In 1938, the Fair Labor Standards Act established the federal minimum wage. Businesses were required to pay employees at least $0.25 per hour (the equivalent of $4.74 in 2023 dollars). Congress has adjusted the minimum wage 22 times since then, most recently in 2009 when it raised the rate to $7.25 per hour ($10.53 when adjusted for inflation).
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Forty-five states have laws setting a minimum wage for workers in the state. In 14 of these states, the minimum wage is equal to the federal rate. These states are Idaho, Indiana, Iowa, Kansas, Kentucky, New Hampshire, North Carolina, North Dakota, Oklahoma, Pennsylvania, Texas, Utah, Wisconsin and Utah.
States With a Minimum Wage Lower Than the Federal Rate
Three states have established a minimum wage lower than the federal rate. In Georgia and Wyoming, it is $5.15 per hour. Montana has an hourly minimum of $4.00. Some small businesses — typically companies with sales less than $500,000 and those in certain industries like agriculture and seasonal work — may be exempt from the requirements of the Fair Labor Standards Act, and can pay their employees less than the federal rate. That’s what happens in these three states.
States With No Minimum Wage
Five states have no laws setting a minimum wage, which makes the federal rate the default. These states are Alabama, Louisiana, Mississippi, South Carolina and Tennessee. Workers in those states must earn at least $7.25 per hour, which works out to around $15,000 for a full-time employee with no vacation time. Here’s how that compares to the median annual wage in each of those states:
- Alabama: $59,609
- Mississippi: $52,985
- Louisiana: $57,852
- South Carolina: $63,623
- Tennessee: $64,035
Cost of Living in the States With the Lowest Minimum Wage
Workers earning minimum wage typically need to pay attention to the cost of living in their areas because their dollars stretch further there. The five states with the lowest cost of living are Mississippi, Oklahoma, Kansas, Missouri and Alabama. Interestingly, of the three states with a minimum wage lower than the federal rate, Georgia is the most affordable with a ranking of 38 out of 50. Wyoming comes in at 34, and Montana leads the list at 17.
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Of course, where you live plays a factor in the cost of living. The average home value in Georgia is a little more than $315,000, according to data from Zillow. In Atlanta, the median listing price for a home is $410,000, but this drops to $270,000 in Clayton, County south of Atlanta.
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This article originally appeared on GOBankingRates.com: States With the Lowest Minimum Wage
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