In 2020, the federal minimum wage is $7.25 per hour (or $2.13 for tipped workers), which was set back in 2009.
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If your city or state minimum wage is higher than the federal minimum wage, you’ll need to pay your qualified workers the highest amount.
While both sides of the aisle recognize that the minimum wage hasn’t kept up with inflation, there’s an endless debate about how to actually solve the problem.
Here’s a quick breakdown of the pros and cons of raising the minimum wage:
|Proponents of a higher minimum wage believe it will...||Opponents of a higher minimum wage believe it will...|
|Stimulate job growth||Raise the price of goods|
|Improve income inequality||Increase unemployment|
|Decrease crime rates||Increase crime rates|
|Improve the national economy||Lead to outsourcing|
Obviously, reconciling these two opposing positions is a difficult policy problem. That’s why many cities and states have taken it upon themselves to raise their own minimum wages. And in response, some business owners are getting creative with how they’re handling minimum wage hikes.
Many localities are working toward a $15 per hour minimum wage, which equates to $31,200 per year (assuming an employee works a 40-hour week). The 2020 California minimum wage, for example, starts at $12, depending on your city and number of employees.
Among the states and Washington, D.C., the nation’s capital has the highest minimum wage at $14. The lowest minimum wages are in Georgia and Wyoming, at $5.15 per hour—although most employers in those states will still need to pay the federal minimum wage.
Before we get to the specific minimum wage in your city or state, let’s go over a few key definitions.
What’s the difference between minimum wage and tipped wage?
The Fair Labor Standards Act (FLSA) sets the federal minimum wage at $7.25 per hour for “covered, nonexempt workers.” If you fall in at least one of the below categories, your employees are covered under this law:
- You have at least two employees.
- You employ domestic workers, like a housekeeper, cook, or nanny.
- Your business produces at least $500,000 in sales or services.
- Your business is a hospital, school, preschool, or government agency, or it provides medical or nursing care.
- Your business is involved in interstate commerce, such as selling products over state lines or working closely with people or companies in other states.
You may also have employees who are exempt from minimum wage laws. Depending on the work they do, they can even be exempt on some weeks and nonexempt on other weeks.
Below are some types of employees who might be exempt—although we recommend consulting with an employment lawyer first.
- Farmworkers who work on small farms
- Seasonal and recreational employees, if your company only operates for seven or fewer months each year, or if your average receipts for half of the previous calendar year were less than 33.33% of the average receipts for the other half of the year
- Salaried employees who work in executive, administrative, professional, and outside sales roles
There’s another big category of employees who don’t receive the minimum wage: tipped employees. The FLSA sets the minimum wage for servers and other tipped employees at $2.13, as long as the tips and the hourly wages combine to meet the federal minimum wage. Your employee must also earn an average of at least $30 a month in tips.
If the combination of tips and hourly wages don’t meet the federal minimum wage of $7.25 an hour, you’ll need to make up the difference.
Are there any other types of workers who don’t qualify for the minimum wage?
In certain circumstances, other employees may be exempt from the minimum wage. They include:
- Employees with disabilities that affect their earning capacity or work ability. These disabilities may include blindness, mental illness, developmental disabilities, and drug and alcohol addiction. In order to pay lower wages to these employees, you’ll need to apply for a certificate from the Wage and Hour Division of the U.S. Department of Labor (DOL).
- Full-time students who work in retail, service, or agriculture, or who work for a college or university. With a certificate from the DOL, you can pay students 85% (or more) of the minimum wage. However, students can work no more than eight hours in one day or 20 hours in a week during the school year, or 40 hours per week when school isn’t in session.
- Student learners currently enrolled in vocational education. These employees can be paid no less than 75% of the minimum wage.
- Employees under 20 years old, for the first 90 days they work for you. During those days—or once they hit their 20th birthday, whichever comes first—you may set their minimum wage as low as $4.25 per hour.
Should I follow federal or state minimum wage laws?
You should know about all of them, but follow the one that’s the highest.
If your state has a minimum wage, your employees are always entitled to the higher wage or the law that offers the most benefits, whether that be federal or state.
2020 minimum wage laws by state
For each state, we’ve included the minimum wages for the five largest cities, or the cities with independent minimum wages, if there are less than five.
Keep in mind that this is not an inclusive list of all city, county, and municipality minimum wages, and you may need to look into other legal considerations. Check whether local laws apply, as well as restrictions and conditions of the tipped minimum wage by state.
|State||Minimum wage||Minimum tipped wage|
|Arizona||$12||$3 less than nontipped employees|
|California||The California minimum wage is $12 if you have 25 or fewer employees; $13 if you have more than 25 employees||The California minimum tipped wage is $12 if you have 25 or fewer employees; $13 if you have more than 25 employees|
|Los Angeles County||The LA minimum wage is $13.25 if you have 25 or fewer employees; $14.25 if you have more than 25 employees||The minimum tipped wage in LA is $13.25 if you have 25 or fewer employees; $14.25 if you have more than 25 employees|
|San Francisco||The San Francisco minimum wage is $15.59, which is the same as the minimum tipped wage.||$15.59|
|Connecticut||$10.10||$6.38 for restaurant employees and $8.23 for bartenders|
|Montgomery County||$12.50 if you have 50 or fewer employees; $13 if you have more than 50 employees||$4|
|Prince George's County||$11.50||$3.63|
|Minnesota||The Minnesota minimum wage is $8.15 if your gross revenue is less than $500,000; $10 if your gross revenue is more than $500,000||The tipped minimum wage is $8.15 if your gross revenue is less than $500,000; $10 if your gross revenue is more than $500,000|
|Minneapolis||$11 if you have 100 or fewer employees; $12.25 if you have more than 100 employees||$11 if you have 100 or fewer employees; $12.25 if you have more than 100 employees|
|Nevada||The Nevada minimum wage is $7.25 per hour if you offer health insurance; $8.25 per hour if you don't||The tipped minimum wage is $7.25 per hour if you offer health insurance; $8.25 per hour if you don't|
|New Jersey||$11 for employers with 6 or more employees, $10.30 for seasonal employers or those with 5 or fewer employees||$3.13|
|Albuquerque||$8.35 if you offer health insurance and/or child care benefits; $9.35 if you don't||$5.60|
|Santa Fe (city)||$11.80||$2.13|
|Santa Fe County||$11.80||$3.53|
|New York||$11.80||The New York tipped minimum wage is $9.85 for service employees; $7.85 for food service workers|
|Long Island and Westchester||$12||$10 for service employees; $8 for food service workers; and $9.05 for all other service employees, as long as tips are at least $2.95 per hour—otherwise, $10.20|
|New York City (small employers)||The New York City minimum wage is $15 for businesses with 10 employees or less.||$12.50 for service employees; $10 for food service workers|
|New York City (large employers)||For businesses with 11 employees or more, the New York City minimum wage is $15||$12.50 for service employees; $10 for food service workers; and $11.35 for all other service workers, as long as tips are at least $3.65 per hour—otherwise, $12.75|
|Nonurban Oregon counties||$11||$10.75|
|Seattle||Seattle’s minimum wage is $16.39 if your business has more than 500 employees; $15.75 if you have fewer||$13.50|
Last updated January 2020