Article

The Minimum Wage Is a Poverty Wage

The federal minimum wage has lost the ability to keep workers out of poverty; but this November, voters in multiple states will have the chance to ensure better wages.

Activists in the restaurant and service industries gather for a Raise the Wage Act rally.
Activists in the restaurant and service industries gather for a Raise the Wage Act rally on the National Mall in Washington, D.C., on March 8, 2021. (Getty/Win McNamee)

Today marks the 15-year anniversary of the last increase to the federal minimum wage in 2009, when it rose from $6.55 to $7.25 per hour. Since then, the minimum wage’s purchasing power has only declined as price levels have risen over time. As of 2024, the minimum wage is worth nearly 30 percent less than it was 15 years ago and nearly 40 percent less than its peak value in 1968. This has gone on for so long that the value of a full-time job paying $7.25 per hour is no longer enough to comfortably surpass the extremely low bar of keeping someone out of poverty, as defined by the already outdated and insufficient federal poverty guideline.

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Every year, the U.S. Department of Health and Human Services updates its poverty guidelines, which are used to determine financial eligibility for a wide variety of government assistance programs, including the Supplemental Nutrition Assistance Program (SNAP), Head Start, and parts of Medicaid and Medicare. These guidelines are based on the Census Bureau’s poverty thresholds using the official poverty measure and are simplified for administrative use.

According to the 2024 guidelines, a full-time employee earning the federal minimum wage of $15,080 per year makes just $20 more than the poverty guideline for a one-person household. And minimum-wage workers who have kids or care for other family members fall well below poverty levels, as guidelines increase with household size. (see Table 1) For example, a full-time $7.25 hourly wage meets slightly less than three-quarters of the income needed for a two-person household to stay out of poverty. A worker would need an hourly wage of $9.83 just to meet this bare-minimum threshold.

$15,080

Annual wages of a full-time worker making $7.25 per hour

$15,060

2024 poverty guideline for a one-person household in the 48 contiguous states

It is far past time that Congress increase the federal minimum wage through the Raise the Wage Act, which would gradually increase the minimum wage to $17 per hour, index it to median wages thereafter, and eliminate subminimum wages for tipped workers, workers with disabilities, and young workers so that they are no longer paid less than the minimum. In the absence of federal action, though, many states have already taken action on this front, with 22 states increasing their minimum wages in January 2024 alone.

November 2024’s election will provide even more opportunities for progress, as Arizona, Alaska, and Oklahoma will all likely have questions on the ballot on whether or not their state minimum wages should increase. Voters in these states should take advantage of this chance to give workers a much-needed raise.

Arizona

Arizona’s minimum wage typically increases annually, as state law requires it to be adjusted each January for changes in the cost of living. The current rate in 2024 is $14.35 per hour, putting a full-time minimum-wage worker just below double the poverty guideline for a one-person household. (see Table 2) However, adding family members quickly reduces this ratio.

A citizen-led ballot initiative would increase the hourly rate by one dollar in 2025 and 2026 on top of the scheduled cost-of-living increases. Importantly, it would also phase out the subminimum wage for tipped workers by 2027.

$14.35

Arizona’s current minimum wage

$1.00

Proposed 2025 and 2026 increase to the minimum wage on top of annual increases

Yet this measure faces a significant challenge from a separate proposal state lawmakers have sent to the ballot—referred to as the “Tipped Workers Protection Act,” or Proposition 138. Contrary to the name, this proposition would end up reducing wages for tipped workers. Under current Arizona law, employers can pay tipped workers $3 below the minimum wage if their tips make up the difference, but this proposal would make it so that employers could instead pay up to 25 percent below the minimum wage if workers’ combined wages including tips are at least $2 more than the minimum wage. Using Arizona’s 2024 minimum wage of $14.35, this means tipped workers could be paid nearly $0.60 less per hour than the current subminimum wage. This gap would only grow each year, as the base minimum wage increases due to cost-of-living adjustments, allowing that 25 percent cut to take more money from workers’ paychecks.

Raise the Wage AZ, the group behind the citizen-led initiative, filed a lawsuit claiming that the Tipped Workers Protection Act’s title is misleading and could be confusing to voters, giving the impression that it would protect workers when, in reality, it would cut their wages.

Alaska

Alaska is another state that automatically increases its minimum wage each year to adjust for inflation, landing at $11.73 in 2024. However, this would temporarily pause under a ballot initiative that proposes a more significant increase for the minimum wage, to $13 per hour in 2025. The minimum wage would then continue to increase until it reached $15 in 2027. At that point, the inflation adjustments would resume.

Tipped workers would also benefit from the change since they are already paid the full minimum wage. Research suggests this proposal would benefit nearly 10 percent of Alaska’s wage-earning workforce, or roughly 30,800 workers. More than 20 percent of these workers currently live in poverty, an all-too-common occurrence considering a two-person household needs an hourly wage of $12.28 just to match Alaska’s poverty guideline. (see Table 3)

$11.73

Alaska’s current minimum wage

$13.00

Proposed 2025 minimum wage

$15.00

Proposed 2027 minimum wage

The ballot initiative also includes two other important provisions. The first would guarantee that workers can accrue up to 56 hours of paid sick leave per year depending on the employer’s size. The second would protect workers from being compelled to attend meetings regarding political or religious matters, a method commonly used to combat unionization efforts.

Oklahoma

Oklahoma stands out from the group of states listed in this column for being the only one to still have a minimum wage that equals the federal rate of $7.25 per hour, meaning that a full-time worker with these earnings would just barely stay out of poverty if they lived alone—and supporting a family of any size would push them well below the poverty guideline. That could change if State Question 832 is passed by voters in November. This measure would increase the state minimum wage to $9 per hour in 2025 and rise to $15 by 2029. Further adjustments would be tied to increases in the cost of living starting in 2030.

$7.25

Oklahoma’s current minimum wage

$9.00

Proposed 2025 minimum wage

$15.00

Proposed 2029 minimum wage

Unfortunately, state lawmakers have made passing this ballot initiative difficult. In May, a bill was passed to extend the period to challenge submitted signatures required to put policy proposals on the election ballot from 10 days to 90 days, significantly delaying the approval process.

Conclusion

While Congress continues to let the federal minimum wage lose more value each year, many states and localities across the country have tried to pick up the slack. Now, voters in Arizona, Alaska, and Oklahoma will get to have a say in whether their current minimum wages are insufficient and whether their states should better support low-wage workers and their families this November.

The author would like to thank Mimla Wardak for her research and fact-checking assistance as well as Lily Roberts, Emily Gee, and CAP’s Art, Editorial, and Legal teams for their helpful review and feedback.

The positions of American Progress, and our policy experts, are independent, and the findings and conclusions presented are those of American Progress alone. A full list of supporters is available here. American Progress would like to acknowledge the many generous supporters who make our work possible.

Author

Kyle Ross

Policy Analyst, Inclusive Economy

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