What Is Minimum Wage?

Minimum wage on the surface seems like a simple concept: You clock in, clock out and get the lowest pay rate per your state law. But what about accounting for inflation? And what if you start to take an interest in your job and want a raise? Several companies, states and workers have taken note of these questions — and are implementing change. 

By Helen Harris

I worked a minimum-wage job the summer before my junior year of high school and was paid $7.25 an hour. With each paycheck, I always felt I had a decent chunk to save for the upcoming school year and anything else I might want or need to purchase. Keep in mind I was 16, gas prices were lower, I lived with my parents and was not responsible for any bills.   

But individuals, and families, live off this salary. 

To explore this fact a bit further, the U.S. Bureau of Labor and Statistics reports that in 2020, 73.3 million workers aged 16 and older in the United States were paid at hourly rates (55.5% of all wage and salary workers). Of those paid by the hour, 247,000 workers earned exactly the prevailing federal minimum wage — $7.25 per hour. That equates to roughly $15,000 annually. 

The source further reports that about 865,000 hourly workers had wages below the federal minimum.

Demisha Jennings, The Salary Amplifier, resume writer and diversity, equity and inclusion (DEI) expert, lends her knowledge on the topic of minimum wage. 

“As a high school student — and even my first job out of high school — I was making $9 an hour, and I felt on top of the world,” said Jennings. “That was a lot of money to me then. But if someone is still paying on the low side of minimum wage in 2022, we have a big problem. Because we know the facts. We see the reports. It's not feasible to live off that.” 

Understanding Minimum Wage 

To understand why Jennings says it’s not practical to live off of certain minimum wage rates today, you must understand what minimum wage is at the core. 

“In the abstract form, minimum wage means an employer is looking for an instrument for work to get some kind of task or tasks done — and the tasks are simple, easily learned and relatively straightforward,” said Dave Wolovsky, career development coach. Therefore, these roles often pay as little as possible, which is minimum wage.”

The technical definition of minimum wage per Merriam Webster is “the lowest wage paid or permitted to be paid. …. Specifically, a wage fixed by legal authority or by contract as the least that may be paid either to employed persons generally or to a particular category of employed persons.” 

You may be familiar with minimum wage in your state and its surrounding states, but consider the following information from the U.S. Department of Labor: 

• States have the option to exceed the federal minimum wage ($7.25).
• States can choose to stick to that federal rate.
• States can go below that federal rate. (However, if this is the case, employers in those states must adhere to the Fair Labor Standards Act and pay the current Federal minimum wage of $7.25 per hour). 
• States with no minimum wage rate must pay the federal rate. 
• Of the 29 states and territories that exceed the federal minimum wage of $7.25, Washington D.C. ($15.20), California ($14.00), Washington ($14.49), Massachusetts ($14.25) and New York ($13.20; $15.00 for Long Island, Westchester, & NYC) top the list. 
• The two states that have the lowest minimum wage are Georgia and Wyoming, both paying $5.15 per hour. However, employers in these states must abide by the Fair Labor Standards Act and pay the federal minimum of $7.25.   

It’s a positive indication that more than half of U.S. states have taken the initiative to increase minimum wage, as Forbes recently reported that inflation is at a 40-year high. No doubt, people are struggling through this economy. Most notably, those who make minimum wage. 

The Current State of Minimum Wage 

As Jennings alluded to the statistics and reports that the “old” minimum wage salary just isn’t realistic anymore, here is why: Living today is more expensive than ever. Consider the price increases for the following everyday items, as reported in May 2022 by the U.S. Bureau of Labor Statistics: 

• Meats, poultry, fish and eggs: 14.2% 
• Fruits and vegetables: 11.8% 
• Electricity: 12% 
• Gas: 30.2%
• Cleaning products: 9.9%
• Rent for primary residences: 5.2% 

“People cannot pay their rent making $7.25 an hour,” said Jennings. “It does not equate to a monthly rent payment. And if it does, that's all you have. That take-home check can't buy food. You can't buy gas — especially in the places where prices are $7 a gallon.”

To put things into perspective, an employee making $7.25 takes home a biweekly paycheck of $580. If the rate increases slightly to $9.87, that brings the biweekly check up to $790. The numbers continue to trend up or down slightly depending on whichever state you’re in. But compare those numbers with the most recent national median rent of $1,827 a month, up 16.7% from 2021, according to a report from Realtor.com. 

The pandemic-induced job losses hit low-wage workers the hardest and this segment of workers have been the slowest to return, despite job demand. As The Brookings Institution reports, the unsettled labor market and disgruntled employees tired of low wages and their previous work conditions have played a role in the labor shortage. 

The source additionally mentions that even before the pandemic, a great deal of the low-wage workforce was teetering on the poverty line, earning roughly $10.40 per hour. About two in five low-wage workers lived below 200% of the poverty line and one in four low-wage workers were receiving safety-net benefits such as food assistance or Medicaid.

This prompts Jennings to further her call for a change in the companies that have not adopted a higher minimum-wage pay. Doing so could help with the rampant cycle of employee burnout and worker shortages. 

“It's a broken cycle that we really need to pay closer attention to,” said Jennings. “If there's a worker shortage and you’re looking for top talent and having a hard time finding people — maybe you need to increase the pay to create a more sustainable business.” 

Despite the current challenges of insurmountable inflation, Jennings offers hope for minimum wage employees who may be struggling. She mentions top players in the food industry, such as Chipotle and Chick-Fil-A, who have increased the minimum-wage pay for employees. According to Payscale, Chick-Fil-A Inc. pays its employees an average of $11.99 an hour, and the salaries range anywhere from $8.48 to $18.72 an hour depending on state. Chipotle is slightly ahead, paying its employees an average of $12.13 an hour, with the hourly pay ranging anywhere from $9.37 to $16.73 an hour.  

Aspiring for More Than Minimum Wage 

“If you are in a position where you are making minimum wage and you're struggling to make ends meet, you need to start making a 30- to 60- day exit plan right now,” said Jennings. “If you are falling behind on bills, I recommend you get a second part-time job if you are able. Start researching places that are paying a little bit more. That exit plan is going to be the key to getting out and getting more money.” 

Jennings also recommends looking into remote roles, such as working for an airline call center, working in customer service — something that might not require years of experience and allows you to develop your skills. 

“Most of these roles start out at least $15 an hour and are fully remote,” said Jennings. “Allocate time in the week to apply to these remote jobs online and set a goal to apply for a certain number per day, and then follow up on those applications and connect with those recruiters on LinkedIn.” 

Wolovsky offers another perspective — one of growing where you currently are by actively getting to know your manager and looking for ways to take on new roles in your workplace where you are making minimum wage. 

“If you have that daily or weekly interaction with your manager, demonstrate that you’re showing up to go above and beyond, are willing to solve problems and most importantly, have conversations with that manager. The more dialogue you have back and forth, you’ll get to know each other. You will now be a whole person to them rather than someone who just clocks in and out.”  

Additionally, he stresses the importance of networking and perfecting your “elevator speech,” regardless of what role you’re in at the moment. From crafting your resume and having an active and updated LinkedIn profile to talking with people you wish to learn more about, either in person or virtually — these are all great career-building steps to take to help boost your salary in the long run. 

“One of the most important things is being able to talk about what you strive to do and what you can do,” said Wolovsky. “That’s where perfecting the elevator speech comes in. Practice getting that crystal clear and being able to say that, in one sentence, to anyone who asks you. Being able to do this could lead to the highest leverage in your career, and there’s limited downside and unknown upside. Any good conversation could turn into an opportunity — you never know.” 

Top Takeaways 

What Is Minimum Wage? 

• The prevailing federal minimum wage is $7.25 per hour. That equates to roughly $15,000 annually. 
• “If someone is still paying on the low-side of minimum wage in 2022, we have a big problem. Because we know the facts. We see the reports. It's not feasible to live off that.” 
• It’s a positive indication that more than half (29) of the U.S. states thus far have taken the initiative to increase minimum wage. 
• Forbes recently reported that inflation is at a 40-year high. People who make minimum wage are struggling. 
• The pandemic-induced job losses hit low-wage workers the hardest, and this segment of workers have been the slowest to return, despite job demand.
• “It's a broken cycle that we really need to pay closer attention to,” said Jennings. “If there's a worker shortage and you’re looking for top talent and having a hard time finding people — maybe you need to increase the pay to create a more sustainable business.” 
• To increase your take-home pay, look into remote roles, such as working for an airline call center, working in customer service — something that might not require years of experience and allows you to develop your skills.