Federal Minimum Wage to Go to $5.85 Per Hour on July 24

Published on Thu | 07 Jun 2007

Federal Minimum Wage to Go to $5.85 Per Hour on July 24

On May 25, President Bush signed legislation increasing the federal minimum wage for the first time since 1997. The increase was tacked on to an unrelated “war supplemental” appropriations bill and approved by the U.S. House and Senate by large margins.

Title VIII, Subtitle A, of the U.S. Troop Readiness, Veterans’ Care, Katrina Recovery, and Iraq Accountability Appropriations Act of 2007 (Pub. L. No. 110-28), is the Fair Minimum Wage Act of 2007, which increases the minimum wage. Title III, Subtitle B, is the Small Business and Work Opportunity Tax Act of 2007, an accompanying package of business tax incentives.
Fair Minimum Wage Act
The Fair Minimum Wage Act of 2007 increases the federal hourly minimum wage rate to:
• $5.85, effective 60 days after the date of enactment (i.e. July 24, 2007);
• $6.55, effective 12 months after the 60th day (i.e. July 24, 2008); and
• $7.25, effective 24 months after that 60th day (i.e. July 24, 2009).
FLSA tip Credit. When the minimum wage rises to $5.85, the Fair Labor Standards Act (FLSA) tip credit will rise to $3.72 ($5.85-$2.13). When the minimum wage rises to $6.55, the tip credit will rise to $4.42 ($6.55-$2.13). And when the minimum wage rises to $7.25, the tip credit will rise to $5.12 ($7.25-2.13). The cash wage for tipped employees will remain unchanged.
Northern Mariana Islands. The Act also specifies an hourly minimum wage rate for the Northern Mariana Islands (NMI) if $3.55, effective 60 days after the date of enactment (July 24, 2007). This rate will be increased by $0.50 an hour (or if necessary, a lesser amount) beginning one year after the date of enactment and each year thereafter until the minimum wage applicable to the NMI is equal to the federal hourly minimum wage in the U.S.
American Samoa. The Act also specifies an hourly minimum wage rate for American Samoa (AS) equal to the applicable industry-specific wage rate in effect under 29 C.F.R. §697 on the date of enactment (July 24, 2007). This rate will be increased by $0.50 an hour beginning on the 60th day after the date of enactment and then by another $0.50 an hour (or, if necessary, a lesser amount) beginning one year after the date of enactment and each year thereafter until the minimum wage applicable to AS is equal to the federal hourly minimum wage in the U.S. Finally, the Act deletes provisions in the FLSA calling for special industry committees and wage orders in AS, now that the federal minimum wage will be applied in AS.
State minimum wage rates
The minimum wage rate in several states is tied to the federal rate in various ways. Five states- Alabama, Louisiana, Mississippi, South Carolina, and Tennessee – have no minimum wage law. One state - Kansas- had a minimum wage rate lower than the federal rate. And 13 states- Georgia, Idaho, Indiana, New Hampshire, New Mexico, North Dakota, Oklahoma, Puerto Rico, South Dakota, Texas, Utah, Virginia, and Wyoming- follow the federal rate. The rates in all these states will change along with the federal rate.
In States without a minimum wage rate, the federal minimum wage applies to employees covered by the FLSA. This also holds true where a state minimum is lower than the federal minimum wage. However, where a state minimum wage is higher than the federal minimum, the state minimum applies to all employees covered by the state provisions. In most states, the types of employees exempt from minimum wage protection are similar to those exempt under FLSA.
American Payroll Association. Payroll Currently, Vol. 15, Issue.12, June 8, 2007