Does raising the minimum wage increase unemployment?

In brief: No. High-quality economic research finds increasing the minimum wage does not significantly impact employment.

In detail: The 90% of high-quality economic studies show that increasing the minimum wage boosts wages for low-wage workers without meaningfully increasing unemployment. These studies use statistical tools and empirical methods to measure what happens to workers before and after a minimum wage increase, controlling for other factors that can impact employment. The consistency of these findings across time, place, and level of increase is powerful evidence that increasing the minimum wage creates a healthier low-wage labor market.

An increase in the minimum wage raises the cost of labor for businesses by definition, but the economy can absorb these changes through channels of adjustment including decreased turnover, modest price increases (see Question 2), lower profits, and the reallocation of workers to more productive firms. Even if a minimum wage increase leads businesses to adjust their staffing levels, what workers are likely to experience are decreases in hours worked or increased time between jobs, not categorical unemployment. Higher hourly earnings can more than offset these reductions, leaving many workers with greater total income even if they are working fewer hours.

Will raising the minimum wage cause inflation?

In brief: No. Increasing the minimum wage does not meaningfully increase prices.

In detail: Economists do find that raising the minimum wage increases prices at affected businesses but only very modestly. For example, one study found that a 10% minimum wage increase was associated with a 0.14 percentage point increase in the Consumer Price Index. A study focused on the restaurant industry found a 10% increase in the minimum wage was associated with a 0.58% menu price increase. Even some of the most ambitious minimum wage policies, such as California’s $20 hourly wage floor for fast-food workers, only increased fast-food prices 2.1% (around 8 cents for a $4 item). 

The economic benefits of the minimum wage far exceed these price increases. For low-wage workers, the wage boost from the higher minimum wage more than compensates for increased prices of the goods and services they buy. These workers are in turn spending more in aggregate because of their additional income, which can boost the overall economy. It is also worth noting that modest price increases on things like restaurant menu items are redistributive. Higher-earning consumers pay higher prices, transferring income to low-wage workers receiving bigger paychecks.

Claims that increasing the minimum wage will dramatically increase prices in the economy are false. Low-wage labor is a small share of total business expenses. In restaurants, for example, total labor costs are around 30% of operating costs—which also include rent, food, utilities, and insurance—and the wage bill of the lowest paid workers is an even smaller amount. This, combined with the fact that minimum wage increases can be offset through reduced profits, lower turnover, and higher productivity, is why price increases are small.

Will businesses just relocate if a state or locality raises its minimum wage?

In brief: The best economic research suggests businesses do not move in response to minimum wage increases.

In detail: One way that economists try to understand the impact of minimum wage increases is to compare economic outcomes across jurisdictional borders where a minimum wage increase took effect on one side but not the other. An analysis of cross-state and county impacts of all local minimum wage differences between 1990 and 2006 found no evidence that employment decreased in the places where the minimum wage went up or that employment increased in the places without a minimum wage increase. More recent research supports these findings, strongly suggesting that businesses are not relocating or moving their workers in response to minimum wage changes.

Businesses commonly affected by minimum wage changes (such as restaurants and retail) want to locate where there are consumers with money to spend. Because raising the minimum wage boosts the spending power of low-income households, it can strengthen the local customer base for these direct-to-consumer businesses even as it raises their labor costs.

Is the minimum wage an effective way to fight poverty?

In brief: Increasing the minimum wage does reduce poverty and should be paired with a strong safety net.

In detail: Minimum wage increases do significantly reduce poverty by boosting household income, especially among low-income households. Research has found that a 10% increase in the minimum wage reduces nonelderly poverty by 2–4%. When EPI applied this research to the 2021 Raise the Wage Act (which would have gradually increased the minimum wage to $15 an hour), an estimated 1.8 to 3.7 million individuals would have been lifted out of poverty, including up to 1.3 million children.

The current weakness of the federal wage floor exposes workers to poverty-level wages. As of 2025, a full-time worker earning the federal minimum wage makes less than the poverty line. A stronger wage floor would generate more savings across critical safety net programs like Medicaid, SNAP, the Earned Income Tax Credit (EITC), and the Child Tax Credit (CTC), as fewer workers would need or be eligible for these programs due to their increased wages. The safety net would thus be more targeted toward the households that need assistance the most. Those public savings can and should be reinvested in those programs to make benefits more generous.

Can increasing the minimum wage harm workers by pushing them over a “benefits cliff”? 

In brief: The minimum wage does reduce safety net program eligibility, but the wage gains almost always outweigh the loss of benefits.

In detail: Most income-tested safety net programs are not characterized by “cliffs” but rather gradual phase outs. Nevertheless, when a worker’s income increases because of a minimum wage increase, they can lose eligibility to programs like Medicaid, EITC, CTC, SNAP, and housing assistance. Research on the interaction between the minimum wage and safety net eligibility finds that benefit reduction is significantly outweighed by the increase in income from the minimum wage. Benefit reductions offset around a third of the income increases for low-income families caused by the minimum wage—meaning that on net they still benefit overwhelmingly.

Higher minimum wages also help low-wage workers increase their access to medical coverage. While minimum wage increases can lift workers out of income eligibility for Medicaid, they simultaneously increase the take-up of employer-based health insurance plans by many low-wage workers, since those workers can more easily afford those plans. Many workers who lose Medicaid eligibility also can receive heavily subsidized private health care through the Affordable Care Act (ACA) exchanges. Researchers estimate that the $20 fast-food minimum wage in California could push almost 60% of Medi-Cal eligible workers in the industry off Medi-Cal and onto alternative health insurance. The wage benefits of the wage floor increase far outweigh the annual premium contributions workers must pay for ACA marketplace healthcare, even accounting for the Trump administration’s choice to let expanded subsidies for the ACA expire.

The reduction in public benefit usage created by higher minimum wages generates substantial savings for federal and state government. These savings should be reinvested in the safety net by expanding program eligibility or otherwise strengthening programs.

There are some safety net programs, which have cliff-like characteristics, like child care assistance, although states are required to provide a graduated phase-out. In rare cases where changes in program eligibility from a minimum wage increase does reduce a family’s total income, this indicates that the design of these programs’ eligibility criteria needs reform, not that the minimum wage increase should be abandoned.

Should lower cost of living in the South and Midwest mean a lower wage floor in those states?

In brief: Even accounting for differences in the cost of living, the minimum wage is far too low in many states across the South and Midwest.

In detail: Cost of living does vary between states and regions across the country, but the minimum wage is still too low across the South and the Midwest. According to EPI’s Family Budget Calculator, even under conservative assumptions of what constitutes a living wage, there is almost no county in the U.S. where a single adult worker can achieve a modest but adequate standard of living earning less than $15 an hour. In fact, many metro areas in the South and Midwest are much more expensive to live in. The living wage in Austin, Atlanta, and Charlotte exceeds $20 an hour. Affordability is still a pressing issue across these regions, even if on average the cost of living is lower. Notably, voters in Florida, Missouri, and Nebraska passed ballot referenda to raise their state minimum wages to $15.

Low wage floors in Southern and Midwestern states hurt workers by suppressing their pay. Most of the states that use the $7.25 federal minimum wage are in the South and Midwest, meaning the effective wage floor in these states is a poverty-level wage (see Question 5). Compounding the problem, many states in these regions preempt localities from passing their own minimum wage policies, preventing policymakers in these jurisdictions from setting wage floors that meet the needs of workers. The use of preemption to dismantle higher labor standards like the minimum wage in the South and Midwest has a long history of being used to reinforce anti-Black racism and white supremacy in these regions.

Can employers ever pay less than the minimum wage?

In brief: Most U.S. minimum wage laws do exempt some groups of workers (such as farmworkers) or set lower minimum wages that apply in certain circumstances (such as for workers who customarily receive tips). Unfortunately, these exemptions can be deeply harmful to workers; in some cases, they were originally adopted to exclude workers of color from minimum wage protections.

In detail: Federal and state labor standards make several groups of workers either ineligible for minimum wage protections or subject to a separate “subminimum wage.”

The FLSA exempts a variety of occupations and types of workers from minimum wage protections. Agricultural workers are excluded from the federal minimum wage entirely and workers who customarily receive tips may be paid a subminimum wage (sometimes called the “tipped minimum wage”) as low as $2.13 an hour (see Questions 8–11). Both of these exemptions originated as ways to exclude Black workers from New Deal economic policies in order to appease Southern lawmakers. Originally, the FLSA also excluded domestic workers, another group of workers with a high concentration of Black workers, but lawmakers extended coverage to them in 1974.

The FLSA also allows employers who have been granted a certificate from the U.S. Department of Labor to pay less than the minimum wage to employees with disabilities (see Question 14).

Another category of federal exemptions and subminimum wages impact young workers. Youth under 20 can be paid as little as $4.25 per hour for their first 90 calendar days of employment. Full-time students, apprentices, and student-learners can also be subject to subminimum wages. And specific occupations typically held by young workers, like babysitters and seasonal amusement workers, are exempt.

Workers misclassified as independent contractors, such as gig economy workers and other wrongly classified employees are not eligible for FLSA protections, including the minimum wage. Also, despite the fact around half of incarcerated people work full-time, these individuals are also excluded from the minimum wage.

State and local policymakers in many states have made efforts to close many of these gaps in minimum wage coverage, but states that do not go beyond the federal standards maintain these exemptions.

Does raising the tipped subminimum wage hurt the restaurant industry?

In brief: Tipped workers are low-wage workers who need wage increases just as much as any other type of worker. Economic research does not find that boosting the minimum wage for tipped workers hurts the restaurant industry.

In detail: There is no inherent economic reason why tipped workers should be paid a lower minimum wage than other workers. The fact that U.S. law allows this can be traced directly back to racist economic practices following the abolition of slavery. Seven states do not have a separate subminimum wage for tipped workers yet still have strong restaurant and hospitality industries. Economic research on the restaurant industry finds that tipped minimum wage increases boost wages for workers without affecting employment. Similarly, when the District of Columbia increased its tipped minimum wage, the restaurant industry did not suffer in terms of employment growth or number of establishments when compared with the U.S average or nearby counties.

Don’t tipped workers earn enough to earn a living wage?

In brief: Tipped workers, including restaurant servers and bartenders, are overwhelmingly low-wage workers. Many struggle to make ends meet, especially those in states where they can be paid less than the minimum wage.

In detail: Tipped workers are more than twice as likely as non-tipped workers to be in poverty. Poverty rates of tipped workers who live in states that use the federal tipped minimum wage of $2.13 are substantially higher than poverty rates of tipped workers in states that use the same minimum wage for all workers, regardless of tips.

The subminimum wage for tipped workers exacerbates economic insecurity for many workers. Employers are legally required to ensure that on a weekly basis, tipped workers’ tips cover the gap between the tipped minimum wage and the regular minimum wage for all hours worked that week, on average. If they do not, employers are responsible for making up the difference. In practice, this requirement is exceptionally difficult to enforce, as it is largely left to workers themselves to track their hours and tips, make the relevant calculations, and then confront their employer if something seems amiss. As a result, tipped workers—who are already paid low wages—are particularly vulnerable to wage theft.

Will raising/eliminating the tipped minimum wage lead to fewer tips or force restaurants to end tipping?

In brief: Tipping is deeply embedded in U.S. culture. Even in places with no separate tipped subminimum wage, workers still receive tips and typically have higher overall take-home pay than their peers in places with a separate tipped subminimum wage.

In detail: In the seven states that do not have a tipped subminimum wage, tipped workers continue to receive tips. According to the Toast platform, California (a state where tipped workers receive the full minimum wage) had the lowest tipping rate (i.e., the average percentage tip on a bill) in the country at 17.2%. This is less than 5 percentage points less than Delaware, the highest tipping state (21.8%). By contrast, the effective minimum wage for tipped workers in California ($16.90) is more than seven times greater than in Delaware ($2.23). EPI research finds that tipped workers in states without a lower tipped subminimum wage earn, on average, 17% more per hour in total take-home pay (base wages plus tips) than tipped workers in states that use the federal $2.13 tipped subminimum.

There is nothing wrong with workers receiving tips for their work in service jobs, but formalizing tipping in minimum wage law allows employers to shift responsibility for paying their workers onto customers. This in turn means workers are more vulnerable to harassment, discrimination, and other forms of abuse. Restaurant workers, particularly women, are subject to the highest rates of sexual harassment of any industry. Research has also found that racial discrimination leads to Black workers receiving fewer tips than their white counterparts. Relying on tipping means workers have less ability to avoid or protect themselves from harmful interactions in the workplace.

Does the so-called “no tax on tips” deduction eliminate the need to raise the tipped minimum wage?

In brief: The 2025 budget tax bill did create a temporary tax deduction for tipped income, but for most tipped workers the benefits are modest and pale in comparison to the benefits of increasing the wage floor.

In detail: The 2025 Republican budget bill created a new, temporary federal income tax deduction for tipped income. This policy does little to address the precarity of tipped work and the benefits to most tipped workers pale in comparison to the gains they would receive through a significant minimum wage increase. The tax deduction encourages employers to rely more on tipped jobs and avoid raising base wages, exacerbating the low wages and challenging conditions of most tipped jobs (see Questions 9 and 10). Many tipped workers earn too little to qualify for the benefit, and those that do will likely see modest tax benefits. Whereas the average annual benefit for an eligible tipped worker will be around $1,700 a year for the three remaining years the deduction is in place, a minimum wage increase to $15 per hour would boost earnings by $3,200 a year for a full-time worker, in perpetuity.

Aren’t most minimum wage workers teenagers?

No, the vast majority of workers impacted by the minimum wage are not teenagers. Low-wage work is a widespread problem and not just isolated to younger workers. EPI’s analysis of the 2025 Raise the Wage Act found that only 14% of the workers that would be impacted by the policy were younger than 20 years old.

Will raising the minimum wage hurt young workers in their first jobs? 

In brief: Higher minimum wages cause little to no employment changes for teenagers.

In detail: The majority of studies find little to no evidence that the minimum wage causes employment losses for teen workers. Instead, their incomes increase as they earn higher pay. It is also worth keeping in mind that teen workers are a minority of low-wage workers, and a shrinking share of the workforce overall as the cultural and economic emphasis on education has grown. To that end, minimum wage increases can support young workers’ educational attainment, particularly for low-income teens. Minimum wage increases significantly improve high school graduation rates for low-income students, a vital investment that can have large long-term consequences for those workers’ lifetime earnings.

Do workers benefit from the FLSA’s subminimum wage for workers with disabilities?

In brief: The federal subminimum wage for disabled workers does not provide real wage protections and is out of step with the most effective ways to boost employment for workers with disabilities.

In detail: Under Section 14(c) of the Fair Labor Standards Act, employers can apply for special certificates with the Department of Labor that allow employers to pay workers with mental or physical disabilities less than federal minimum wage. Employers can only apply for certificates if the worker’s disability actually impairs the worker’s earning or productive capacity. An overwhelming share (96%) of 14(c) employees work in so-called “sheltered workshops” which put workers with developmental disabilities in isolated, noncompetitive environments.

These certificates apply to a small number of workers (less than 37,000 nationally) but also produce exceedingly low pay for workers with disabilities. Nearly half of 14(c) workers were paid less than $3.50 an hour, exacerbating the economic precarity experienced by disabled workers. Disabled adults are 24.1% more likely to live in poverty than other adults. The low pay permissible under 14(c) perpetuates these workers’ struggle to make ends meet. This measure is also unnecessary for providing well-paying employment opportunities to workers with disabilities.

Researchers studying state repeals of 14(c) have found that the change has not hurt disabled workers’ employment. In Maryland, eliminating the provision caused no significant change to disabled worker employment, while in New Hampshire, employment increased. An analysis of the federal AbilityOne program, which is composed of nonprofits that primarily employ workers with disabilities, found that state and local minimum wage increases did not impact the employment of those workers. Employers also do not appear to shift more workers to 14(c) certificates in response to minimum wage increases.

Overall, the use of 14(c) certificates has been declining over time. Across the country, 27 states and D.C. have eliminated or restricted the use of the provisions, reflecting that the policy does not offer real wage protections for disabled workers and that there are superior models of employment for workers with developmental disabilities. Respecting the dignity of workers with disabilities requires prioritizing real pay and inclusion in supportive, but integrated employment opportunities.

Many cities and states already have minimum wages above $15 an hour. Is increasing the federal minimum wage still important?

In brief: Yes, tens of millions of workers still earn less than $15 an hour. In many states and cities, higher wage floors are needed to provide meaningful economic security.

In detail: In the last decade, dozens of cities and states have responded to federal minimum wage inaction by enacting stronger wage floors, in many cases reaching or exceeding $15 an hour. As of 2026, more workers work in a state with at least a $15 minimum wage than in a state using the federal minimum wage. However, there are still 20 states that use the federal $7.25 wage floor and around 14 million workers earn less than $15 an hour.

Even places with recent minimum wage increases might need higher wage floors. The first $15 minimum wage was enacted in 2013. Prices have risen substantially since then, and consequently, the value of targets like $15 an hour has declined significantly. According to EPI’s Family Budget Calculator, $15 is not a living wage almost anywhere in the country. Many cities and states have at least partially protected their wage floors by adopting automatic annual adjustments to account for inflation, but if the initial value is too low, this inflation-indexing only locks in an unlivable floor.

Very few workers earn the federal minimum wage of $7.25 an hour. Is the minimum wage even relevant anymore?

In brief: The fact that so few workers earn the federal minimum wage is a policy failure, not a reason to abandon the policy. The minimum wage is a vital tool for lifting wages and addressing systematic power imbalances between workers and employers. The failure to adequately raise the minimum wage over time has left millions of workers being paid less today than they could have been earning.

In detail: It is true that a small fraction of the labor force earns exactly the federal minimum wage, but this is a policy failure that has left tens of millions of workers with lower wages. Had Congress simply raised the federal minimum wage to keep pace with inflation since the late 1960s, it would be over $12.50 today. According to EPI’s Low Wage Workforce Tracker, 14 million workers earn less than $15 an hour, while 42 million earn less than $20 an hour. The minimum wage does not just impact workers at the very bottom of the wage distribution; it exerts upward pressure for low-wage workers in general. Minimum wage increases create “spillover effects,” where workers above the new minimum wage threshold also see wage increases as employers keep wage ladders and seniority consistent in their firms.

It is important to recognize that without leveraging policy tools like the minimum wage, the low-wage labor market gives employers excess power to set low wages. Workers have limited information about the wages and work policies at alternative employers and can be constrained in their job choices by limited transportation options or the need to maintain specific schedules for child care and other family needs. These economic “frictions” add up, providing leverage for employers to pay lower wages than is optimal for the economy. In short, the longstanding failure to increase the federal minimum wage suppresses worker pay, leaving low-wage workers worse off every year there is no increase.

Does raising the minimum wage lead to automation of low-wage jobs?

In brief: The minimum wage is not a primary cause of automation of low-wage work, but automation is changing the tasks and occupations of some low-wage workers.

In detail: Increasing the cost of low-wage labor can encourage businesses to invest in automation. This can lead to disruption for specific low-wage jobs, or changes in the roles in those occupations. Since we see that the minimum wage does not increase unemployment for low-wage workers (Question 1), the effects of automation on these low-wage jobs are either limited or counterbalanced by expanding employment in other occupations. Evidence suggests that while in recent years automation is taking over a growing number of routine tasks from low-wage workers, the minimum wage has a limited contribution in driving that adoption. Researchers with access to extensive data on McDonalds franchises nationwide found that, while the adoption of touch-screen ordering kiosks grew significantly between 2017 and 2019, there was no evidence that uptake was driven by minimum wage increases. So far, the overall employment impact of automation on low-wage workers has been insignificant, as reductions in occupations with high amounts of routine tasks have been replaced with greater demand for jobs with interpersonal tasks.

Technology is a tool, but the balance of labor market power determines who it helps. Automation has been a feature of our economy since the industrial revolution, boosting productivity in our economy. Technological change can disrupt employment for specific sectors or professions, but in aggregate the economy benefits. Workers benefit from these productivity increases when there are strong labor institutions like access to unions, a strong minimum wage, and policies that support full employment. When those institutions are weak, the gains from technological advancement are not shared widely and contribute to increased inequality.

Related: Why the U.S. needs a $17 minimum wage • Why eliminate the tipped minimum wage

Interactive

Without a policy change, we project there will be 1.68 million NYC workers earning less than $30 an hour in 2030, or 36.7% of the city’s wage-earning workforce. It is likely that the vast majority of these workers would experience significant wage gains if a $30 minimum wage were implemented.

An enormous body of research on the effects of higher minimum wages has shown that past minimum wage increases have meaningfully raised pay for low-wage workers without causing significant increases in unemployment. However, the “$30 by 2030” proposal would go beyond the levels of minimum wages studied in past research, making it more difficult to precisely estimate the number of workers who would benefit and any additional impacts of the measure, such as reductions in hours or employment.

New York City’s current minimum wage does not come close to a living wage

NYC workers face some of the highest living costs in the nation. EPI’s Family Budget Calculator (FBC) measures the income a family needs to attain a modest yet adequate standard of living in every U.S. county. The FBC thresholds are conservative amounts: they account for necessities like housing, food, transportation, health care, and child care but do not provide any allowance for savings for retirement, emergencies, or college. As Figure A shows, a family of two adults and two children in the Bronx faces annual costs of nearly $135,000.2 In Manhattan, these costs are greater than $167,000 a year. For a single adult with no children, annual costs range from $62,913 in the Bronx to $87,038 in Manhattan.

Figure A

With the FBC cost data we can estimate a living wage that would allow workers to support their families.3 Table 1 shows that the living wage in 2025 is already above $30 an hour in Manhattan ($33.89), Queens ($31.31), and Staten Island ($30.68). While Brooklyn and The Bronx do not exceed this threshold, the costs facing these families will almost certainly continue to rise between today and 2030. These figures make it clear that discussions of a $30 minimum wage in New York City are not superfluous—they reflect the very real needs of working people throughout the city.

Relative to the actual living wage, New York City’s minimum wage is significantly lower than many other high-cost-of-living cities in the country. NYC’s $16.50 minimum wage is around half of the living wage in most of the city’s boroughs. By comparison, the minimum wage is around three-quarters the estimated living wage in Seattle, Washington D.C., and Los Angeles. Chicago’s and Denver’s minimum wages are each more than 80% of a living wage, while the minimum wage is 69.3% of the living wage in San Francisco. All these cities have room to push for higher wages for their workers, but it is clear that New York City’s minimum wage leaves workers further behind than many other major cities in the country.

It is notable that among the cities in Table 1, those with local control over minimum wage policy have been significantly more successful at approaching living wage targets. While New York City’s minimum wage is higher than the upstate region, the policy is currently set by state lawmakers in Albany, not at the local level. Boston (Suffolk County, MA) uses the Massachusetts state minimum wage of $15.00, which is around half of the living wage in the city. Portland, OR, also has its minimum wage set by state lawmakers and has a slightly stronger minimum wage floor (69.8% of the living wage), but every city with a wage floor of at least 70% of the living wage has local control over the policy.4 This pattern suggests that when given the power to do so, local government officials are more responsive to the wage floor needs of workers in their city.

Without a policy change, 1.68 million New York City workers will be paid less than $30 an hour by 2030

Under the status quo minimum wage policy in New York City, we project there will be 1.68 million workers earning less than $30 in 2030, a little more than a third (36.7%) of the total wage-earning workforce in the city. These workers would likely be directly affected by the minimum wage increases in Mamdani’s policy proposal. In addition, economic research shows that workers already earning above the new minimum wage also typically benefit through spillover wage effects as employers seek to maintain organizational wage ladders.

Most minimum wage research finds that increasing the wage floor significantly increases earnings for affected workers, while causing little to no loss in employment. That’s because businesses are able to adjust to increased labor costs through modestly increasing prices, reductions in turnover, and the movement of workers from less-productive firms to more-productive firms.

Moreover, even if a minimum wage increase did result in reduced employment, it’s important to understand what that actually means for low-wage workers. The low-wage job market is characterized by high levels of turnover and churn, as workers are typically always looking for any new position that will offer them more livable pay. Many low-wage workers also spend some portion of the year not employed—due to care responsibilities, participating in education or training programs, or seeking other work. In this context, what researchers would describe as reduced employment does not mean that some set of workers will now be permanently unemployed. Rather, it likely would mean that some low-wage workers would work fewer hours over the course of the year or spend more time between jobs. Of course, these workers would now be earning more per hour when they do work because of the higher minimum wage—what really matters is the net outcome on their annual earnings.

We are cautious about extending the general conclusions of minimum wage research on employment to a $30 minimum wage in New York City. The proposal is more ambitious than the levels that economists have studied extensively. One tool economists use to assess the “bite” of a minimum wage is the minimum-to-median-wage ratio (sometimes called the “Kaitz index”). When underlying wages in the labor market are higher, as proxied by the median wage, the minimum-to-median-wage ratio is lower, and a given minimum wage affects a smaller share of employment. For example, a $17 minimum wage will have a much smaller effect on workers and employers in a higher wage place like New York City than it would have in places where wages are generally much lower.

Table 2 estimates the minimum-to-median-wage ratio for a $30 NYC minimum wage in 2030, as well as other wage thresholds. The ratio of a $30 minimum wage in 2030 would be around 0.76, higher than most other policies in the U.S.5 In a 2021 paper, economists Arindrajit Dube and Attila Lindner compared minimum-to-median-wage ratios across the 10 most populous U.S cities with minimum wages above the state level and found a population-weighted average minimum-to-median-wage ratio of 0.64.6 At the time, Los Angeles’s minimum wage had a Kaitz index of 0.75, but this policy has not been studied enough to understand its employment effects. According to Dube and Lindner, most state minimum wage policies greater than the federal minimum sit at a minimum-to-median-wage ratio of around 0.50. Among international peers, it is notable that the United Kingdom officially targets a minimum wage policy that is two-thirds the median wage (ratio of 0.67). Other Organization for Economic Co-operation and Development (OECD) countries also have high minimum-to-median-wage ratios, including France (0.62), New Zealand (0.69), Mexico (0.74), Chile (0.75), Costa Rica (0.87), and Colombia (0.92).

The cost-of-living crisis in New York City requires bold steps forward as part of a cohesive strategy to create a more equitable economy. Increasing the minimum wage should be one key part of this strategy, which must also include tackling the cost of housing, child care, and health care. The experience of other high-cost cities also indicates that local lawmakers are better positioned than state officials to set appropriate and livable minimum wages for their jurisdiction’s workers. New York state lawmakers can be much more ambitious in setting high standards for New York City, but it likely would be better to let the city set its own wage standards above the state floor, much in the same way that states can set their own minimums above the federal minimum.

Table 1

Table 2

Notes

1. The proposal also calls for indexing the minimum wage to inflation or productivity increases, whichever is greater, thereafter. The tipped minimum wage in New York is set at two-thirds the regular minimum wage.

2. The FBC data is organized by county, but for the purposes of this analysis we refer to the corresponding New York City boroughs.

3. Gould, Mokhiber, and deCourcy (2024) suggest living wages can be approximated by 81% of the associated FBC thresholds because middle-income families receive about 81% of their income through wages and 19% from other non-wage sources, including government transfers (such as refundable tax credits) and non-wage market income (such as interest on savings).

4. Of course, any state action is more beneficial than using the stagnant federal minimum wage, which is still the effective wage floor in Philadelphia, Dallas, Houston, and other cities in states where local minimum wage increases are preempted. These localities all have effective minimum wages that are less than half of the living wage.

5. Our projections assume a nominal annual wage growth of 3.3% based on Congressional Budget Office (CBO) projections of the Employment Cost Index. If we vary this assumption ±0.5%, the outcomes of a $30 minimum wage in 2030 vary as follows: Kaitz ratio: 0.73–0.79. Share of workers under $30 an hour: 36.0%–40.0%.

6. At the time New York City had a 0.66 Kaitz index, higher than it does today (approximately 0.5).

The Fair Labor Standards Act (FLSA) establishes a “floor under wages” mandating that employers pay covered employees no less than a minimum hourly rate for all hours worked, whether they are paid on an hourly or salaried basis. The current federal minimum wage is $7.25 per hour—a rate set in 2009. FLSA minimum wage rules apply to all private businesses with annual revenue of at least $500,000, as well as hospitals, care centers, schools, and public agencies. 

The FLSA exempts a variety of specific occupations from the minimum wage, such as newspaper delivery workers, seasonal farm workers, workers in commercial fisheries and canneries, private investigators, and babysitters. It allows workers under 20-years-old to be paid as little as $4.25 per hour for their first 90 days of employment. The FLSA also allows employers who have been granted a certificate from the U.S. Department of Labor (DOL) to pay less than the minimum wage to employees with disabilities. It also allows employers to pay workers who customarily receive tips as little as $2.13 per hour, so long as the tips they receive over the course of a workweek bring them to an average hourly combined wage (tips plus base wage) of at least the minimum wage.

What are the threats to federal minimum wage protections?

• Allowing the value of the minimum wage to continue to erode: Since the federal minimum wage was last raised in June 2009, its value has declined by 30%. At its 1968 high point in inflation-adjusted terms, the federal minimum wage was worth roughly $12 in 2024 dollars. In 2019, the U.S. House passed a bill to gradually raise the federal minimum wage to $15 and then automatically update it for inflation every year thereafter; however, the Senate never took up the bill. Every year it remains unchanged, the purchasing power of the minimum wage erodes, undermining wage growth for millions of low-wage workers, including many earning wages above the minimum. Moreover, without an increase, the gap between the current minimum wage and what would constitute a true living wage gets larger—making any eventual effort to reach a living wage more challenging.
• Continuing to subject tipped workers to a lower and difficult-to-enforce subminimum wage: The subminimum wage for tipped workers was set in 1991 at $2.13 per hour and has not been raised since. At such a low level, many tipped workers effectively receive no pay from their employers; their take-home pay comes entirely from what they receive in tips. Consequently, tipped workers’ income is volatile and unpredictable, and they can be subject to abuse by customers and employers who, in every shift and transaction, hold power over tipped workers’ pay. Although the FLSA requires that employers must “top off” workers’ paychecks if their tips do not make up the difference between the tipped minimum and full minimum wage, this requirement is notoriously hard to enforce.
• Denying minimum wage coverage to some groups of workers: The Trump administration has already taken initial steps to roll back existing DOL rules that ensure minimum wage coverage for direct care workers (home health aides) and has withdrawn a proposed rule that would have phased out programs allowing payment of subminimum wages to workers with disabilities. Proposals laid out in Project 2025 recommend altering the FLSA to allow states to seek waivers to core FLSA provisions—which could open the door to exclusions of additional groups of workers from coverage.
• Increasing likelihood of underpayment: Failure to pay the minimum wage is one of the most common forms of wage theft and diminished DOL capacity to enforce federal wage and hour laws will exacerbate this problem.

How can states maintain and strengthen minimum wage protections?

States have legal authority to establish their own minimum wages that are higher and more expansive in coverage than the federal minimum. Given the very real risk that aspects of FLSA minimum wage protections could be eliminated (or will go unenforced), it is important for states to at least lock in existing FLSA minimum wage protections. However, states should seek to go beyond the current floor, as the federal minimum wage is far too low and does not cover all workers.

Step I: Update state statutes to lock in current federal protections

Because updates to the federal minimum wage have been infrequent and inadequate over the last 40 years, many states—though not all—have established their own minimum wages. The strength of these laws varies greatly. For example:

• 30 states and the District of Columbia have set minimum wages higher than the federal minimum, ranging from $8.75 in West Virginia, to $16.66 in Washington, and $17.50 in the District of Columbia.
• Five states (Tennessee, South Carolina, Louisiana, Mississippi, and Alabama) have no state minimum wage. Two states (Georgia and Wyoming) have state minimum wages below the federal minimum. The federal minimum wage applies in these states to all workers covered by the minimum wage under the FLSA.
• Some states (such as New Hampshire, Idaho, North Carolina, and Texas) set the state minimum to explicitly equal the federal minimum (whatever it may be), while others have set it specifically at $7.25.

To lock in current federal minimum wage protections, states should:

1. Guarantee a strong state minimum wage floor: States without a minimum wage or with one lower than the federal minimum should enact one that is at least as strong as the federal minimum wage—and ideally stronger. States should codify that the state minimum wage always equals the greater of the federal minimum wage or whatever higher explicit value state lawmakers or voters (in the case of a ballot measure) set.
2. Ensure the state minimum wage covers at least those workers covered by the FLSA: Most states, though not all, link coverage of their state minimum wage to the coverage definitions in the FLSA. States should consider spelling out coverage definitions in state code so that currently covered workers remain covered if federal coverage definitions are eroded to exclude certain groups or occupations in the future.
3. Ensure state agencies have authority and capacity to enforce minimum wage laws: Many states rely, at least in part, on federal enforcement of wage and hour laws. Florida, for example, will have a $15 minimum wage in 2026, yet has no state-level wage and hour enforcement body.

State minimum wage rules are typically part of state labor and employment or wage and hour statutes. In some cases, they are set in state constitutions—the result of citizen-initiated ballot measures. Policymakers and advocates should review their state’s labor laws to assess whether their state minimum wage laws codify at least the same level of protection currently provided under the FLSA, and to ensure that the state has the power to enforce its own minimum wage laws without relying on the federal government.

Step II: Raise the minimum wage to an adequate level, set it for automatic annual increases going forward, and eliminate harmful exemptions

While the FLSA sets an important floor for minimum pay, the current level is woefully inadequate and there remain notable gaps in coverage that state policymakers should close. Priority steps states can take to update the minimum wage include:

1. Gradually raise the minimum wage to at least $17 per hour by 2028: Today, there is no county in the country where a single, childless worker can achieve a modest, but adequate standard of living on a wage of less than $15. By targeting at least $17 by 2028, states can raise their minimum wages to an adequate level allowing for any inflation that may occur as the new wage floor is gradually phased in.
2. Gradually raise and eliminate the subminimum wage for tipped workers: There are currently seven states where tipped workers are paid the regular minimum wage, regardless of tips. In these states, tipped worker wages are higher, poverty rates are lower, and the restaurant industry thrives. States should gradually increase the minimum wage that applies to tipped workers (or reduce any “tip credit” employers can claim against their minimum wage obligation) so that eventually all workers are paid the full minimum wage regardless of any tip income.
3. Index the minimum wage for inflation: States should establish that once the minimum wage has reached at least $17 per hour, it must be automatically updated each year to account for any growth in prices over the preceding year. There are 20 states and D.C. that already have automatic inflation-adjustment built into their state minimum wage laws. Most require that the minimum wage be raised the same percentage as any change in the Consumer Price Index (CPI-U) over a preceding 12-month period, rounded to the nearest 5 cents. If the CPI-U decreases, the minimum wage should not be lowered.
4. Codify minimum wage coverage for direct care workers: As noted above, the 2013 FLSA rule that clarified minimum wage and overtime coverage for home care companions who provide direct care services for seniors and persons with disabilities is under attack in the courts, and the Trump DOL has taken initial steps to reconsider it. To protect such workers from losing these key protections, states should ensure that their wage and hour laws clearly cover them. In states where they are exempted or where state coverage of such workers depends on FLSA coverage (such as Connecticut), state laws should be updated to clearly cover such workers, regardless of what happens to the federal rule.
5. Eliminate harmful minimum wage exemptions: Agricultural workers are not covered by the FLSA, a racist holdover from when the act was initially passed in 1938. Other exceptions apply to smaller categories of workers. States have it in their power to eliminate these exemptions. For example, several states—including California, Washington, and Colorado—cover agricultural workers under the state minimum wage. Also, many states have a “training wage” allowing workers—often only those under age 20 or in school—to be paid less than the full minimum wage. Lawmakers should consider whether these training wages are necessary, and if they are maintained, they should be limited to a short period (e.g., 30 days) after a worker’s initial hiring.
6. Ensure localities can establish their own minimum wages above the state minimum: There are nine states in which a city or a county has established a local minimum wage that exceeds the state minimum—with nearly 60 local minimum wages now in effect. Because costs of living can vary considerably within a state, local governments should be able to establish higher wage standards if the people in those localities deem that the state wage floor is inadequate. There are 25 states where state law currently prohibits local wage minimum wages. Lawmakers in those states should reverse that prohibition.

Step III: Modernize minimum wage policies by establishing stronger mechanisms to adjust the level of the minimum wage over time

In addition to codifying FLSA minimum wage rules, setting an adequate minimum wage level, and closing coverage gaps, there are other steps state lawmakers can take to ensure all workers can afford a decent life and benefit from a growing economy.

1. Set the minimum wage to automatically adjust each year based on growth in prices or median wages—whichever is greatest: Indexing the minimum wage to changes in prices ensures that low-wage workers can buy the same amount of goods and services year after year. But as the economy grows and productivity rises, low-wage workers’ standard of living should improve, not just stay the same. Instead of indexing the minimum wage to price changes, lawmakers can index the minimum wage to changes in the median wage.
   • Linking the minimum wage to the median wage ensures that the gap between the lowest paid job and a “middle-class” job never grows; as a middle-class worker’s pay rises, so would pay for a minimum wage worker.
   • Over the long run, wage growth should outpace price growth, but on a year-over-year basis, that may not be true and in some years, median wages could decline. The law should be written such that the minimum wage never goes down and is raised at least as much as any increase in prices—and more when wage growth exceeds price growth.
2. Establish wage boards to periodically evaluate the strength of the minimum wage overall and for specific industries: In some countries—such as the United Kingdom— minimum wage levels are set by boards or commissions (composed of nonpartisan analysts, worker representatives, and members of the business community) that periodically review the level of the minimum wage and recommend changes. In some states—such as in New York and California—there are wage boards for individual industries, such as fast food, that set minimum wages (and potentially other workplace standards) for all workers in that industry. Policymakers should consider establishing or creating mechanisms allowing for such boards to periodically review whether the state minimum wage level is adequate for workers overall, and/or for those in industries with large numbers of low-wage workers.

Additional recommended resources 

• Why the U.S. needs at least a $17 minimum wage (Economic Policy Institute) 

• The impact of the Raise the Wage Act of 2023 (Economic Policy Institute) 

• Minimum Wage Tracker (Economic Policy Institute) 

• Most minimum wage studies have found little or no job loss (Economic Policy Institute) 

• Minimum Wage for Agricultural Workers (The National Agriculture Law Center) 

• Low Wage Workforce Tracker (Economic Policy Institute) 

Editor’s note: This piece was revised on October 23, 2025, to add an “Additional recommended resources” section.

Figure A

While not as widespread as the minimum wage raises at the beginning of the year, these summer increases will nevertheless have a profound impact for lower-wage workers and will benefit a diversity of working people:

• 57.9% of affected workers are women.
• While more than half (54.6%) of the benefitting workers are white, the policy disproportionately affects Black and Hispanic workers.
• 86.2% of affected workers are 20 or older, and more than half (55.3%) are 25 or older.
• 45.0% of the affected workers work full-time.
• 54.5% of these workers belong to households whose incomes are less than 200% of the poverty line, meaning they are either impoverished or struggle to maintain economic security.
• More than one in five (22.3%) of affected workers are parents.

These minimum wage increases will put more money in workers’ pockets, helping many of them and their families make ends meet. The average increase in annual wages for a full-time, year-round worker resulting from these minimum wage hikes ranges from $420 in Oregon to $925 in Alaska.

Workers across the nation continue to face high costs of living. According to EPI’s Family Budget Calculator, there is no county in the nation where a single adult working full time could cover necessities like housing, food, transportation, and health care on less than $17 an hour.1

Table 1

The increases this summer signal broad public support for increasing the minimum wage, as well as the long-lasting impact of state- and city-level action. As indicated in Table 1, Alaska’s July increase is the result of a 2024 ballot measure that will eventually increase the state minimum wage to $15 an hour. On the other hand, Oregon lawmakers last made a significant change to the state’s minimum wage policy in 2016, but the wage floor’s value is tied to inflation—meaning it is adjusted automatically each year to reflect price changes. As a result of this indexing, more than 800,000 Oregonians will get a raise this July. Oregon’s standard wage floor will reach $15.05, making it the 11th state to meet or surpass the $15 threshold.2 Indexing the minimum wage to price increases helps preserve its purchasing power over time—in stark contrast to the stagnation of the federal minimum wage, which lawmakers have allowed to erode to a poverty-level wage.

Lawmakers in several states seek to water down minimum wage ballot measures, particularly for tipped workers

According to EPI’s Minimum Wage Tracker, 30 states and D.C. have a higher minimum wage than the federal minimum. Many of these gains were achieved through the ballot initiative process. In the last decade, voters have directly passed state-level minimum wage increases in Alaska, Arizona, Arkansas, Colorado, Florida, Missouri, Maine, Nebraska, South Dakota, and Washington.

In response to minimum wage increases and other progressive ballot measure victories, at least seven states have passed policies restricting access to ballot initiatives. Even policies that were successfully passed by voters are at risk of being clawed back.

In recent months, lawmakers have watered down a handful of minimum wage ballot initiatives. In 2024, Missouri voters approved a ballot measure that would increase the state minimum wage to $15 an hour in 2026 and index the minimum wage to inflation thereafter. But in May 2025, lawmakers stripped the inflation adjustment provision from the policy.3 Florida is also on the path to $15 an hour, but this year state lawmakers proposed a harmful minimum wage carve-out for interns and work-study workers. The Florida measure has failed for now.

Two jurisdictions have interfered with ballot initiatives that seek to eliminate the tipped minimum wage, a carve-out in federal and many state minimum wage laws which allows tipped workers like waiters and bartenders to be paid less than the regular minimum wage. In Michigan, after a seven-year legal battle over a ballot initiative that Republican state lawmakers had illegally undermined, the state legislature again shortchanged tipped workers by scrapping planned tipped minimum wage increases that would have eventually provided tipped workers the regular minimum wage.

In Washington, D.C., voters overwhelmingly approved a ballot initiative in 2022 to phase out the tipped minimum wage carve-out. However, in June, the D.C. Council voted to delay a scheduled increase of the tipped minimum wage from $10 to $12 an hour.4 The increase, which was scheduled for July, will now take place in October, denying a wage increase for 12,200 tipped workers in the District. Future wage increases for these workers are also in jeopardy since D.C. Mayor Muriel Bowser is pushing to repeal the policy entirely.

Tipped workers are not a large percentage of the overall workforce, but they are disproportionately low-wage workers. They experience poverty at greater rates than other workers and are much likelier to experience sexual harassment. Both their low wages and vulnerability to mistreatment are shaped by the tipped minimum wage. Unlike the traditional employee-employer relationship where workers are paid predictably for their time working, workers subject to the tipped minimum wage often receive virtually all their earnings from tips—making their weekly income unpredictable and subject to a multitude of factors out of their control. Research shows that tip amounts are only weakly connected to the quality of service and Black workers receive fewer tips than their white counterparts for the same reported quality of service. This dependence on customer approval also compels workers to remain in situations where they might experience abusive treatment from customers and supervisors.

Opponents to increasing the tipped minimum wage say that industries that employ tipped workers, primarily restaurants, are experiencing acute hardships due to inflation, consumer spending changes since the pandemic, and economic uncertainty. In the District of Columbia, there is no question that the Trump administration’s cuts to the federal workforce and contracts with regional employers will weigh on the D.C. metro economy. At this point, however, the best evidence shows few signs of any restaurant underperformance in terms of employment or wage growth in the District relative to its regional neighbors—meaning that it would be seriously inaccurate to claim D.C. restaurants are exceptionally burdened by the rising tipped minimum wage. Economic headwinds like inflation and federal government cuts have affected workers as much as they have businesses; tipped workers should not have to bear the brunt of businesses’ response to those headwinds. Moreover, should conditions for the regional or national economy deteriorate significantly, supporting workers’ wages will be vital for renewing growth. Increasing wages for low-wage workers stimulates the economy because low-income households typically spend a greater share of their wages than higher-income households, injecting money into the economy that would otherwise be held back.

Table 2

Some state and local lawmakers are fixing long-standing gaps in minimum wage protections

Lawmakers in other jurisdictions are boosting wages for workers that have been historically excluded from minimum wage coverage. In Chicago (see Table 2), the tipped minimum wage will rise in July from $11.02 to $12.62 an hour as the city gradually phases out the lower tipped minimum wage by 2028. There are already seven states (Alaska, California, Minnesota, Montana, Nevada, Oregon, and Washington) without a tipped minimum wage carve-out. In Maine, lawmakers passed legislation that will extend the state’s minimum wage to agricultural workers, increasing the effective minimum wage from $7.25 to $14.65. Maine joins 21 other states that pay their agricultural workers more than the federal minimum wage, although many states have exemptions for certain types of agricultural workers.

More state-level increases could be on the way. The Rhode Island House and Senate have each passed bills set to increase the minimum wage to $17 an hour by 2027. Currently, approximately 82,000 Rhode Island workers earn less than $17 an hour, or around 17% of the state’s workforce. If fully approved by the chambers and the governor, Rhode Island will most likely join California, Connecticut, and Washington as the fourth state to adopt a minimum wage exceeding $17 an hour by 2027.5

The minimum wage continues to be a powerful, evidence-backed policy for increasing the wages of working people. States and localities must continue to strive for minimum wage targets that provide meaningful economic security to workers in their jurisdictions. This includes ensuring that all workers are subject to the minimum wage, regardless of occupation or industry.

1. Assuming the worker receives all their income from wages.

2. Oregon’s has three distinct minimum wage levels for different geographies in the state (Portland Urban Growth Boundary, Nonurban counties, and remainder of state). Nonurban counties remain at $14.05.

3. Missouri legislators also repealed the paid sick leave portion of the ballot measure.

4. D.C. is increasing its regular minimum wage in July as a result of the indexing provision in its minimum wage policy.

5. California, Connecticut, and Washington’s minimum wages are all projected to surpass $17 an hour by 2027 due to inflation adjustments to their minimum wage. The District of Columbia and numerous localities in Arizona, California, Colorado, Maryland, and Washington already have wage floors exceeding $17 an hour. By 2027, the minimum wages of Chicago, New York City, and the Oregon Portland Urban Growth Boundary will also reach or exceed $17 an hour.

If the Trump administration and its allies in Congress genuinely wanted to help tipped and lower-paid workers, there are far better options they could pursue, like raising the federal minimum wage. To illustrate this, we compare the estimated impact of no tax on tips with the Raise the Wage Act of 2025, a bill that would raise the federal minimum wage from $7.25 to $17 an hour by 2030 and gradually phase out the tipped minimum wage. Here is an overview of how the two plans compare.

How many workers would be affected? How long would benefits last?

No tax on tips: Between 2.5 and 5.2 million tipped workers would receive an income tax deduction over the next four years, but benefits would end after 2028.1

The Raise the Wage Act: Nearly 23 million workers, including 2.8 million tipped workers, would earn higher wages with no end date—meaning affected workers would continue to benefit indefinitely.

How much would these workers benefit annually? How would benefits differ based on income?

No tax on tips: Eligible tipped workers would receive an average annual tax cut of $1,700 for the four years it would be in effect. However, the benefits would heavily skew toward higher-income tipped workers. Among all tipped workers, the top 20% would receive an average tax cut of $5,768 while those in the bottom 20% would only get $74 on average. The average for the bottom quintile is small in large part because two-thirds of those workers have incomes so low that they do not pay federal income taxes and thus will not see any tax benefit.2

The Raise the Wage Act: Affected workers who work year-round would receive an average wage increase of $3,200 per year. After taxes, the net pay increase would be marginally smaller but still significantly larger than what a worker would receive on average with a tax deduction on tips.3 In stark contrast to “no tax on tips,” which excludes workers with the lowest incomes, the largest benefits of the Raise the Wage Act would go to the lowest-paid workers.

Who pays for these benefits?

No tax on tips: The public writ large would pay. House Republican lawmakers are already proposing massive cuts to social programs, such as Medicaid and food stamps that benefit millions of people (including tipped workers), to offset foregone revenue from no tax on tips and large tax cuts for the rich. The Republican plan would also dramatically increase the federal debt, which could substantially raise borrowing costs for households and businesses in the future.

The Raise the Wage Act: Employers of low-wage workers would pay for these wage increases, absorbing the higher labor costs over time through a variety of channels. Importantly, the Raise the Wage Act not only increases the federal minimum wage but also phases out the tipped minimum wage, a system that has provided employers of tipped workers an enormous—and highly problematic—public subsidy for decades.

While no tax on tips would benefit only the small share of workers who receive tips as a portion of their compensation, the Raise the Wage Act would benefit all low-wage workers in the U.S., including 4.2 million people with incomes below the poverty line. Over the next 10 years, the Raise the Wage Act would have a total benefit to affected workers of $700 billion, compared with about $39 billion from “no tax on tips” in the House bill (see Figure A).

Figure A

As we at EPI and others have noted, no tax on tips is problematic for a variety of other reasons, aside from its paltry and poorly targeted benefits. The measure that passed in the House caps eligibility to workers in certain tipped occupations earning less than $160,000 in annual income. This will mitigate tax avoidance by the highest earners, but it does not fix other problems, including the fact that ending taxation of tips would likely expand employer use of tipped work—a system already rife with discrimination and worker abuse. No tax on tips would also undercut efforts to raise worker compensation while depleting tax revenue for public services. By subsidizing the use of tipping in the federal tax code, no tax on tips would further cement a system that lets employers off the hook from paying their workers a fair wage—in this case, forcing taxpayers to foot the bill. In contrast, the Raise the Wage Act gives workers a durable wage increase paid for by those who should be paying—their employers.

Beyond raising the minimum wage, there are several other effective and more equitable policies to support working families—including expanding the Earned Income Tax Credit and Child Tax Credit, providing workers with paid sick leave and paid family and medical leave, and supporting workers’ rights to form and join unions. But Trump and congressional Republicans, while claiming to support workers, have not pursued these policies. Instead, they have relentlessly attacked workers, and pushed an enormous tax cut for the wealthy—paid for by cutting essential social programs for low-income people and children and adding trillions to the public debt. As many as 16 million people would lose their health insurance under the House budget bill.

The Raise the Wage Act is by no means an outlier or a radical exercise in messaging—it’s cosponsored by majorities of House and Senate Democrats. If even a few Republicans were willing to support it, it could easily have the votes to pass. No tax on tips, on the other hand, remains a deceptive ploy that would provide few benefits to workers and fail to offset the harm the Republican budget bill would impose on millions of workers and families.

1. According to Yale Budget Lab’s estimates, about 6.3 million tax units claim tipped income, though only about 4 million workers work in tipped occupations. Since 37% of workers in tipped occupations earn so little that they do not pay federal income taxes and thus would not benefit from the plan, the lower bound of this estimate is 2,520,000 (0.63 times 4 million). The upper bound takes the average share of tax units with a tax cut by quintile (Yale Budget Lab Figure 5) and multiplies it by the total number of tax units with tipped income (83.3% of 6.3 million is 5.2 million).

2. See Yale Budget Lab “No Tax on Tips”: Budgetary, Distributional, and Tax Avoidance Considerations, Figures 5 and 6. 1^st quintile is 0.336*220=$74. 5^th quintile is 0.991*5820=$5,768.

3. For example, the marginal federal income tax rate on all taxable income between $11,600 and $47,150 is 12%. For the average tipped worker, assuming they use the standard deduction and have no other sources of income, their total taxable income likely falls in this range. Thus, a $3,200 increase in wages—without accounting for any tax credits— would net a roughly $2,800 increase in annual post-tax income, $1,100 more than the average net income increase under no tax on tips.

While the federal minimum wage continues to stagnate, states like Colorado have set higher standards for their workers. In 2016, voters passed an initiative that increased the minimum wage to $12 an hour and required annual inflation adjustments. As a result, Colorado’s minimum wage in 2025 is $14.81. In 2019, Colorado lawmakers repealed a ban on local wage-setting, allowing cities and counties to set higher minimum wages to respond to local economic factors—like the high cost of living in urban areas. Following this decision, a handful of localities have passed higher minimum wages, demonstrating the popularity of and need for stronger wage floors in the state (see Table 1).

Table 1

One problem, however, that Colorado has not addressed is the persistence of a lower minimum wage for tipped workers like restaurant servers and bartenders. Under state law, employers are allowed to pay tipped workers $3.02 per hour less than the regular minimum wage, effectively creating a state “tipped minimum wage” of $11.79. (This $3.02 is called the “tip credit”—i.e., the credit that employers may take against their obligation to pay at least the minimum wage with the expectation that tips will make up the difference.) Although local governments can set higher minimum wages, state law still preempts them from eliminating or reducing the tip credit.

Subjecting tipped workers to a separate and lower minimum wage creates a host of problems, including making them more vulnerable to wage theft, sexual harassment, and racial discrimination. In seven states and several cities, lawmakers and voters have eliminated the tip credit so that all workers receive the regular minimum wage regardless of any tip income. In these states, tipped workers have lower poverty rates and higher take-home pay.

Instead of following the lead of these states, HB 1208 would make matters worse for Colorado’s tipped workers by lowering their minimum wage even further. The bill would increase the tip credit in localities that have passed a higher minimum wage by the same amount that the local minimum wage exceeds the state minimum—effectively reinstating a single statewide tipped minimum wage. For instance, in Denver where the local minimum wage is $18.81, the tipped minimum wage currently stands at $15.79 an hour ($18.81 minus $3.02). If HB 1208 is enacted, policymakers would cut Denver’s tipped minimum wage by 25% to $11.79 (equivalent to Colorado’s state tipped minimum wage).

Deepening this harmful carveout is a step backwards that jeopardizes economic security for 70,000 tipped workers in the state. It also tramples on the democratic will of the cities and localities that chose to set stronger wage standards for their workforces. State lawmakers are interfering in local decision-making at the expense of working people.

Table 2

Most tipped workers are low-wage workers who struggle to make ends meet, especially with rising costs in recent years. As shown in Figure A, the median tipped worker in Colorado earns $19.95 an hour from wages, tips, and overtime. For context, EPI’s Family Budget Calculator estimates that even in Colorado’s least expensive county (Mesa County), a single adult must earn at least $19.85 an hour working full time for their wages to cover the cost of necessities like food, housing, and health care. In many regions of the state, costs are much higher. In Denver, a similar living wage standard is $27.75 an hour, while in Boulder it is $28.83. Faced with this steep cost of living, a strong minimum wage policy is vital for working families.

Figure A

Increasing or eliminating the tipped minimum wage does not jeopardize the restaurant industry or the economy overall. Seven states of various sizes and economic makeups (Alaska, California, Minnesota, Montana, Nevada, Oregon, and Washington) have long treated tipped workers the same as all other workers, providing them the same minimum wage regardless of their tips. In these states, restaurants still flourish and tipping is still widespread. The difference is that workers are less likely to require their customers’ good will to secure a livable wage. Further, the highest quality minimum wage research continues to show that increasing the minimum wage boosts workers’ wages with no meaningful impact on employment or business growth, including in the restaurant industry.

Both workers and businesses have had to adapt to large price increases in recent years. However, in Denver, where the tipped minimum wage is higher than the state’s, the restaurant industry remains resilient. Denver had more restaurants in 2024 than it did in 2019, and the county’s restaurant industry has grown more quickly over that period than the U.S. average.

The question of whether economic conditions demand changes to the tipped minimum wage in places such as Denver should be left up to local policymakers who are accountable to local constituents, including workers and business owners. HB 1208 would backtrack on Colorado’s commitment to local democracy and take away more of localities’ already limited ability to decrease the harm of the tipped minimum wage.

If passed, HB 1208 would be one of dozens of examples across the country of state lawmakers suppressing the will of localities that want to set higher standards for their workers. Previous EPI research has documented how state preemption in the South and the Midwest prevents cities from taking a variety of steps to improve economic security for local workers, including increasing the minimum wage above the state level. It is notable that this abusive state preemption of local lawmaking often follows a pattern where a mostly white state legislature undermines local policymaking that would benefit large shares of workers of color, entrenching racial disparities in economic outcomes.

The evidence is clear: A strong minimum wage benefits workers without harming businesses. Instead of rolling back progress, Colorado should continue moving toward ensuring all workers receive a fair and livable wage without exception.

Now that lawmakers in a multitude of states have supported the idea, it’s worth unpacking just how incredibly foolish and dangerous these proposals are. In summary, exempting tips from taxes would:

1. help very few workers and undermine pay increases for many more;
2. expand the use of tipped work—a system rife with discrimination and worker abuse— potentially leading to consumers being asked to tip on virtually every purchase; and
3. deplete state and federal budgets and create new avenues of tax avoidance, especially for high earners.

Map

No tax on tips would help few low-wage workers, while potentially undercutting pay for more

Proponents of exempting tipped income from federal and state taxes have called the proposal a “lifeline” that will “deliver financial relief” and “put cash back in the pocket of a significant number of workers.” In reality, exempting tips from taxable income will help very few workers. First, very few low-wage workers receive tips. If you look at those earning less than $25 per hour, which is just less than half of the workforce, only 5.1% are in traditionally tipped occupations.

Second, many tipped workers already don’t pay federal income tax. According to researchers at the Brookings Institute, 37% of tipped workers “earn so little that they pay no federal income tax.” Similar trends often apply with state income taxes. For instance, families in Virginia earning less than $26,500 only pay 0.3% of their income toward income taxes.

Moreover, exempting tips from taxation will lead to cases where low-income workers end up effectively losing income through losing eligibility to tax credits such as the Earned Income Tax Credit (EITC) and Child Tax Credit (CTC).1

Among tipped workers who do owe taxes, the greatest beneficiaries of this proposal would inherently be those who are already the best off—i.e., those receiving the most tips. It makes no sense for lawmakers to give preference in the tax code to servers in expensive, high-end restaurants who are receiving large tips over a waitress at Denny’s struggling to make ends meet. Nor does it make sense to give tax preference to low-wage tipped workers over nontipped low-wage workers like a bank teller, a retail cashier, or a teacher’s aide. Efforts to raise pay for low-wage workers should focus on the level of earnings, not whether payment came as a gratuity.

Ending taxation of tips would benefit employers at workers’ expense

First, not taxing tips would reduce pressure on employers to raise base wages. Employers would use the preferential tax treatment of tipped earnings as a justification to deny wage increases to their employees, allowing them to effectively capture a portion of the tax benefit.

Such measures could also undermine efforts to raise minimum wages, particularly for tipped workers. The federal minimum wage of $7.25 hasn’t been raised in over 15 years, and the subminimum wage for tipped employees—the mandatory base wage employers must pay to tipped workers regardless of their tip income—remains just $2.13 per hour at the federal level, an amount set in 1993. Even as lawmakers in 30 states and over 60 localities have set higher minimum wages, many of these states still maintain an unconscionably low subminimum wage for tipped workers.

Not taxing tips could further undercut efforts to raise compensation for rideshare, delivery, and other gig/app-based workers who receive tips, and make it more difficult to set pay standards for these workers or to challenge the legality of their independent contractor status. Moreover, if a worker were converted from a regular W-2 employee to an independent contractor under the guise of avoiding income taxes on tips, their overall tax burden could increase since their earnings could now be subject to self-employment taxes (i.e., the employee and employer sides of federal Social Security and Medicare payroll taxes.)2

These proposals will likely set off an expansion of tip requests and employers’ use of tipped work

In the wake of the pandemic, many “quick service” businesses (i.e., coffee shops, bakeries, fast food) began prompting customers to tip as part of the regular payment process, spurring some backlash. This will only accelerate if tips were untaxed and could quickly start showing up in whole new categories of consumer transactions. It’s easy to imagine businesses automatically adding “recommended gratuity” to invoices with the expectation that many consumers won’t be willing to speak up in protest. Do people really want to be asked to tip on their oil change? On their cable or broadband installation? On their dental cleaning? On their child care?

There are virtually no guardrails, other than consumers’ tolerance, to prevent tip requests from showing up everywhere. And employers will want to encourage tipping because it could allow them to pay their workers less than the minimum wage. Federal law only requires that employees “customarily and regularly receive more than $30 a month in tips” for their employers to classify them as tipped employees and pay them as little as $2.13 an hour.

Because of the perceived tax benefit, workers may give employers more latitude to encourage customer tipping and use tips to replace a portion of their base wage—a misguided trade-off. Absent much larger labor law reforms and worker protections, an expansion of tipped work would be unquestionably harmful to workers. Tip income is far more volatile than getting a regular paycheck. If a customer fails to tip or bad weather reduces customer traffic or some other factor outside of a worker’s control leads to low tip income, there’s no real recourse for those workers. Tipped workers accept this arrangement under the shaky assumption that the generous tips and well-paying shifts will offset the low-paying ones.

Tipped minimum wage laws are supposed to ensure that tipped workers receive at least the minimum wage, but this is highly problematic because tipped workers must effectively police their own employers. Not surprisingly, tipped workers experience high rates of wage theft. Customer tipping practices are often discriminatory, and tip amounts have been shown to be only “weakly related to service quality.” When tips are a significant source of workers’ earnings, they may feel forced to tolerate greater mistreatment by customers and employers out of fear of losing a tip.

No tax on tips will encourage tax avoidance and deplete state budgets

Every new tax exemption creates new strategies for tax avoidance, particularly for higher earners with the means to pay for accountants and tax attorneys. It’s easy to imagine many highly paid professionals (e.g., lawyers, consultants, accountants, financial advisors, investment bankers, etc.) opting to have their clients denote a portion—maybe even all—of their fees as “tips” in order to avoid paying taxes on them.3

Even without trying to estimate the full scope of new avoidance strategies, exempting tips from taxable income would strain already stressed state budgets. Estimates from proposals in Arizona and Virginia anticipate revenue losses of over $30 million in the first year alone. The tax benefits could accrue primarily to high-income taxpayers, yet the revenue losses would harm the public overall, as governments would have less funding for high-quality public education, safe roads, public health, and anti-poverty programs for children and families.

In some cases, such as in California’s proposed bill, tips would also be excluded from wages for the purpose of calculating unemployment insurance, meaning tipped workers would have smaller unemployment benefits if they lose their job and less revenue would be directed to the state’s unemployment insurance trust fund.

To actually help tipped workers, lawmakers should raise the minimum wage and phase out the tipped minimum wage

Ending taxation of tips is a distraction from proven methods for supporting low-wage workers, like raising the minimum wage and eliminating the subminimum wage for tipped workers. There are seven states where tipped workers already earn the full minimum wage, with tips on top. In those states, tipped workers have higher take-home pay and lower poverty rates than tipped workers elsewhere.4 And, if lawmakers want to help gig/platform workers in particular, they should support pay and benefit standards, organizing rights, and proper employee classification. A regressive tax gimmick that encourages the proliferation of tipping is not helpful to the workers who genuinely need help, and certainly not a “lifeline” to anyone. It would, however, be a boon to unscrupulous employers and tax cheats.

Notes

1. For instance, if an unmarried worker with one child earns roughly $18,000, they get the full $4,200 Earned Income Tax Credit (EITC). But if that income is two-thirds tips and $12,000 is no longer taxable, their EITC would drop by about $2000. Very low-wage workers would also lose access to the full federal Child Tax Credit.

2. Note that, at most, 12% of the workforce has done any sort of “gig” work (mostly Uber, Lyft, DoorDash, and similar) and “in the vast majority of cases, the amounts earned by workers on transportation apps have been small and supplemental to their W-2 earnings.” Only 2–3% of full-time workers are contractors whose livelihood depends primarily on self-employment income.

3. Notably, a Connecticut bill aims to limit the damage from a federal no-tax-on-tips law by requiring workers who earn more than $100,000 annually to pay state taxes on that income in the amount the taxpayer would have paid to the federal government (if the federal government eliminates the tax on tips.)

4. Those states are Alaska, California, Minnesota, Montana, Nevada, Oregon, and Washington. Michigan will soon join them. The District of Columbia, Chicago, and Flagstaff (Arizona) are also in the process of phasing out the tipped wage.

Michigan lawmakers could once again interfere with voters’ desire to strengthen economic security for low-wage workers

Michigan’s minimum wage is scheduled to increase to $12.48 on February 21, 2025, before growing each year to $14.97 in 2028.1 The tipped minimum wage, which is currently set to 38% of the regular minimum wage, will also increase annually from $5.99 in February 2025 until eventually matching the regular minimum wage in 2030.

This series of increases is the latest legacy of a 2018 state ballot initiative that would have raised the state minimum wage to $12.00 an hour by 2022 and gradually eliminated the subminimum tipped wage. The measure was highly popular with voters, securing more than 280,000 signatures to be placed on the ballot. Before the full electorate could weigh in on the ballot measure, however, the state’s Republican-controlled legislature chose to “adopt and amend” the measure and remove it from the ballot by passing their own weaker minimum wage legislation. The enacted legislation extended the implementation of the increase by eight years to 2030 and preserved the lower tipped minimum wage, dramatically weakening the benefits to workers.

In 2024, the Michigan Supreme Court found the “adopt and amend” tactic used by Republican lawmakers was unconstitutional as it denied Michigan voters’ their right to the ballot initiative process. The court ordered the minimum wage to be increased more rapidly in the spirit of the original measure and that the value of the increases be adjusted to account for inflation since 2018. The court decision also reestablished the phase-out of the tipped minimum wage.

Table 1

Through 2028, Michigan’s reinstated increases stand to lift wages for more than 560,000 workers, or approximately 13% of the state’s wage-earning workforce. Increasing the minimum wage would boost wages for workers by more than $1.3 billion, with the average affected full-time worker gaining more than $2,300 in annual wages.2 Almost 100,000 tipped workers in Michigan would benefit from the increases. Full-time tipped workers could earn significantly higher wages, earning $6,700 more a year through 2028.

These gains will be jeopardized if lawmakers once again make changes that weaken the minimum wage schedule. Conservative lawmakers are particularly focused on preserving the subminimum tipped wage, which is an enduring exception to the regular minimum wage in both federal and many state laws. The policy is rooted in the country’s history of slavery and continues to expose many tipped workers to greater levels of poverty and wage theft. In addition to this economic harm, preserving the tipped minimum wage would once again undermine the desire for change voters expressed in 2018.

If Michigan does follow through on eliminating its tipped minimum wage, it will be the first state to do so in recent years. However, seven states (AK, CA, MN, MT, NV, OR, and WA) have long treated tipped workers the same as all other workers, providing them the same minimum wage regardless of tips. In the past few years, voters and lawmakers have also chosen to eliminate the tipped minimum wage in Washington D.C., Chicago, and Flagstaff, AZ.

Business lobbying groups are pushing misleading narratives about the tipped minimum wage

Business and industry lobbying groups insist that eliminating the tipped minimum wage will cause significant harm to businesses where tipped workers are concentrated, particularly in restaurants. They also claim that eliminating the tipped minimum wage will end the practice of tipping entirely. Neither of these arguments holds up to scrutiny. The highest quality minimum wage research continues to show that increasing the minimum wage boosts workers’ wages with no meaningful impact on employment or business growth, including in the restaurant industry. The practice of tipping remains commonplace in states that do not have a subminimum tipped wage such as in Minnesota or Nevada. The difference is that in these states, workers are less likely to require their customers’ goodwill to secure a livable wage.

Michigan should eliminate the tipped minimum wage

Instead of undermining the economic security of tipped workers, Michigan policymakers should take steps to make the phase-out of the tipped minimum wage as smooth as possible for businesses, workers, and consumers. This includes issuing clear guidance on the use of “service fees” by restaurants and other establishments so that customers know if the fee is going to workers’ wages or not. Policymakers should also provide resources to proactively investigate minimum wage violations and other forms of wage theft. In 2022, Michigan’s Attorney General and Department of Labor recovered more than $2.6 million in wage violations, but this is likely only a small share of total infractions.

The 2018 ballot initiative reflected clear public support for Michigan to increase the economic security of low-wage workers, particularly tipped workers. Despite resistance from business lobbying groups and conservative lawmakers, Michigan should maintain the court-ordered path to eliminate the tipped minimum wage and the exploitation it perpetuates.

Notes

1. After 2028, Michigan’s minimum wage will be adjusted each year for inflation. In 2029, Michigan will likely join 19 other states in having a minimum wage of at least $15 an hour.

2. EPI Minimum Wage Simulation Model. See Technical Methodology.

Our report shows that more than $1.5 billion in stolen wages were recovered for workers between 2021 and 2023. The report highlights wage theft recovery by the U.S. Department of Labor (DOL), state agencies, and class action litigation. Finally, the report recommends policy solutions to combat wage theft in the United States.

Background and prior studies

Wage theft is a costly and pervasive problem that affects millions of workers across the country. For example, Cooper and Kroeger (2017) investigated just one type of wage theft (minimum wage violations) and found that in the 10 most populous states in the country, 17% of eligible low-wage workers reported being paid less than the minimum wage, amounting to 2.4 million workers losing $8 billion annually. Extrapolating from these 10 states, Cooper and Kroeger estimated that workers throughout the country lose $15 billion annually from minimum wage violations alone. To put that into perspective, the latest data from the Federal Bureau of Investigations showed that robberies accounted for $598 million in losses in 2018 and $482 million in losses in 2019, totaling only $1.8 billion in a two-year period (Ed and Workforce 2024).

The personal cost of wage theft to these workers is significant: Cooper and Kroeger found that on average, the workers suffering from minimum wage violations in these 10 states were cheated out of $64 a week—about $3,300 annually for year-round workers. These workers lost almost one-quarter of their earnings, receiving on average only $10,500 in annual wages instead of the $13,800 they should have received.

Additionally, only a small portion of stolen wages are ever recovered on behalf of workers. A 2021 EPI report found that only $3.24 billion in stolen wages was recovered for workers in a four-year period (2017–2020) by DOL, state departments of labor and attorneys general, and class action litigation (Mangundayao et al. 2021).

Wage theft occurs in all industries and impacts workers at all income levels, especially low-wage workers. According to DOL, low-wage workers in construction, food service, health care, and retail experience high rates of wage theft. Temporary work is also among the low-wage industries with high violations of wage theft (DOL 2024b). One report finds that almost a quarter (24%) of temporary workers report experiencing wage theft from their employer by being paid less than minimum wage, failing to receive overtime pay, or failing to receive pay for all hours worked (NELP et al. 2022).

Findings and analysis

In this report, we seek to contribute to the understanding of wage theft by collecting and aggregating available data on recovery of stolen wages in the United States. In order to get as comprehensive a picture as possible of wage recovery across the United States, we reviewed current U.S. Department of Labor wage enforcement data, surveyed state labor departments and attorneys general, and reviewed data on class action litigation. 

Our analysis shows that $1.5 billion in stolen wages were recovered for workers from 2021 to 2023 by the U.S. Department of Labor, state agencies, and class action litigation. Crucially, however, this statistic is not representative of all wage theft in the United States because many workers will never file a claim to recover stolen wages. For example, Estlund (2018) estimates that 98% of low-wage, private-sector, nonunion workers subject to forced arbitration do not file a claim when their wages are stolen. Further, federal law does not require employers to provide workers with regular pay stubs, which means workers may not even know they are experiencing wage theft.

Wage recovery by the U.S. Department of Labor

According to Wage and Hour Division (WHD) enforcement data, DOL recovered $234.3 million for workers in fiscal year 2021, $213.1 million in fiscal 2022, and $212.3 million in fiscal 2023—for a total of $659.8 million across four years (Table 1). These wages were recovered on behalf of 510,534 workers, with an average of $1,292 in recovered wages per worker (WHD 2024).

Table 1

Wage recovery by state departments of labor and attorneys general

During the summer of 2024, EPI contacted state departments of labor and attorneys general via phone and email to compile data on their wage recovery efforts. We collected data, summarized in Appendix Table 1, from 34 states and the District of Columbia. The remaining 16 states either did not respond to our request, did not track the requested data, or were unable to provide the requested data.

According to our analysis, state departments of labor and attorneys general in 34 states and the District of Columbia recovered $53.1 million in 2021, $63.5 million in 2022, and $53.8.6 million in 20231—a total of $201.4 million recovered over those three years.2

Wage recovery through class action settlements

Based on research conducted by Seyfarth Shaw LLP (2022), the value of the top 10 wage and hour class action settlements totaled $641.3 million in 2021, as shown in Figure A. The total value of these class action settlements in 2021 is comparable to the value of DOL wage recovery efforts during the full three-year period that we report above.

This class action data illustrates that workers are more effective in recovering stolen wages on a collective versus individual basis. However, many workers are barred from joining class action cases, because they are subject to forced arbitration agreements. According to Colvin (2018), 56.2% of private-sector, nonunion workers are subject to forced arbitration agreements, which are more costly to workers than class action lawsuits. For example, Stone and Colvin (2015) find the typical award per worker in forced arbitration ($36,500) is only 21% of the median award in a class action lawsuit in the federal courts ($176,426).

Figure A

Case studies

Below, we provide some examples of wage theft recovery to illustrate the breadth of the problem across states and industries, and the efforts of state-wide worker protection agencies to combat wage theft.

U.S. Department of Labor

In January 2024, the U.S. Department of Labor recovered over $1.1 million in back wages and damages for 165 garment workers in Los Angeles. Four sewing contractors supplying goods to Beyond Yoga were found to have failed to pay overtime and falsified payroll records. Beyond Yoga agreed to pay the wages owed and entered into a compliance agreement to improve labor practices within its supply chain. The settlement was the largest for California garment workers to date (DOL 2024a).

Rhode Island: Department of Labor and Training

The Rhode Island Department of Labor and Training Adjunction Unit issued a Hearing Officer Decision to WL Builders LLC in December 2023. The decision confirmed that WL Builders LLC did not pay the required prevailing wage to 15 workers on three public works construction projects. The total wages and interest owed were $454,074.56 and the civil penalty was $ 414,074.56—for a total of $868,149.12 owed. In addition, WL Builders LLC misclassified 15 individuals working on the project (Turley 2024).

Illinois: Department of Labor and Attorney General

In July 2023, the Illinois Department of Labor and the Attorney General reached a settlement with a medical staffing agency that was illegally charging workers fees for missing work. The company had a practice of deducting “booking fees” when workers missed shifts. Under the settlement, GrapeTree Medical Staffing LLC agreed to pay approximately $950,000 in back wages and interest to around 3,000 current and former workers in Illinois (State of Illinois 2023).

Washington: Department of Labor and Industries

The Washington State Department of Labor and Industries (L&I) investigated a claim regarding workers who were performing aircraft maintenance overseas at the Boeing Company in 2022. This claim led to a larger investigation of the travel pay and benefits for workers in Washington state. L&I found that Boeing was not complying with Washington state wage and hour laws regarding overtime and paid sick leave related to out-of-town travel. In May 2024, L&I collected $11.5 million in back wages for 495 workers of Boeing Company as result of the investigation (Washington L&I 2024).

Policy recommendations

Federal solutions

Policymakers should increase the funding for DOL’s Wage and Hour Division. The WHD has not seen a significant increase in funding in over a decade (Rowland, Poydock, and Zhang 2024). In 2022, the average wage and hour investigator was responsible for safeguarding the earnings of almost triple the number of workers of their 1973 counterpart (Costa and Martin 2023). Additional funding and investigators will help the WHD effectively enforce the Fair Labor Standards Act and efficiently recover stolen wages. Further, the WHD should implement strategic enforcement strategies—focusing on industries with a history of high rates of wage theft violations and conducting proactive investigations and compliance sweeps in those industries. Strategic enforcement is effective in combatting wage theft by recovering wages for workers on a larger scale, while also deterring employers in those industries from stealing wages from workers (Weil 2010).

In addition to increased enforcement capacity, there is also a great need to inform workers of their rights under the law. The Wage Theft Prevention and Wage Recovery Act would help combat wage theft and empower workers to receive all the pay they are entitled to. The bill would increase transparency for workers by requiring employers to provide workers terms of their employment and regular paystubs. The bill also authorizes DOL to issue meaningful penalties for employers who commit wage theft. The bill would also allow DOL to issue grants to organizations and partners to help create outreach and education campaigns to inform workers of their rights under the law (Ed and Workforce 2023).

Finally, federal policymakers should pass legislation strengthening key labor standards to combat wage theft. Policymakers should eliminate the tipped minimum wage and create one federal minimum wage to raise wages for workers and facilitate the enforcement of minimum wage violations (Allegretto and Cooper 2014). Policymakers should also ensure all workers have the right to join in union and bargain collectively. Unionized workers are far less likely to experience wage theft, because their bargaining power provides them means of redress for and protections from wage theft. The Protecting Right to Organize Act would strengthen the right for private-sector workers to form unions and collectively bargain. The Public Service Freedom to Negotiation Act would establish a federal standard of collective bargaining rights for public-sector workers.

State and local efforts

As we illustrate in this report, state agencies and attorney generals are key enforcers in combatting wage theft on the state and local levels. The examples above highlighted efforts made by state and local governments to deter wage theft and efficiently recover stolen wages for workers.

While federal legislation to combat wage theft has stalled, many states have enacted laws to prevent wage theft by providing workers with greater transparency on their terms and conditions of employment. For example, 41 states have enacted laws that require employers to provide their workers with regular pay stubs (Paystub.org 2023).

Many states have strengthened penalties for wage theft violations, enforcing them as criminal statutes. For example, Minnesota and South Dakota classify violations of wage theft laws as misdemeanors, while California, Hawaii, New Jersey, New York, and Rhode Island classify such violations as felonies.3 California and New York designate willful violations as grand theft or larceny, and in New Jersey, the state has the power to impose jail time to employers who violate wage and hours laws (Hacker et al. 2023).4 Enforcing wage and hour laws as criminal statutes imposes more expensive fines and longer potential prison sentences on employers who violate wage and hour laws, which can serve as a powerful deterrent for other employers.

Some states have established laws allowing victims of wage theft to obtain a lien on employer property to ensure payment of back pay. This is designed largely to stop the practice of employers selling or dissolving a business after committing wage theft only to reconstitute as a new business entity shortly thereafter and never pay the wages owed (NELP 2011). Maryland and Washington are examples of states that have enacted such laws (Bushaw 2021).

Some localities have established funds specifically to help workers who are victims of wage theft. For example, San Diego County leaders in California reported progress in combating wage theft, highlighting the success of the Workplace Justice Fund and the Office of Labor Standards and Enforcement. The fund provides financial aid to workers awaiting back pay and supports broader collaboration to hold employers accountable (DeFore 2024). In New York City, Manhattan District Attorney Alvin Bragg announced the creation of the Worker Protection Unit to combat wage theft and unsafe work conditions (Manhattan DA 2023). This unit will prosecute individuals and corporations exploiting workers and includes the establishment of a Stolen Wage Fund to aid victims.

Conclusion

Wage theft is a costly and pervasive problem that impacts millions of workers across the country. More than $1.5 billion in stolen wages were recovered for workers by U.S. Department of Labor, state agencies, and class action lawsuits between 2021–2023. Federal, state, and local lawmakers should pursue policies that prevent and combat wage theft to ensure workers receive all wages they are owed.

Acknowledgements

The authors thank the Notre Dame Student Policy Network (SPN) for their contributions in the background research of this report. The authors would like to thank Alex Young and Annie Chen for leading the SPN team, which includes Tess Barrett, Billy Bonnist, Max Feist, Hannah Huston, Emi Kartsonas, Ashleigh Lobo, and Darren Tanubrata.

Appendix

Appendix Table 1

Notes

1. Note that 2023 totals include some data from 2024, as some states tracked wage recovery efforts by fiscal year instead of calendar year.

2. Total recovery amounts include three states (Idaho, Kentucky, and New Jersey) who provided data on total recovery efforts, but not recovery by year. See Appendix Table 1 for full data.

3. Labor and Employment, S.D. Codified Laws §§ 60-11-15 (South Dakota Legislative Research Council 2008).; Wage Theft, Minn. Stat. §§ 3-6 (Department of Labor and Industry 2018); Wage and Hour Law, Haw. Rev. Stat. §§ 387-12; Payment of Wages, R.I. Gen. Laws §§ 28-14-17.; Wage and Hour Act, N.J. Stat. Ann. §§ 34:11-58.6.

4. Offenses Involving Theft, N.Y. Penal Law §§ 155-05; Of Crimes against Property, Cal. Penal Code §§ 5-487.

References

Allegretto, Sylvia, and David Cooper. 2014. Twenty-Three Years and Still Waiting for Change: Why It’s Time to Give Tipped Workers the Regular Minimum Wage. Economic Policy Institute, July 2014.

Bureau of Labor Statistics (BLS). 2024. “Table 3. Employees on Nonfarm Payrolls by State and Selected Industry Sector, Seasonally Adjusted.” Local Area Unemployment Statistics (LAUS). Last modified November 19, 2024. 

Bushaw, Emily A. 2021. “New Washington Law Creates Statutory Wage Lien for Claims on Unpaid Wages.” Perkins Coie, June 24, 2021.

Colvin, Alexander J. S. 2018. The Growing Use of Mandatory Arbitration: Access to the Courts Is Now Barred for More Than 60 Million American Workers. Economic Policy Institute, April 2018.

Cooper, David, and Teresa Kroeger. 2017. Employers Steal Billions from Workers’ Paychecks Each Year. Economic Policy Institute, May 2017.

Committee on Education and the Workforce, Democrats (Ed and Workforce). 2023. “Wage Theft Prevention and Wage Recovery Act” (fact sheet). September 2023.

Committee on Education and the Workforce, Democrats (Ed and Workforce). 2024. A Slap on the Wrist: How It Pays for Unscrupulous Employers to Take Advantage of Workers. April 2024.

Costa, Daniel, and Philip Martin. 2023. Record-Low Number of Federal Wage and Hour Investigations of Farms in 2022: Congress Must Increase Funding for Labor Standards Enforcement to Protect Farmworkers. Economic Policy Institute, August 2023.

DeFore, Tracy. 2024. “County Leaders Report Progress Fighting Wage Theft.” County News Center, March 19, 2024. 

Department of Labor (DOL). 2024a. “Department of Labor Recovers $1.1M for 165 Garment Workers After Sewing Contractors Withheld Overtime Wages, Falsified Records” (press release). January 3, 2024.

Department of Labor (DOL). 2024b. “Low Wage, High Violation Industries” (web page). Accessed December 3, 2024.

Department of Labor, Wage and Hour Division (WHD). 2024. “All Acts” (web page). Accessed December 3, 2024.

Estlund, Cynthia. 2018. “The Black Hole of Mandatory Arbitration.” North Carolina Law Review 96, no. 3: 679–710.

Hacker, Chris, Ash-har Quraishi, Amy Corral, and Ryan Beard. 2023. “Wage Theft Often Goes Unpunished Despite State Systems Meant to Combat It.” CBS News, June 30, 2023.

Mangundayao, Ihna, Celine McNicholas, Margaret Poydock, and Ali Sait. 2021. More Than $3 Billion in Stolen Wages Recovered for Workers Between 2017 and 2020. Economic Policy Institute, December 2021.

Manhattan District Attorney’s Office (Manhattan DA). 2023. “D.A. Bragg Announces Creation of Office’s First ‘Worker Protection Unit’ to Combat Wage Theft, Protect New Yorkers from Unsafe Work Conditions” (press release). February 16, 2023.

National Employment Law Project (NELP). 2011. Winning Wage Justice: An Advocate’s Guide to State and City Policies to Fight Wage Theft. January 2011.

National Employment Law Project (NELP), Warehouse Workers for Justice, North Carolina Justice Center, New Labor, Mississippi Workers’ Center for Human Rights, Chicago Workers Collaborative, and Temp Worker Justice. 2022. Temp Workers Demand Good Jobs. February 2022.

Paystub.org. 2023. “The Complete Guide to Pay Stub Requirements by State” (web page). Published June 30, 2023.

Rowland, Catherine, Margaret Poydock, and Jiayi (Sonia) Zhang. 2024. “Proposed Cuts to Worker Protection Agencies and What They Mean” (fact sheet). Congressional Progressional Caucus Center and Economic Policy Institute, July 15, 2024.

Seyfarth Shaw LLP. 2022. 18th Annual Workplace Class Action Litigation Report. January 2022.

State of Illinois. 2023. “Attorney General Raoul Reaches Settlement with Medical Staffing Agency Charging Employees Fees for Missing Work” (press release). July 6, 2023.

Stone, Katherine V. W., and Alexander J. S. Colvin. 2015. The Arbitration Epidemic: Mandatory Arbitration Deprives Workers and Consumers of Their Rights. Economic Policy Institute, December 2015.

Turley, Elizabeth. 2024. “Construction Company Owes $869K in RI Wage Theft Case.” WPRI, March 4, 2024.

Washington State Department of Labor & Industries (Washington L&I). 2024. “Boeing Pays Millions in Wages After L&I Starts Investigation.” May 3, 2024.

Weil, David. 2010. Improving Workplace Conditions Through Strategic Enforcement: A Report to the Wage and Hour Division. Boston University, May 2010.