Federal minimum wage loses ground after 17 years at $7.25

The federal minimum wage has remained at $7.25 an hour for 17 full years, and the Center for Economic and Policy Research says inflation has pushed its buying power to a 70-year low. The think tank says a full-time, year-round worker paid at that rate now earns less than the federal poverty threshold.

CEPR senior economist Sylvia Allegretto wrote that the country is in the longest stretch without a federal minimum-wage increase since the wage floor was created in 1938. She said the current rate is “officially a poverty wage.”

The Department of Health and Human Services set the relevant poverty threshold at $15,650, according to CEPR. A worker making $7.25 an hour for a full-time, year-round schedule would fall below that level, the group said.

The wage floor last rose in 2009. CEPR said its current value is far below its peak purchasing power in 1968, because prices have continued to rise while the statutory rate has not changed.

Pay debate returns as costs rise

Federal Reserve Bank of Atlanta data show wage growth has cooled from 6.7% in July 2022 to 3.6% last month. The minimum-wage debate has resurfaced alongside higher living costs, including housing and child care, according to the economic data and policy discussions cited by CEPR.

Public support for a higher wage floor has been broad, though not uniform. A 2021 Pew Research Center survey found 62% of Americans supported a $15 federal minimum wage, while many opponents of that level still favored a rate above $7.25.

Minimum-wage proposals have also appeared in local campaigns. City & State New York reported that Zohran Mamdani proposed raising New York City’s minimum wage from $16.50 to $30 by 2030 during his mayoral campaign.

States split from the federal floor

Allegretto wrote that 30 states and Washington, D.C., have minimum wages above the federal rate. She said states that still use the $7.25 floor, many of them in the South, also have some of the country’s highest poverty levels.

CEPR cited figures showing more than one-quarter of Mississippi workers earn less than $15 an hour. It said about one-fifth of jobs in Arkansas, Oklahoma and Alabama also pay below that level.

Research has long linked low wages and poverty. A 1987 study by Congressional Budget Office economists Ralph E. Smith and Bruce Vavrichek found that 20% of hourly workers paid at or below the then-minimum wage of $3.35 had incomes under the poverty line. The Center for American Progress has estimated that childhood poverty reduces productivity and economic output by about 1.3% of GDP each year.

Economists remain divided on effects

The Cato Institute has argued that market wages have risen even without a higher federal minimum. Cato calculated the average minimum wage at $12.13 as of January and said mandated increases can reduce employment for less specialized workers, raise consumer prices and cut jobs through higher labor costs.

Cato also cited Bureau of Labor Statistics data in a November 2025 report on California’s $20 fast-food minimum wage, saying the sector lost 18,000 jobs relative to the broader labor market after the law took effect.

Other researchers reached a different conclusion. A University of California at Berkeley working paper released earlier this year found California’s fast-food wage law raised average weekly pay for eligible workers by about 11% without affecting employment. The paper found prices rose about 1.5%, equal to six cents on a $4 item.

The National Employment Law Project reported that about two dozen states are set to raise minimum wages this year. Michael Reich, chair of UC Berkeley’s Center on Wage and Employment Dynamics and author of the California study, told Fortune that many people are watching California and that it “could be a model for the rest of the country.”

This story draws on original reporting from Fortune.