Sets a national floor
The federal rate is the baseline pay for workers in states that haven't set a higher minimum, directly affecting earnings for millions of low-wage employees.
In plain English
The legal floor under your paycheck.
It's the lowest hourly wage employers across the country are generally allowed to pay, set by federal law.
Simple example
A cashier covered by federal law in a state without a higher wage floor — such as Texas or Georgia — must be paid at least $7.25 per hour in 2026.
Why it matters
What the term actually changes.
Shapes broader pay
Changes to the federal minimum can ripple upward, influencing wages slightly above the floor and affecting business costs, consumer prices and hiring decisions.
Long-running debate
Because the rate doesn't adjust automatically for inflation, its real value falls over time, making periodic congressional action a recurring policy fight.
How it works
The mechanics, in practice.
Set by Congress
Only Congress can change the federal rate, typically through legislation signed by the president. There is no automatic cost-of-living adjustment.
States can go higher
States and localities may set minimums above the federal level; workers receive whichever rate is higher. Thirty states plus D.C. exceed $7.25 as of 2026.
Coverage and exceptions
The Fair Labor Standards Act covers most employers, but includes carve-outs for tipped workers, some small businesses, certain farm labor and youth training wages.
Related guide
Should the federal minimum wage rise to $15 an hour?
A look at how the federal wage floor works, what raising it to $15 could do, and why economists still disagree.
Read the guide → Related issue brief
Should the federal minimum wage rise to $15 an hour?
Lawmakers and economists continue to debate whether more than doubling the $7.25 federal floor would lift workers out of poverty or cost jobs.
Read the brief →You’ve learned the term. Now vote.
Should the federal minimum wage rise to $15 an hour?
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