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Fair Minimum Wage Act of 2007

Updated on July 11, 2010

Fair Minimum Wage Act of 2007

The Fair Minimum Wage Act of 2007 is a U.S. congressional act that primarily focuses on increasing the rate of the federally mandated minimum wage. Prior to the introduction of the bill, the federal minimum wage was $5.15 an hour, an amount that had not seen a single increase since 1997. While it was historically adjusted every one or two years on average, the federal minimum wage increased only once--a mere 65 cents--under the Clinton Administration’s eight-year term. Under the Fair Minimum Wage Act, the federal minimum wage immediately increased by 70 cents and over the proceeding years, increased a full $2.10 by 2009.

Objective

The Federal Minimum Wage Act increased the lowest acceptable hourly wage that an employer is permitted to pay his employees (and conversely, that an employee may accept in exchange). The primary purpose is to set a minimum acceptable standard of living and reduce poverty amongst the working class. In conjunction with statutory maximum workweeks and overtime wages, the act also aims to increase employment rates by encouraging employers to spread labor across multiple employees instead of forcing one employee to work strenuous hours.

Tiered Increase

Rather than boost minimum wage significantly at one time, the act gradually increased to reduce the negative impact it would have on employers. This was done to prevent job layoffs due to budget cuts to cover the increase in employees’ salaries across the board. The first increase came within 60 days of enactment, which increased the federal minimum wage from $5.15 to $5.85, or a total of 70 cents. The second increase came one year later on July 24, 2008, which upped the federal minimum wage from $5.85 to $6.55, or a total of $1.40. The third and last increase came two years after the initial increase on July 24, 2009, which increased the federal minimum wage from $6.55 to $7.25, for a total increase of $2.10 an hour per employee.

State Minimum Wages

The Fair Minimum Wage Act did not require states to increase their own statewide minimum wages to meet the minimum $7.25 an hour. States that set a lower minimum wage than the act still allow employers to pay their employees at the lower rate. Minnesota and Wyoming both set a minimum wage lower than the federal standard. Conversely, other states that previously did not follow the federal minimum wage did increase their respective wage rates to meet or even exceed federal guidelines.

Exemptions

While the act initially aimed to increase the rate of hourly pay for tipped employees, this aspect of the act was not included in the final bill. Servers, bartenders, busboys and other employees who derive the majority of their income from customer tips are still subject to a federal tipped minimum wage of $2.13. However, tipped employees do receive some benefits from the increase, as employers must make up the difference of the higher federal minimum wage when employees’ tips do not average out to at least an hourly wage of $7.25.

Numerous additional exceptions to the federal minimum wage are defined under Section 213 of the Fair Minimum Wage Act. (29 U.S.C. §213(a), et seq)

Setbacks

Employers who violate the act’s guidelines are required to pay every employees’ back-owed wages, calculated by determining the number of hours each employee worked and the difference between the federal minimum wage and what each employee was actually paid. Unfortunately, many employers who violate minimum wage laws are the same employers who employ illegal immigrants and/or pay their employees “under the table.” Illegal immigrants are less likely to report their employers because they fear deportation, retaliation or termination if they do. Employees paid “under the table” are less likely to report employers, as the employees themselves will also be liable for all back-owed income taxes and may receive additional punishments for accepting such an agreement. This perpetuates the problem that the act hoped to resolve and continues to encourage more employers to pay more employees less than the federal minimum wage.

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