Practice Areas

Evaluating and Comparing Minimum Wage Laws

November 2010

By: Nancy E. Joerg, Esq.

The minimum wage is the lowest rate at which a worker can legally be paid. In the United States, as opposed to many other countries, the minimum wage is pegged to an hourly wage.

A federal minimum wage was first set in 1938. The federal minimum wage has ranged from only $0.25 per hour in 1938 to the current federal minimum wage of $7.25 per hour (which became effective July 2009).

There are special regulations, laws and processes affecting the minimum wage from state to state and sometimes even from city to city within a state. Example: In Iowa, most small retail and service establishments grossing less than $300,000 annually are not required to pay the state minimum wage.

Where federal and state minimum wage rates differ, the higher rate applies. Several states such as California, Illinois, and Ohio have minimum wage rates higher than the federal. Other states such as Wisconsin, Iowa, and Indiana have minimum wage rates the same as the federal minimum wage rate.

Four states have no minimum wage law at all - Alabama, Louisiana; South Carolina, and Tennessee.

Two states - Mississippi and Oklahoma - have no minimum wage law but have adopted the Federal Minimum Wage.

Several states have minimum wage rates lower than the federal minimum wage, Minnesota for example.

Minimum wage rates vary between states:

  • Illinois: $8.25 per hour
  • Indiana: $7.25 per hour
  • Iowa: $7.25 per hour
  • Michigan: $7.40 per hour
  • Minnesota: $6.15 per hour for what is called a large employer (an enterprise with annual receipts of $625,000 or more) and $5.25 per hour for a small employer (an enterprise with annual receipts of less than $625,000).
  • Wisconsin: $7.25 per hour.
  • The State of Washington currently has the highest minimum wage rate at $8.55 per hour.

Application of the Minimum Wage: Not only does the basic minimum wage rate vary from state to state, but so does application of minimum wage. For example, in Illinois, the basic minimum wage rate of $8.25 per hour is applicable to employers of 4 or more employees excluding family members. In Indiana, the basic minimum wage rate of $7.25 per hour is applicable to employers of two or more employees. In Iowa, the minimum wage rate is automatically replaced with the federal minimum wage rate if the federal minimum wage is higher than the state minimum.

Exemptions for Certain Occupations and Industries: Each state has its own laws which determine whether the state's minimum wage rate applies to a particular occupation or industry. Like the federal wage and hour law, state law often exempts particular occupations or industries from the minimum labor standard generally applied to other employment.

State Legislatures Determine How They Will Handle Minimum Wage: How a state sets its minimum wage rates is controlled by the legislative activity within that particular state. There are ten states that have minimum wage rates that are linked to a consumer price index. As a result of this linkage, the minimum wages in these states are normally increased each year, generally around January 1 st.

Questions or concerns? Call Attorney Nancy E. Joerg of Wessels Sherman's St. Charles, Illinois office: 630-377-1554 or any other Wessels Sherman attorney.