Understanding Minimum Wage Laws in 2026
The federal minimum wage of $7.25 per hour has not changed since 2009, making it one of the longest periods without a federal increase in U.S. history. As a result, most wage growth has happened at the state and local level, with 35+ states now setting their own floor above the federal rate.
Employers must always pay the highest applicable minimum wage — federal, state, or local — whichever is greatest. For example, a business operating in Seattle must pay Seattle's local minimum wage, which exceeds both Washington State's rate and the federal rate.
Tipped Employee Minimum Wage
Under federal law, employers may pay tipped employees as little as $2.13/hour — known as the "tip credit" — provided tips bring the worker to at least $7.25/hour total. If tips don't cover the gap, the employer must make up the difference. Many states have eliminated the tip credit entirely, requiring tipped employees to receive the full state minimum wage before tips.
Scheduled Increases
Many states have passed legislation with automatic annual increases — often tied to the Consumer Price Index (CPI) — so minimum wages adjust each January 1 without new legislation. Always verify current rates with your state's Department of Labor, especially when hiring or setting pay rates for the new year.
Frequently Asked Questions
What happens if my state minimum wage is lower than the federal rate? ▾
The federal minimum wage of $7.25/hour acts as a floor. If your state sets a lower rate, federal law supersedes it and you must pay at least $7.25/hour. In practice, states that set a rate below federal either use it as a placeholder or have not updated their statutes, but federal law controls.
Can cities set their own minimum wage above the state rate? ▾
Yes, in many states. Cities like Seattle, San Francisco, New York City, Denver, and Chicago have set local minimum wages significantly above their state rates. Some states (like Alabama, Georgia, and North Carolina) have preemption laws that prevent local governments from setting their own minimum wages.
Do minimum wage laws apply to salaried employees? ▾
Minimum wage requirements apply to all non-exempt employees, whether paid hourly or on salary. For salaried non-exempt employees, you must ensure their effective hourly rate (total compensation ÷ total hours worked) meets the minimum wage floor. Exempt employees must meet the FLSA salary threshold ($684/week), which in most cases exceeds minimum wage requirements.
Are there exceptions for small businesses or youth workers? ▾
Federal law allows a youth minimum wage of $4.25/hour for workers under 20 during their first 90 consecutive days of employment. Some states have similar provisions. Additionally, some states exempt very small employers (e.g., fewer than 2 employees) from state minimum wage laws, though federal law still applies to most businesses engaged in interstate commerce.
How often do minimum wages change? ▾
Many states now have automatic annual adjustments tied to inflation (CPI). These typically take effect on January 1 each year. Other states pass specific legislation with scheduled step increases over multiple years. Always check your state Department of Labor website at the start of each calendar year to confirm current rates.