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Federal Minimum Wage to Increase to $5.85 Per Hour

May 31, 2007

On July 24, 2007 the federal minimum wage will increase from $5.15 to $5.85 per hour, the first increase since 1997. The "Fair Minimum Wage Act of 2007" provides for a three-step increase in the minimum wage, beginning with the initial increase to $5.85 per hour effective 60 days after the enactment of the law. The subsequent increases will take place one year later (July 24, 2008) to $6.55 per hour, and two years later (July 24, 2009) to $7.25 per hour.

The statute was signed by President Bush as part of a spending bill, the "U.S. Troop Readiness, Veterans' Care, Katrina Recovery, and Iraq Accountability Appropriations Act, 2007" (H.R. 2206), which was enacted on May 25, 2007. The bill provides $120 billion for the wars in Iraq and Afghanistan and also includes an extension of the Work Opportunity Tax Credit and a small business tax relief package.

Many states maintain minimum wage rates higher than the federal minimum, including New York (currently $7.15) and California (currently $7.50, increasing to $8.00 as of January 1, 2008). As always, employers will have to comply with whichever rate, state or federal, is higher.