Minimum wage

The minimum wage is a legal floor on hourly pay. The federal minimum, established by the Fair Labor Standards Act of 1938, has been $7.25 an hour since 2009. Many states and cities set higher minimums, some above $15, and some index them to inflation. Special rules cover tipped workers, teens and certain occupations.

Economists have studied the effects extensively. Traditional theory predicts that a price floor above the market wage reduces employment, and some studies find job losses among low-skilled workers. Others, notably work by David Card and Alan Krueger on New Jersey and Pennsylvania fast-food restaurants in the 1990s, found little or no employment effect from moderate increases. A 2019 Congressional Budget Office analysis of a $15 federal minimum estimated raising pay for millions but eliminating some jobs, with a wide range.

Supporters, mostly Democrats, argue that increases raise incomes, reduce poverty and reflect inflation's erosion of the real value. Opponents, mostly Republicans, argue that it raises costs, may cost jobs or hours for the least skilled and that other tools, such as the earned income tax credit, target poverty better; some prefer state or local variation. It is a form of price controls with distinct politics. Compare labor market data in the unemployment rate.