What Is Minimum Wage?

Minimum wage is the lowest hourly rate of pay that an employer is legally permitted to pay workers. Governments set it to protect workers from very low pay and to keep a basic standard of living. It applies to most employees, though exemptions and variations exist.

How it is set

In some countries, such as the UK, Australia and Germany, there is a national minimum that is reviewed regularly, often by an independent commission. In the United States, federal law sets a baseline, and many states, cities and counties set higher rates. Canada's provinces and territories set their own. Rates are usually adjusted yearly, and sometimes tied to inflation.

Because rates change, always check the current official figures for your location.

Variations

• Age-based rates: some countries pay lower minimums to younger workers or apprentices.
• Training or student rates: limited exceptions for students in certain programs or for trainees.
• Industry-specific rules, such as for tipped work, agriculture or domestic work.
• Regional differences, reflecting costs of living.
• Living wage: voluntary or campaign-set rates that aim to cover basic costs and are often higher than the legal minimum.

What it means for student workers

• Part-time jobs and internships are usually covered by minimum wage laws, though some paid-in-experience arrangements are restricted.
• Work-study positions generally pay at least the minimum wage.
• International students may have limits on hours but are protected by wage laws.
• Unpaid internships are allowed only in particular conditions, usually for academic credit or when the intern is the primary beneficiary. Rules vary.
• Overtime and breaks may also be regulated.

Checking your pay

Compare your hourly pay with the legal minimum, including whether tips, meals or accommodation can count toward it, which depends on local law. Keep records of hours worked and pay received. If you believe you are underpaid, talk to your employer, then contact the labor authority or a worker advocacy group.

Debates

Economists and policymakers debate the effects of minimum wage increases on employment, prices and poverty. Evidence varies by context. Governments weigh these considerations when setting rates.

Related terms

See gross vs net pay, gig work, freelancer, employment contract and inflation.