Written by Salary.com Staff
February 12, 2020
Minimum wage has increased in Massachusetts and is $12.75/hour as of Jan 1st, 2020. It was the second yearly raise in a row since a measure enacted in 2018 set the target to increase it up to $15 over five years.
The 2020 minimum wage increase has affected over 400000 workers on an entry-level salary in Massachusetts. But the Bay State is only one of the ones involved by the national effort to bring the minimum wage to $15 per hour in the whole country. The target year for this ultimate minimum wage increase is 2023.
This means that the Massachusetts minimum wage will go up in steps to reach $15 per hour in January 2023. The legislative action stating such an increase was the HB 4640, a bill signed by the State Governor in June 2018. The next steps will see raising the minimum wage year by year at this pace:
But Massachusetts was only one of the twenty-two states to celebrate 2020 with a minimum wage increase. The federal minimum wage, instead, has never changed since July 2009. More than ten years later, it is still fixed at $7.25 an hour.
That is the longest time without raising the federal minimum wage in its history. Since it was made effective in 1938, in fact, the longest time without adjusting the value had been between 1997 and 2007.
The federal minimum wage law is contained in the so-called FLSA, which stands for “Fair Labor Standards Act”. It is a federal law covering most workers in the United States system: full-time or part-time jobs, employed in the private or in the public sector, individual or enterprise workers. The purpose of the minimum wage is, of course, to protect workers from unfair compensation and make sure to empower them to provide for their basic needs.
It is worth saying that you are covered by FLSA if you are not “exempted”: this means that you are paid hourly. If you have a salary, usually to perform executive, administrative or high-end duties, you can consider yourself exempted.
What’s more, the minimum wage law takes into account tipped employees, too. For them, the base wage is way lower because, of course, their income must be integrated with a share of the tips. In Massachusetts, employers have to pay tipped employees according to the minimum stated by the law. This minimum has been raised, too, brought to $4.95, and will get to $6.75 by the year 2023.
In fact, both federal law and the law of most states set a minimum wage. Throughout the years, even local governments have been raising minimum wages, especially in large cities. This was made necessary to keep it up with the rising costs of daily life, mirrored by a lowered purchasing power.
Federal, state, or local minimum wage? Which amount are workers entitled to? The answer is that in most cases workers are entitled to whichever is the highest. This means that in 2020, non-exempted workers in Massachusetts cannot be paid less than 12.75 dollars per hour, which is higher than the federal minimum wage of 7.25 dollars per hour.
On the contrary, in states lacking a minimum wage law an employer still cannot pay workers less than the $7.25/hour amount set by the federal law. Minimum wage policies are completely missing in the southern states of Alabama, Louisiana, Mississippi, South Carolina, and Tennessee.
Instead, where the state law fixed a lower minimum wage, like, for example, in Georgia and Wyoming where it is set to $5.15 per hour, thanks to the FLSA the majority is not paid under the federal standard. Unfortunately, some categories are not covered by the Labor Act, like farm and seasonal workers: for them, the lower minimum is applied, and it also is the lowest minimum wage of the Country.
Comprehensively, the number of states where the federal minimum wage is binding goes up to 21. This results in a loss of purchasing power for workers because their salary can’t keep it up with inflation.
On the other hand, even if each state has its laws and regulations, we can still say that the average minimum wage is increasing in the whole USA. Massachusetts is one of the sates with the highest minimum wage, but not the state with the highest one:
With its $12.75, Massachusetts is right behind the Top 3 states with the highest minimum wage in the USA and considering its comprehensiveness for a wider range of workers we might also put it in the third place as well.
As mentioned in advance, local government laws can increase the minimum wage, too, thus making it higher than the state as a whole. In some big cities, the pay floor was raised above $15 and $16 per hour. Thanks to such data, the average minimum wage for the US worker has been rising faster than ever, growing year by year in the last decade, especially since 2017. Counting federal, state and local ones, the amount has got to $11.80 per hour: the highest minimum wage in American history even adjusting the dollar value for inflation.
But that is not enough. On a global scale, with around 90% of World Countries adopting a minimum wage system, the USA stands 5th only. The highest minimum wage in the world, in terms of nominal dollars value and purchasing power, is in Australia. With $14.56 per hour, this minimum wage accounts for a value higher than 50% of the GDP per capita of the average Australian citizen.
Keeping the current values, this means that when Massachusetts workers will get the 2023 target of raising the minimum wage to $15 per hour, they are going to get one of the highest minimum wages in the world. Not bad.
Download our white paper to further understand how organizations across the country are using market data, internal analytics, and strategic communication to establish an equitable pay structure.