How state minimum wages are set, and the 2027 rates in four states

A worker's minimum wage can come from two places: federal law and state law. The federal minimum wage is $7.25 an hour under the Fair Labor Standards Act. States can set higher rates. Where an employee is covered by both federal and state minimum wage laws, the employee is entitled to the higher of the two, according to the U.S. Department of Labor. The department's state table, last updated July 1, 2026, lists each state's rate.

Not every state has its own minimum. The Labor Department lists five states with no state minimum wage law: Alabama, Louisiana, Mississippi, South Carolina and Tennessee. In Georgia and Wyoming, the state rate is $5.15 an hour. In all of these states, employers subject to the federal law must pay $7.25.

How states set their rates

States that go above the federal minimum use different methods. Some set fixed amounts or a timetable of increases in law, as New Jersey does for farmworkers and for small and seasonal employers. Others adjust the rate every year by a price index, so the minimum follows prices automatically. Each of the four states below has already published its 2027 rate.

• Washington ties its minimum to the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). The state Department of Labor & Industries compares the index for August of the previous year with August of the current year and adjusts the wage based on the percentage change.
• California adjusts its statewide minimum each year based on inflation. The state Department of Finance certified the 2027 increase on July 31, 2026.
• New Jersey sets the coming year's rate from the increase in Consumer Price Index data published by the Bureau of Labor Statistics, under Article I, Paragraph 23 of the state constitution.
• Minnesota uses a different measure, the implicit price deflator for personal consumption expenditures, a national price index. By law, the state labor commissioner must determine the increase by August 31 each year, the increase cannot exceed 5%, and the new rate takes effect the next January 1.

The CPI-W is the same index the Social Security Administration used to set the 3.6% benefit increase for 2027. Our guide to the Consumer Price Index explains how the different price indexes are built.

Rates announced for January 1, 2027

The 2026 figures are the rates shown in the Labor Department's state table; the 2027 figures and the Washington percentage come from the state agencies' announcements.

Other amounts that change with the minimum

Several related pay rules change with the minimum. In the four states above, the 2027 announcements include:

• California: exempt employees must earn at least $72,384 a year, which is twice the state minimum wage for full-time work. They must also meet the duties and other requirements of the exemption.
• Washington: workers aged 14 and 15 must be paid at least $15.07 an hour.
• Minnesota: the 90-day training wage for workers under 20 rises to $9.68 an hour.
• New Jersey: the cash wage for tipped workers rises to $6.61 an hour, while the maximum tip credit stays at $9.87. Direct care staff in long-term care facilities must be paid at least $19.48, and the minimum for agricultural workers reaches $15.00.

Local minimums can be higher

Some cities and counties set their own, higher minimums. Washington's Department of Labor & Industries names Seattle, SeaTac, Tukwila, Renton, Bellingham, Everett, Burien and unincorporated King County as places with local rates above the state's. In California, the Department of Industrial Relations says that where a local minimum is higher, employers must pay the local rate.

Rules on paying the new rates

Pay at the new rate starts on January 1, 2027, in all four states. Minnesota's Department of Labor and Industry says that "Employees must be paid at least the current minimum-wage rate, no matter how they are paid." California employers must post the statewide and industry wage orders and list wage rates on pay stubs, and the state's Labor Commissioner's Office takes wage claims from workers who are paid less than the minimum. Employers who violate California's minimum wage laws may owe back wages, penalties and liquidated damages.

For other states, the Labor Department's table, last updated July 1, 2026, lists each state's current rate.