WASHINGTON, July 16 — The federal minimum wage in the United States has not changed in over 17 years, and the political calculus around raising it remains as fraught as ever. Congress last set the federal rate at $7.25 per hour under the Fair Minimum Wage Act of 2007, with the increase taking effect in 2009. Since then, inflation has steadily eroded the purchasing power of that wage.
The peak came in 1968, when the minimum wage of $1.60 per hour was worth the equivalent of $14.81 in 2025 dollars — more than double today’s federal floor. Strategically, the stagnation at the federal level has shifted the battleground to state capitals.
As of July 2025, 22 states and the District of Columbia have enacted minimum wages above the federal level. This patchwork of state-level action reflects a broader dynamic: the broader stakes of federal inaction are being managed locally, creating a fragmented wage landscape across the country. The origins of the federal minimum wage trace back to the New Deal.
The first such wage was introduced in the National Industrial Recovery Act of 1933, signed by President Franklin D. Roosevelt.
That law was later ruled unconstitutional. The 1938 Fair Labor Standards Act then established the wage at 25 cents per hour — equivalent to $5.72 in 2025 dollars — and that framework has endured, even as its real value has declined. What this signals for the labor market is a concentrated impact.
In 2019, approximately 1.6 million Americans earned no more than the federal minimum wage. That represented about 1% of all workers and less than 2% of hourly-paid workers. Among those earning at or below the federal floor, less than half worked full time.
Almost half were aged 16 to 25. More than 60% worked in the leisure and hospitality industries, where many also receive tips.
Demographically, the data shows no significant differences among ethnic or racial groups. However, women were about twice as likely as men to earn minimum wage or less. Employers are required to pay workers the highest minimum wage demanded by federal, state, or local laws — a rule that creates a compliance burden for businesses operating across multiple jurisdictions.
The Federal Stalemate
The political calculus for raising the federal minimum wage has not changed in years. The $7.25 rate remains a flashpoint in congressional debates, with proponents arguing that inflation has made it a poverty wage and opponents warning of job losses in small businesses and low-margin industries. No federal increase has passed since 2007.
The broader stakes extend beyond wages themselves. The decline in purchasing power since 1968 — from $14.81 in today’s dollars down to $7.25 — represents a loss in real value.
That erosion has occurred entirely through congressional inaction, not through any legislative repeal.
What to Watch
With no federal increase on the immediate horizon, the state-level divergence will likely continue. The 22 states plus D.C. that have already acted above the federal floor represent a growing coalition of jurisdictions that have effectively set their own labor standards. The remaining states, particularly in the South and Midwest, continue to operate at the $7.25 level.
The calculus for businesses operating nationally is becoming more complex. Compliance requires tracking the highest applicable wage across multiple jurisdictions — a logistical challenge that the current federal framework does nothing to simplify.
