From 1998 through 2007, the federal minimum wage was set at $5.15 an hour. Over a three-year period, the minimum wage rose to $7.25 in 2010, and that’s where it stands today. By federal law, states may establish their own minimum wage levels; however, if the state minimum is different from the federal minimum, the higher wage rate applies.
Earlier this year, President Obama proposed a minimum wage hike to $10.10 an hour over a period of two and a half years, but the Democratically controlled U.S. Senate couldn’t pass the bill at the end of last month. And there was never a chance of passage in the Republican-controlled U.S. House.
Which caused 24/7 Wall St. to look at the states where minimum wages are either below the federal minimum or do not exist at all.
Four states still maintain minimum wage levels below the federal minimum of $7.25 an hour: Arkansas, Georgia, Minnesota and Wyoming. Five other states have not adopted a state minimum: Alabama, Louisiana, Mississippi, South Carolina and Tennessee. And one — New Hampshire — repealed the minimum wage law in 2011 but kept a reference to the federal minimum wage.
If the federal minimum must prevail, what’s the point of having a minimum wage below the federal level, or not having a minimum wage at all? The answer, of course, is politics.
Arkansas’s minimum wage has been $6.25 an hour since 2007, for companies with four or more employees. A group in the state is trying to get enough support to include a hike to $8.50 on the November ballot. The group did not think that a raise to $10.10 had a chance in a state where a principal employer is Wal-Mart Stores Inc. (NYSE: WMT), a company not known for high hourly wages. According to Glassdoor, Walmart’s average hourly pay for a sales associate is $8.86. But Arkansas’s $6.25 rate still applies for a small number of workers who work for companies that are not involved in interstate commerce and that post annual revenues of less than $500,000.
Georgia’s minimum wage has been set at $5.15 an hour since 2002. The state legislature earlier this year defeated a bill to raise the minimum wage. The state’s governor points out the state’s high ranking as a good place to do business, while some opponents note that the state ranks 35th in hourly earnings. In Georgia, apparently, being business-friendly means paying low wages.
Minnesota’s minimum wage has had a two-tier structure since 2006: larger companies pay a minimum wage of $6.15 while smaller ones pay $5.25. Legislation passed in April lifts the state out of the ranks of those states that pay less than the federal minimum wage, raising the pay rate for small firms to $6.50 on August 1 and to $7.75 by August 1 of 2016. For larger firms, the pay rate rises to $8.00 this year and $9.50 in 2016.
Wyoming’s state-level minimum wage is $5.15 an hour, and it has been since 2002. In voting against the federal $10.10 minimum wage bill, one of the state’s U.S. Senators, Mike Enzi, said that working minimum wage jobs when he was a young man was where “we learn to be dependable, to work with other employees and to learn that work ethic.” Unless Enzi was working before 1938 or at a job exempted from minimum wage rules, he was covered by the minimum wage laws.
There are, of course, plenty of exemptions even to federal law. For example, a worker under 20 years of age can be paid as little as $4.25 an hour during the first 90 consecutive calendar days of employment. Tipped workers must be paid a cash wage of at least $2.13 an hour if their employers claim a tip credit against the federal minimum wage, effectively guaranteeing a minimum cash wage of $7.25.
And why do five states not have a minimum wage law at all? Louisiana just rejected proposed legislation to create a minimum wage of $8.25 an hour. Business owners and lobbyists prevailed with their arguments that businesses like restaurants and other retailers operate on thin margins and cannot afford to pay more. Businesses, it was argued, either have to raise prices, threatening their sales, or they have to cut expenses, by firing workers presumably.
Tennessee’s U.S. Senator Lamar Alexander said last year that he would prefer to abolish the whole notion of a minimum wage and replace it with a higher earned-income tax credit. General opposition to a federal requirement for anything at all likely has a lot to do with low or no minimum wage levels in the eight or nine states with low or no minimum.
At the beginning of the year, 21 states and the District of Columbia had minimum wage levels set above the federal minimum of $7.25. Five states and the District of Columbia have increased the minimum wage levels since January. As of early April, 34 states are still considering legislation raising state’s minimum wage.