About the Minimum Wage
Updated July 2011
The federal government and State of Minnesota both have minimum wage laws. The federal government raised the minimum wage to $7.25 an hour effective July 24, 2009. It is higher than the state minimum wage and applies to most Minnesota workers. The state law applies to workers who are not covered by the federal law. That includes a $5.25 an hour minimum wage for some small business employees and a short-term $4.90 an hour training wage.
Impact of the Federal Minimum Wage Increase
The 2009 federal minimum wage increase helped nearly 4.5 million workers nationally, according to the Economic Policy Institute. More than 2.8 million got an immediate raise and 1.6 million were helped indirectly, because of the general upward pressure on wages. More than three-fourths of the people who benefited from the federal minimum wage increase were 20 or older. Nearly half of those who benefited (47 percent) were working full-time. Single parents disproportionately benefited. In all, the measure generated $1.6 billion annually in increased wages.
Minimum wage jobs are a critical source of income for many families, yet the federal minimum wage has less buying power today than it did in the past. When adjusted for inflation, the new federal minimum wage still has a lower value than during most of the period from 1961 to 1981. The minimum wage's purchasing power peaked in 1968; to match that buying power today, the 2011 minimum wage would need to be $10.39 an hour, or $3.14 an hour more than the current rate. The federal minimum wage remained flat from 1997 to 2006. The federal government began phasing in increases in 2007.
Federal Minimum Wage Law
Employers covered by the federal minimum wage law include:
- Businesses that exceed $500,000 in annual business volume.
- Businesses involved in interstate commerce, either handling or producing goods.
- Hospitals and nursing homes, private and public schools, and federal, state and local government agencies.
When an employee is subject to both federal and state minimum wage laws, the employee gets the higher of the two wages. Because Minnesota sets a lower minimum wage standard, most often the federal law applies.
Minnesota's Minimum Wage Law
Minnesota is one of five states that have minimum wages lower than the federal minimum wage, according to the U.S. Department of Labor. Twenty-six states set their minimum wage at the same rate as the federal standard, 14 states have minimum wages higher than the federal standard, and five states have no minimum wage law at all. There are two cases where Minnesota's minimum wage law applies. They are:
- $5.25 an hour for people who work for small employers (those with annual gross sales under $500,000), and then only if the company is not engaged in interstate commerce.
- $4.90 an hour for a training wage, which can apply to new employees who are younger than 20 during their first 90 days of employment. (Permanent or current employees may not be displaced by new employees covered by the training wage.)
Minnesota's minimum wage law covers full-time and part-time employees, whether they are hourly, salaried, commissioned or work on piece rate. Tipped employees also are covered. Employees exempt from the Minnesota's minimum wage law include: babysitters, taxicab drivers, elected officials, volunteers for nonprofit organizations, people providing police or fire protection and employees subject to the provisions of the U.S. Department of Transportation (drivers, drivers' helpers, mechanics and loaders).
Additional Resources
- RaiseTheMinimumWage.org, a project of the National Employment Law Project, tracks state and federal minimum wage campaigns, and provides research, analysis, polling data, news clips and fact sheets.
- U.S. Department of Labor, Minimum Wage Laws in the States - Map of United States showing how individual states compare to the federal minimum wage standard.
- U.S. Department of Labor, Fact Sheet #14: Coverage Under the Fair Labor Standards Act (FLSA) - One-page summary explaining who is covered by the federal minimum wage law.
- Minnesota Department of Labor and Industry, State Minimum Wage Laws - One-page summary of Minnesota's minimum wage laws.
- Minnesota's Minimum Wage Statute
- Economic Policy Institute, Fact Sheet for the 2009 Minimum Wage Increase - Includes state-by-state information on the impact of the federal minimum wage increase and analysis of how minimum wage benefits workers.
- Bureau of Labor Statistics, Characteristics of Minimum Wage Workers: 2009.
