not have the same minimum wage as the economic and social demographics between states vary. The minimum wage for a state is set depending on multiple factors including the number of students, young workers, workers who earn tips and overtime pay. If the state minimum wage varies compared to the federal wage, the higher one is applicable. David Neumark and William Wascher, in their book, "Minimum Wages," state, "the federal minimum wage has now been in effect for seventy years and state minimum wage laws have been around in some form or another for nearly a century."


Everyone in the U.S. is not eligible to receive the minimum wage. The minimum wage applies to employees of enterprises that have a revenue of $500,000 in any given year. Employees of smaller firms are eligible for a minimum wage if they are engaged in interstate commerce or in the production of goods for commerce. In addition, the minimum wage also applies to employees of federal, state or local government agencies, hospitals and schools. Under FLSA the executive, administrative and outside sales employees are not eligible for the minimum wage and overtime pay. They are compensated "on a salary basis," depending on their contract.

No Gender Discrimination and Domestic Services

According to FLSA there should be no sex discrimination and the employer should pay individuals the same wage when the employees are working for similar hours, have equivalent skills and undertake similar responsibility. Employees performing domestic services should also be paid equally and not less than the minimum wage.

Employees Less Than Twenty Years Old

Mary Gregory, Wiemer Salverda and Stephen Bazen, in their book, “Labour Market Inequalities: Problems and Policies Of Low-Wage Employment In International Perspective” write, “A ten percent increase in the minimum wage reduces the employment of teenagers between one and three percent below what it would otherwise have been.” Employees less than twenty years of age cannot be paid less than $4.25 an hour during the first 90 consecutive calendar days. No employer can take any action to displace employees including partial displacements such as reduction in hours, wages or employment benefits.