Minimum wage in the United States? What you need to know

TransferWise
07.23.18
7 minute read

Many people want to live and work abroad. Maybe you’re thinking of a working gap year, or you want to settle permanently in a new place to give your career a boost. To make sure your move is successful, it’s important to understand the likely wage you can earn - and of course the cost of living wherever you’re headed.

Salaries vary hugely in the United States, with minimum wages for most workers set on a federal and state level. That means that the minimum wage in a state can be higher than the amount agreed at a federal level, but in effect, it can not be below this threshold. Knowing the minimum wage for the state you intend to move to can help you figure out the balance between wages and costs of living in the area that interests you.

This guide tells you all you need to know about the minimum wage levels allowed by law in the United States, how they compare to the costs of living in the US, and minimum wages elsewhere in the world.

What’s the minimum wage in the United States?

The federal minimum wage is $7.25 an hour.

However, the minimum wage in the US is set at both a state and federal level. Where there's a conflict, the stricter standard - that is the one that’s better for the employee - applies. That means that the federal minimum is effectively the lowest wage payable anywhere in America - but in specific states that minimum might be a lot higher. There are also variations in the other aspects of minimum wage law in different states, for example, which employees are eligible, or how young people and student learners are dealt with under the rules. Make sure you know all the details for your state.

At present, 29 states and the District of Columbia, have a minimum wage which is higher than the federal minimum. 14 states have a minimum wage which is set at the same level as the federal minimum wage. There are then 2 states with a minimum wage lower than the federal minimum, and another 5 with no minimum at all. Effectively, in these 7 states, federal law takes precedence, so the federal minimum wage level is used.

There are a number of exceptions made to the federal rules, which mean that not everybody is entitled to the minimum wage. So for example, if you’re working for a family member, if you’re aged under 20, if you work in a job where you're paid tips, or if you’re a student, different rules might apply. Make sure you understand all the small print related to your particular circumstance.

Who determines minimum wages? When was the last increase?

The federal minimum is set by the US Government. However, states can also set their own minimums. Here’s a state by state breakdown.

States where there's no minimum wage:

  • Alabama
  • Louisiana
  • Mississippi
  • South Carolina
  • Tennessee

Here, because there's no minimum wage set at state level, the federal minimum is applied.

States where the minimum wage is lower than the federal minimum:

  • Georgia - $5.15
  • Wyoming - $5.15

Here, because the state level is below the legal limit set by federal law, the federal legal minimum is used.

States where the federal minimum wage applies:

  • Iowa
  • Idaho
  • Indiana
  • Kansas
  • Kentucky
  • North Carolina
  • North Dakota
  • New Hampshire
  • Oklahoma
  • Pennsylvania
  • Texas
  • Utah
  • Virginia
  • Wisconsin

States where the minimum wage is greater than the federal minimum:

  • Alaska - $9.80
  • Arkansas - $8.50
  • Arizona - $10.00
  • California - $10.50
  • Colorado - $9.30
  • Connecticut - $10.10
  • District of Columbia - $12.50
  • Delaware - $8.25
  • Florida - $8.10
  • Hawaii - $9.25
  • Illinois - $8.25
  • Massachusetts - $11.00
  • Maryland - $9.25
  • Maine - $9.00
  • Michigan - $8.90
  • Minnesota - $9.50
  • Missouri - $7.70
  • Montana - $8.15
  • Nebraska - $9.00
  • New Jersey - $8.44
  • New Mexico - $7.50
  • New York - $9.70
  • Nevada - $8.25
  • Ohio - $8.15
  • Oregon - $10.25
  • Rhode Island - $9.60
  • South Dakota - $8.65
  • Vermont - $10.00
  • Washington - $11.00
  • West Virginia - $8.75

12 states set their minimum wages by looking at a consumer price index, so wages can be linked to the cost of living. This means that these state minimums usually rise every year around January.

However, in the states where the federal minimum is applied, there may not be any change on an annual basis. The federal minimum wage of $7.25 an hour has been in place since 2009. For it to rise, a bill recommending this has to be passed by congress and signed by the President.

Does the minimum wage differ by age in the United States?

Each state can apply their own laws, so it’s worth checking the specific details if you're looking at a state which doesn’t apply federal minimum wage levels.

When it comes to the federal rules, young workers aged under 20 can be paid only $4.25 an hour for the first 90 days they’re in employment. If they hit the age of 20, or else, after their first 90 days of work, they should be paid the federal minimum wage of $7.25.

Is there a different minimum wage for apprenticeships or internships?

There’s a provision in federal law which allows employers to pay 75% of the minimum wage, for employees who are student learners. That applies to people taking vocational education courses, known as shop courses. For this to apply, the employee must be at least 16, and the employer must have a certificate confirming that they’re a student learner.

What’s the living wage in the United States? How much can you really get by on?

When you’re working out the practicalities of living in the US, it’s important to take into consideration the cost of living in the United States. The price of rent, and regular daily costs can vary hugely depending on location. Often you’ll find that the places with the best salaries on offer also come with the highest cost of living.

World renowned university MIT has a living wage calculator, which lets you compare the cost of living, minimum wage, and typical average wages by state. This is a handy way to figure out how you can balance the cost of day to day living expenses with the salaries on offer in your chosen location.

Living between countries or thinking of making a move? TransferWise could help you save when you send money abroad.

Wherever in the US you’re headed to, there are some practical steps to make sure your money goes further. One challenge faced by many expats and frequent travellers, is the cost of converting your cash to different currencies when you’re abroad.

This can hit you in the pocket in a couple of different ways. Firstly, the fees and charges applied to your conversion can quickly mount up. And secondly, if your bank or exchange service offers you a poor exchange rate, you’ll be left with less than you expect. If your bank or exchange service says that they offer currency exchange with low, or no fees, be wary. They still have to make a profit, so instead of listing a transparent fee, they mark up the exchange rate and take the difference as their profit.

If you want to check if your bank is giving you a good rate, use an online currency converter to compare the difference between the real exchange rate, and the one they’re offering you.

If it doesn’t look like a good deal, you may find you can get more for your money with TransferWise. TransferWise uses the real exchange rate - the one you’ll find on Google - and applies only a low, upfront fee for transfers. This is possible because while most money transfer services have high charges for international transfers using the SWIFT system, TransferWise does things differently than banks. By avoiding the costs of using SWIFT, TransferWise can pass on the savings to customers. That means that you get a fast, safe transfer, using the best exchange rate on offer - and no nasty surprises.

What to make your money even more flexible? Try a borderless multi-currency account from TransferWise

If you live and work abroad, or just travel a lot and need to move your money between different currencies frequently, a borderless multi-currency account could save you money, and make your life much easier.

This new type of account is perfect for freelance and remote workers, too. If you live in one country but work in another, you can get paid like a local in the UK, the US, the EU or Australia. By using the local bank details which come with your TransferWise account, you won’t have to pay expensive international fees when you’re paid from abroad.

You can hold your money in dozens of different currencies, and check your balance across them all at a glance. Whenever you want to switch between them, you can move your cash between currencies easily, and with a low fixed fee. Send and receive cash, make direct payments, and from early 2018, you’ll be able to get a consumer debit card attached to your account, too.

Compared to other countries, is the minimum wage in the United States good?

So how does the US minimum wage level compare to the minimum set in other countries across the world?

CountryUSAUKGermanyFranceSpainAustralia
Minimum RateVaries by state - from about $7.25 to $12.50$9.94$10.41$11.49$5.67$13.81

Not all countries have a minimum wage set in law. Some prefer their minimum wages to be set by collective agreements, made by trade unions and employers. This means that there could be different minimum wages depending on the sector - although in many cases these minimums are then covered and enforced by law. Belgium, Norway and Sweden work in this way, for example.

Other countries apply their own rules on minimum wages. For example, Singapore has minimum wages set by the government, but only across some low income sectors, and applicable to Singapore nationals and permanent residents only. In other countries, there's no minimum wage at all, leaving employers and employees to negotiate wage levels on an individual basis.

Any international move is a big deal. If you’re considering moving to the US for a while to work, it’s a good idea to do your research in advance and understand what sort of lifestyle you can afford there. Life in some places in America is quite expensive, although jobs in these areas also tend to attract higher salaries. Wherever you live, if you cut out unnecessary - and unfair - costs, such as excessive fees for your day to day banking, you can make the most of your money. Then you’ll have more in your pocket to enjoy all the United States has to offer.


Screen shots of citations:

Minimum wage rises, student learners (FED)

Above - fed minimums historic data, below: california, for some examples of how state rules might vary compared to the fed laws

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