Minimum Wage

Written By
Paul Tracy
Updated November 4, 2020

What is Minimum Wage?

Minimum wage is the lowest hourly amount an employer may legally pay an employee. In the United States, the amount varies from state to state.

How Minimum Wage Works

If an employer compensates employees on an hourly basis, that employer must pay the employee no less than the minimum wage. In the United States, the minimum wage is set by the federal government. The government periodically modifies the minimum wage to reflect rises in the general price level and cost of living.

Why Minimum Wage is Important

In the labor market, wages rise and fall depending on the supply and demand for labor. Though it restricts economic efficiency, the argument in support of minimum wage laws is that it curbs employers' attempts to exploit workers and ensures that employees are compensated at a livable rate.

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