Even if you love your job, you probably wouldn’t clock in day in and day out if there wasn’t a paycheck involved. Let’s face it—pay matters.
Research from LinkedIn found that 70% of professionals want to hear about salary in the first message from a recruiter, and 59% of candidates said that salary was the leading factor that contributed to feeling fulfilled in their careers.
With all of the conversations around the skyrocketing cost of living and potentially increasing the minimum wage as a result, we can’t blame you if this question is rattling around in your brain: If you’re already above minimum wage, will your pay go up because minimum wage did?
It’s a totally justifiable question. We’re answering that (and even more burning questions about minimum wage) in this guide.
What is the current minimum wage?
The national minimum wage rate is established in the Fair Labor Standards Act (FLSA). Currently, the federal minimum wage for covered, nonexempt employees is $7.25 per hour. But, that doesn’t mean that all low-wage workers across the country earn that rate.
Many critics assert that $7.25 per hour is hardly a living wage, especially as the cost of living has continued to rise. So, with more and more people pushing for a higher hourly wage, many states (and even individual cities) have passed minimum wage increases.
For example, here’s a look at the current minimum wage in several different states:
- Arizona: $12 per hour
- California: $12 per hour for employers with 25 employees or less, $13 per hour for employers with 26 employees or more
- Maine: $12 per hour
- New York: $11.80 per hour, $13 per hour (Long Island and Westchester), $15 per hour (NYC)
If you’re curious about the state minimum wage where you are, the Department of Labor has a helpful breakdown of state minimum wage laws.
Also, keep in mind that different minimum wage laws apply for tipped employees. The federal minimum wage for employees who collect tips is $2.13 per hour, provided that amount combined with tips received at least equals the current federal minimum wage.
Will there eventually be a higher minimum wage?
The conversation about raising the federal minimum wage isn’t a new one. In July of 2019, the United States House of Representatives voted 231 to 199 to raise the minimum wage to $15 per hour.
But, don’t get too excited quite yet—momentum has completely stalled since then, and that new minimum wage hasn’t been implemented. The bill has died in the Senate, and it was never even voted on. Lawmakers were hesitant, as the Congressional Budget Office claimed the increase could lead to job losses in the millions.
So, while the Raise the Wage Act garnered plenty of support, there are no firm plans currently in the works. However, minimum wage continues to be a topic of conversation, as cost of living continues to rise (the Bureau of Labor Statistics says it rose by 2.3% from 2018 to 2019). Additionally, nobody knows what could happen with future administrations in place.
If you’re already above minimum wage, will your pay go up because minimum wage did?
Here’s the short answer: not necessarily.
Raising the minimum wage means that business owners and employees in the United States are legally required to raise the hourly wage for their minimum wage workers—and only their minimum wage workers. If you’re already earning above minimum wage, your employer won’t be required to give you a pay increase too.
However, while it won’t be mandated, it’s likely that many companies would boost the pay rates for their other workers too. Here are a few reasons why:
- They’ll want to recognize different skill levels: Let’s say that you currently work in a somewhat skilled position at a pay rate of $15 per hour. You have a technical degree and several years of experience. If the minimum wage rate goes up to $15 per hour, that means you’ll be earning the same pay as the high school student who works part-time for your same company. Most employers recognize that this isn’t fair to you, and that different positions are worthy of different wage levels.
- They’ll want to maintain employee morale: Employers also recognize that these types of pay discrepancies can tank employee morale. Pay and benefits carry a huge amount of weight in employee satisfaction, and companies recognize that motivation, commitment, and enthusiasm will suffer if compensation becomes a pain point for employees.
- They’ll want to boost employee retention: When employees are happier, they stick around longer. In fact, research shows that a 10% increase in base salary equates to a 1.5 percent increase in the likelihood that a worker will stay with their current employer.
Despite the fact that a minimum wage increase would result in a trickle effect of higher labor costs across their entire company, a survey conducted by the National Employment Law Project found that a significant portion of employers were in favor of raising the federal minimum wage. In fact, 61% of small business owners supported a minimum wage hike.
Minimum wage matters for both sides of the equation
For wage earners, an increase in the federal minimum wage could be good news. It would mean that employee pay rates could better keep up with the ever-increasing cost of living, and the boost for low-wage workers would likely trickle through the business and positively impact other employees too.
It’s not all bad news for business owners either. While increasing pay across the board would mean substantially higher labor costs, they’d reap the benefits in terms of morale, engagement, and retention.
Benefits aside, there aren’t any firm plans in place to increase the minimum wage. Numerous states and cities have taken matters into their own hands, but there haven’t been any sort of changes in federal law quite yet.
So, for now, employers and employees alike can only sit back and watch as the conversation unfolds. In the meantime, this guide will help you figure out how to move forward if and when a federal minimum wage increase goes through.
Are you an employer worried about how a minimum wage increase would impact your payroll process? Take some stress off of your plate with Hourly.