The minimum wage is the lowest remuneration employers pay to employees for their work. It plays a critical role in shaping workers’ financial stability and sets a baseline for fair pay, ensuring employees receive compensation that meets their basic standard of living.
The purpose of minimum wage in most countries is to ensure that workers and employees are protected from being underpaid, thereby reducing inequality and poverty.
Minimum wage rates vary from country to country, but in this article, we will focus on the Utah state minimum wage and Utah wage laws.
Utah is one of the states in the United States that offers the lowest minimum wage to its workers, maintaining the federal minimum wage rate since at least 2008.
This article explores the Utah minimum wage current rate, requirements, history, and its impact on workers and employers.
Understanding Minimum Wage in the United States
The minimum wage in the United States reflects the balance between worker protection, the state’s economic growth, and business interests. The minimum wage in the U.S. operates under a tiered minimum wage system with varying wage rates. These tiers are:
- Federal minimum wage
- State minimum wage
- Local ordinances or municipal minimum wage
Before getting into Utah’s minimum wage policy it’s crucial to understand and grasp the broader landscape of minimum wage laws in the United States.
Federal Minimum Wage
The federal minimum wage, established by the Fair Labor Standards Act (FLSA), is the baseline wage for all non-exempt workers nationwide. When established in 1938, the minimum wage was $0.25 per hour, as per federal standards. This rate has increased incrementally over the years, with the current federal minimum wage being $7.25 per hour. This law applies to states without their own minimum wage laws or where state wages are lower than the federal level.
State Minimum Wage Law
Generally, states have the authority to set their own wage rules and rates, which are typically higher than the federal wage rates. This is because states aim to align their wage rates to the regional economic and labor market conditions and cost of living.
Around 30 states and the state of Columbia have their state minimum wage rate above the federal minimum wage. For example, Washington has a minimum wage rate of $15.74/hr, California has a minimum wage of $15.50/hr, and Massachusetts has a minimum wage of $15/hr.
Local Ordinances or Municipal Minimum Wage
Some other cities and countries implement their own custom minimum wage rates, which are often higher than the federal and state minimum wages. Examples of these cities include San Francisco, CA, with a minimum wage rate of $18.07/hr and Seattle, WA, with $18.69/hr as the minimum wage. These local and municipal-level adjustments often reflect higher cost of living in urban regions and cities.
What is the Minimum Wage in Utah?
The current minimum wage rate in Utah is $7.25/hr, which aligns with the federal minimum wage rate. This wage rate has remained unchanged since 2009 despite the inflation and rising cost of living in Utah. This has made low-wage workers in Utah struggle to keep up with the increasing cost of living. Besides Utah, other countries that follow the federal minimum wage of $7.25 per hour are North Carolina, Texas, Tennessee, Alabama, Georgia, Indiana, Kentucky, Pennsylvania, Louisiana, Oklahoma, and Wisconsin.
Utah’s minimum wage applies to most workers except a few non-exempt workers. Here are the details of the current rate and who it applies to:
- Regular employees or non-tipped workers in Utah are eligible for the federal minimum wage of $7.25 per hour, which has been effective since 2009.
- Tipped employees are entitled to earn tips in Utah as per federal standards for tipped workers. It requires employers to pay a base wage of $2.13 per hour for employees. This is to ensure that even if employers pay employees a minimum wage lower than the federal rate requirements, the sum of the wage and the tips earned brings the total earnings of $7.25 per hour. If not, the employer is expected to compensate for the difference.
Utah’s Minimum Wage: History and Timeline
While the federal minimum wage has grown and increased periodically since its inception in 1938, Utah remains one of the states that has consistently adhered to the federal standard instead of establishing a minimum wage standard of its own.
Here are details about the key milestones of Utah’s minimum wage history and its progression over the years.
|
Year |
Minimum wage |
Key context or event |
|
1938 |
$0.25 per hour |
The Fair Labor Standards Act (FLSA) establishes the first federal minimum wage of $0.25/hr to lay baseline income for workers. |
|
1950 |
$0.75 per hour |
Post-World War II, the economic boom and improved standards of living increased the minimum federal wage, expanding its coverage to air transport industry workers. |
|
1961 |
$1.15 per hour |
The minimum wage FLSA amendments to additional industries. |
|
1966 |
$1.40 per hour |
This amendment increases coverage to schools, laundries, nursing homes, and the construction industry. |
|
1968 |
$1.60 per hour |
This year, the federal minimum wage value reached its highest level in inflation-adjusted terms. |
|
1974 |
$2.00 per hour |
FLSA expands coverage to more workers to reflect the rising cost of living and inflation. |
|
1981 |
$3.35 per hour |
The federal minimum wage has remained stagnant at $3.35 per hour for a decade, following pressure to address stagnation and demand changes. |
|
1990 |
$3.80 per hour |
FLSA amends the first increase in nearly a decade, following the need and pressure to address wage stagnation. |
|
1991 |
$4.25 per hour |
Further increase in the federal minimum wage was amended as a part of a two-stage adjustment passed in 1989. |
|
1996 |
$5.15 per hour |
Another two-stage wage increase was amended under the Clinton administration to boost income and meet the cost of living for low-wage workers. |
|
2007 |
$5.85 per hour |
The first federal minimum wage increase was observed in over a decade. |
|
2008 |
$6.55 per hour |
The second phase of the federal minimum wage is implemented. |
|
2009 |
$7.25 per hour |
The final stage of the federal state increase is the current federal minimum wage in Utah. |
Since 2009, the federal minimum wage has remained the same, making it the longest period in the history of the United States without changes in the federal wage rate.
Will Utah’s Minimum Wage Increase?
Several advocates for raising Utah’s minimum wage argue that the current federal minimum wage rate is insufficient for workers to meet their basic needs.
The primary reasons behind supporting an increase in the federal wage include:
- Improved living standards and cost of living in Utah
- Boosting economic growth with increased consumer spending
- Addressing wage disparities to align with the national trends
- Addressing issues like inflation
Examples of such advocacy groups are Utahans Against Hunger, who have been actively vocal about wage increases and the state legislators who proposed the Raise the Wage Act of 2021, proposing to raise the federal minimum wage to $15 per hour. However, despite consistent efforts and proposals to increase the minimum wage in Utah, there is no certainty about the changes in the minimum wage in Utah as of yet.
Employees Exempt From Utah’s Minimum Wage
In Utah, certain employees and workers are exempt from the federal minimum wage requirements under federal and state labor laws.
These exemptions are specifically meant for specific employee roles and arrangements, job types, and industries. Here is an overview of these minimum wage exemptions in Utah:
-
Tipped employees
Employers in Utah can choose to pay tipped employees, such as waitstaff and bartenders, an amount lower than the federal minimum wage, $7.25 per hour, unless and until employers pay a base wage of $2.15 per hour and the total earnings (wage + tips) of employees sum up to $7.25 per hour. The law also requires employers to ensure and make up for the difference in case the employee’s total earnings don’t meet the federal rate requirements.
-
Minors
Employers under the age of 20 are paid a youth minimum wage of $4.25 per hour for the initial consecutive days of employment. After 90 days, employers must pay the federal minimum wage of $7.25 per hour to these employees.
-
Employees with disabilities
Employees with disabilities are paid a lower wage than the federal minimum wage in Utah, provided the employer gets a relevant certificate from the U.S. Department of Labor. This enables employers to pay employees with disabilities based on their productivity, which might be typically less than the Utah minimum federal wage.
-
School or college students
School, high school, or college students who work part-time or full-time are paid 85% of the Utah minimum wage for up to 20 hours of work per week or are enrolled in the work-study program. At the same time, jobs classified as “learner’s positions” or individuals in apprenticeships or formal training are paid less than the federal minimum wage for a limited period of time.
-
Overtime pay
For employees who work overtime, which is typically 40 hours per week, the Utah overtime minimum wage is $10.88 per hour, making it 1.5 times higher than the regular federal minimum wage.
-
NGOs and independent contractors
Independent contractors are not considered full-time employees; hence, employers can choose not to pay the federal minimum wage to such employees under state or federal law. At the same time, non-profit or educational organizations can pay their employees less than the federal or state-mandated wage, provided they submit a formal application to the Department of Labor.
-
Seasonal and recreational workers
Employees working at recreational establishments and seasonal amusements, like summer camps or ski resorts, are exempt from the federal minimum wage. However, this is also only applicable if the establishments or businesses operate for fewer than 7 months in a year and meet certain seasonal criteria.
-
Executive and professional employees
Certain salaried employees and administrative professionals, especially those who handle managerial positions and responsibilities, are exempt from the federal minimum wage under the Fair Labor Standards Act (FLSA). This is applicable to professionals who earn more than the salary limit of $684 per week.
What is the Impact of Utah’s Minimum Wage on Businesses
The minimum wage in Utah not only impacts workers but also influences Utah’s employers and businesses. Employees face challenges with stagnant wages and limited economic mobility. Meanwhile, employers must balance labor costs with operational efficiency.
Here are a few ways that Utah’s minimum wage impacts businesses:
- The federal minimum wage particularly helps small businesses keep labour costs low, profiting them in cost management, maintaining high-profit margins, and enabling competitive pricing.
- It can get challenging for businesses in Utah to attract and retain employees, especially with neighboring states, like Arizona, New Mexico, and Colorado, offering higher minimum wages. This makes businesses face competitive challenges.
- With fewer earnings, workers have limited purchasing power, which affects consumer needs and demands for goods and services. This results in reduced sales and revenue for businesses.
Businesses can overcome these challenges by offering potential solutions, such as gradually increasing wages and offering tax incentives, to maintain and improve sales and employee retention.
Conclusion
The Utah state minimum wage of $7.25 per hour, as per federal law, is a subject of concern and ongoing debate. This wage has far-reaching implications for workers, employers, and the state’s broader economy.
By understanding Utah wage laws, businesses can meet legal compliance requirements and implement an efficient payroll system that makes tasks like payment processing and managing payroll records a breeze.
At Darwinbox, we offer solutions, like compensation management that facilitates compensation planning with a secure and flexible HRMS platform. Businesses can leverage features like configurable pay-scale groups, 100% statutory compliance, and automatic F&F settlement to ensure painless payroll processing. With our solutions, you can save time, money, and effort while ensuring high security and compliance.
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