6 min read · Last updated September 23, 2026
A flat national minimum is not how every federal wage floor works, though. How a federal prevailing wage is set covers the Davis-Bacon Act’s county-by-county system, which applies a completely different method to federally funded construction work.
- The federal minimum wage has been $7.25 an hour since July 24, 2009, fixed by the Fair Labor Standards Act (FLSA), the 1938 law that created the country’s first federal wage floor.
- Congress sets the number directly. Nothing in the statute raises it automatically when prices rise, the way Social Security’s Cost-of-Living Adjustment (COLA) does for retirement benefits.
- Employers can pay a tipped worker as little as $2.13 an hour in direct wages and claim a tip credit of up to $5.12 an hour, but only if tips actually cover the rest.
- When a state or city sets a minimum wage above $7.25, the higher rate applies, because the federal law sets a floor, not a ceiling.
The federal minimum wage is $7.25 an hour, a fixed dollar figure written into the Fair Labor Standards Act (FLSA) that changes only when Congress passes a new law. It has held at $7.25 since July 24, 2009, and any state or city is free to set its own higher wage floor, which then overrides the federal number for workers there.
In this article
- How the wage floor gets written into law
- How the tip credit actually works
- How state and local rates override the federal floor
- Common misconceptions about the minimum wage
- Frequently asked questions
The federal minimum wage has been $7.25 an hour since July 24, 2009, the same rate a first-time worker earned the year the first iPad went on sale. It hasn’t moved since. Not because prices stopped rising, but because raising it takes a bill, a vote in both chambers of Congress, and a president’s signature. Nothing in the law adjusts it on its own.
How the wage floor gets written into law
The Fair Labor Standards Act (FLSA), the 1938 federal law that created the country’s first minimum wage, still governs the number today. Under 29 U.S.C. § 206(a)(1), the statute sets the federal minimum at $7.25 an hour as a flat dollar figure written directly into the law’s text, not tied to any formula.
That’s the part worth understanding. The wage isn’t linked to inflation, the Consumer Price Index, or any other measure that moves on its own. Every increase in the law’s history, including the current one, needed its own separate act of Congress. The $7.25 rate itself arrived in three steps. An earlier law raised the wage in stages over several years until it reached $7.25 in 2009, and it has stayed there ever since, because no bill raising it further has passed.
This is different from how Social Security retirement benefits work, where a Cost-of-Living Adjustment (COLA) formula raises payments automatically each year based on inflation data. The minimum wage has no equivalent formula. If prices rise and Congress does nothing, the buying power of $7.25 falls, and nothing in the statute corrects for it.
How the tip credit actually works
For tipped workers, the wage floor splits into two pieces. Under 29 U.S.C. § 203(m), the statute freezes a tipped employee’s minimum direct cash wage at the level that was required back on August 20, 1996, which works out to $2.13 an hour today. The employer then counts a tip credit, the tips the worker actually earns, toward the rest of the $7.25 total. The maximum tip credit an employer can claim is $5.12 an hour, exactly the gap between $2.13 and $7.25.
| Piece of the formula | Amount |
|---|---|
| Full federal minimum wage | $7.25 an hour |
| Minimum direct cash wage an employer must pay | $2.13 an hour |
| Maximum tip credit an employer can claim | $5.12 an hour |
| Tips required to legally close the gap | At least $5.12 an hour, every workweek |
That credit comes with a hard condition. If a tipped worker’s cash wage plus their actual tips don’t add up to $7.25 in a given workweek, the employer owes the difference, in cash, for that same pay period. A paycheck showing $2.13 an hour isn’t automatically illegal. It only becomes illegal if the tips never closed the gap and the employer never made up the shortfall.
The credit is capped at the value of tips a worker actually received, never an assumed or average amount. An employer may never keep any portion of a tipped worker’s tips, whether or not it claims the credit at all.
How state and local rates override the federal floor
The FLSA sets a floor, not a ceiling. States, counties, and cities are free to set their own minimum wage above $7.25, and much of the country now does. Where a state or local rate is higher than $7.25, employers must pay that higher rate. Washington state, for example, requires $17.13 an hour, more than double the federal floor. The federal number only controls in places that haven’t set their own higher minimum.
The same logic reaches the tip credit. A number of states require employers to pay the full state minimum wage in cash before any tips count at all. Washington is one of them. State law there bars employers from counting any tip toward the minimum wage at all. A tipped worker in that state is legally owed the full $17.13 in direct cash wages, regardless of what federal law permits nationally. A worker’s real legal minimum wage depends on every rate that applies to that job stacked together: the federal floor, the state rate, and sometimes a city or county rate on top of that. The highest of the three governs.
Common misconceptions about the minimum wage
A common assumption is that the minimum wage quietly keeps pace with inflation somewhere in the background. It doesn’t. The $7.25 figure buys less today than it did in 2009, because nothing in the statute adjusts for that, and it will keep buying less until Congress passes a new number.
Another common mix-up: a state cannot set its own minimum wage below the federal floor. The FLSA sets the national minimum every covered employer has to meet, and state law can only push that number up, never down.
A fixed dollar wage also interacts with other federal benchmarks that aren’t fixed at all. How the Federal Poverty Guidelines Are Set walks through a benchmark that updates every year, unlike the minimum wage, which only changes when Congress votes on it directly.
Frequently asked questions
Has the federal minimum wage ever gone down? No. Every change to the federal minimum wage since 1938 has been an increase. The rate can stay flat for years, as it has since 2009, but the law has never been amended to lower it.
Can an employer pay a tipped worker less than $2.13 an hour in direct wages? Not under federal law. $2.13 an hour is the minimum direct cash wage the FLSA allows for a tipped employee, and some states set that floor higher or bar the tip credit entirely.
Does the $7.25 federal rate apply to every job in the country? Not in practice. The FLSA’s minimum applies to employees the law covers, and wherever a state or local minimum wage is higher than $7.25, that higher number is the one that actually governs pay.
Why hasn’t Congress raised the federal minimum wage since 2009? Raising it requires a bill to pass both chambers of Congress and be signed into law, the same process behind every past increase. No such bill has reached a president’s desk since the current rate took effect.
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