What is the federal minimum wage?

In 2023, the federal minimum wage in the U.S. remains stuck at $7.25 an hour. It's been this way for 14 years.

Most states have higher minimum wages now; however, in 20 states, employers can still pay employees the federal minimum wage of $7.25 an hour.

The percentage of people who still make the federal minimum wage is small, but raising it to $15 an hour — in $1 to $2 increments over several years — would nevertheless raise incomes for millions of people currently living below or near the poverty line.

HR leaders and compensation professionals are largely in favor of raising the federal minimum wage.

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What is the controversy around raising the federal minimum wage?

The federal minimum wage is the lowest hourly wage that employers subject to the FLSA are legally required to pay their employees in the United States. It serves as a baseline standard across the country, but individual states and municipalities can set their own minimum wage which can be higher than the minimum set by federal law. Employers not subject to the law due to size or other exemptions can also pay less than the minimum.

The original purpose of the minimum wage was to both stimulate the economy and protect employees from exploitative practices by ensuring that they are fairly compensated for their work. It was introduced in 1933 as part of the Industrial Recovery Act to lead the U.S. economy out of The Great Depression. It was formally established in 1938 as part of the Fair Labor Standards Act at $0.25 an hour.

The federal minimum wage was last raised (to $7.25 per hour) in July of 2009 — 14 years ago. Failure to raise the federal minimum wage since then inspired the “Fight for $15” campaign in November of 2012 — a presidential election year. The Fight for $15 campaign was driven by fast food workers, many of whom were adults trying to support their families on $7.25, or $15,000 a year. The Fight for $15 campaign proposed that the federal minimum wage be raised to $15 an hour by 2024. It’s now 2023, and the federal minimum wage remains at $7.25 per hour.

Controversy about the need to pass legislation to raise the federal minimum wage continues to exist. Supporters for raising the federal minimum wage argue that doing so will help alleviate poverty, address income inequality, decrease the gender and racial pay gaps, ensure fair compensation for workers, and ultimately stimulate the economy by increasing incomes and enabling struggling families to spend more.

However, opponents express concerns about the potential negative impacts on businesses, unemployment, and inflation if the federal minimum wage is increased. They also argue that doing so may be unnecessary, as most states have adopted their own minimum wages and most organizations offer floor wages (the floor below which wages are not allowed to fall) higher than the minimum wage. It should be noted that the Fight for $15 campaign inspired some of these changes. 

The Raise the Wage Act was brought before Congress in 2021. The Congressional Budget Office (CBO) reported that 27 million Americans would be affected by the increase and that 900,000 would be lifted out of poverty. However, the act was ultimately not included in the $1.9 trillion COVID-19 relief package and has still yet to be passed. 2024 is another presidential election year in which this legislation may be the focus of renewed interest.

The history of federal minimum wage increases

The federal minimum wage was established in 1938 and saw steady increases through legislation up until 1981, where it stalled at $3.35 for almost 10 years. It was then raised to $3.80 in April of 1990 and to $4.25 in April of 1991. At that time, an amendment was passed to allow for a lower wage 85 percent of the minimum wage for training employees under the age of 20. However, that provision expired in 1993. Between 1997 and 2007, the federal minimum wage stalled again at $5.15 an hour — another 10year stretch without an increase. After three steep jumps in 2007, 2008, and 2009, the federal minimum wage ceased to receive further increases. It has now been 14 years since it was last increased to $7.25 an hour. Raising it again has been highly politicized, which has contributed to its stagnation.  

Historic increases for the federal minimum wage overtime


The federal minimum wage adjusted for inflation


When we recalculate the federal minimum wage in 2023 dollars, adjusting for inflation, we can see that it has fallen in value over time and that the minimum wage is now worth less than any time in history since its inception in 1938. For comparison, when adjusting the federal minimum wage to 2016 dollars, it was roughly equal to what it was worth in 1986. But now, after the rapid inflation that followed the COVID-19 pandemic, the purchasing power of the federal minimum wage has dropped lower than at any point in history. 

The federal minimum wage was worth the most in 1968, which was $1.60 at the time and equivalent to $14.23 in 2023 dollars. The real value of the federal minimum wage dropped a bit for a few years after that but reached a secondary high of $12.89 in 1978 and $12.91 in 1979. Overall, the federal minimum wage would need to be raised to between $10 and $15 to have the same value that it did anytime between 1960 and 1980. Since then, the value of the federal minimum wage has been in steady decline. It has fallen sharpest and fastest in the three years since the COVID-19 pandemic when inflation climbed to a high of 9.1 percent in June of 2022.

Federal minimum wage in 2023 dollar value

The federal minimum wage against productivity

When the federal minimum wage was first introduced, it tracked to productivity. Labor productivity is a measure of economic performance that compares the amount of output with the amount of labor used to produce that output. It is calculated by dividing real output by hours worked. See an example from the BLS on how labor productivity is calculated.

Productivity measured over time

The federal minimum wage was raised to $1.60 as a result of the 1963 March on Washington, which was organized by Martin Luther King, Jr. and demanded a living wage for the time of $2 an hour. In the 1980s, productivity began to more noticeably outstrip the federal minimum wage. It has continued to stagnate over time, which has progressively widened the productivity gap especially when adjusted for inflation (shown as minimum wage in 2022 dollars).

Although few workers today earn the federal minimum wage of $7.25 an hour, proponents of raising it argue that the minimum wage should track closer to productivity. If minimum-wage workers earned the same in value today that they earned in 1968, the minimum wage would be over $22 an hour in 2023. 

Federal minimum wage against productivity over time through 2023

The age and gender of federal minimum-wage workers

It’s important to note who makes minimum wage, especially the federal minimum wage of $7.25 an hour. In 2021, the Bureau of Labor Statistics released a minimum wage report that stated 181,000 workers earned exactly the prevailing federal minimum wage of $7.25 per hour and about 910,000 workers earned wages below the federal minimum. Combined, these 1.1 million workers make up just 1.4 percent of all hourly paid workers.

Workers making less than the minimum wage include workers who also earn tips or commission or are otherwise exempt from FLSA statutes. It should be noted that the BLS only reports hourly workers in its minimum wage report. This can mean that the total number of workers earning at or below the federal minimum wage could be underestimated, as some salary workers may make less than the minimum when converted to hourly earnings.

People often assume that only very young workers make $7.25 an hour, such as students doing work studies through universities. However, the data show that 44 percent of federal minimum wage earners are under 25 while 55 percent are over the age of 25. Overall, the percentage of workers making at or below the federal minimum wage is in decline due to states and municipalities raising the minimum wage and organizations offering higher floor wages. However, increasing the federal minimum wage would have ripple effects on state and city minimum wages as well as on employees making just above minimum wage. Research from Oxfam America estimates that nearly 52 million U.S. workers — 32 percent of the country’s total workforce — earned less than $15 an hour in 2022. The full report provides an interactive map with breakouts by racial minority, gender, and age as well as scorecards by state.

It should be noted that women make up a greater percentage of workers earning the federal minimum wage than men, which contributes to the gender pay gap. Women were also more heavily impacted by layoffs and pay reductions related to COVID-19 in 2020; however, some women were able to switch jobs for more pay during the Great Resignation, when job openings surged. Raising the federal minimum wage would positively impact women and help to close the gender pay gap.

Federal minimum wage workers over time by gender

Which industries have the most minimum-wage workers?

When it comes to what kind of jobs people do when earning the federal minimum wage of $7.25 an hour, the largest population is found in the food and beverage industry, which is part of the leisure and hospitality super sector. It’s important to remember that even low-wage earners are subject to pay ranges. A policy brief from the National Restaurant Association advised against supporting the Raise the Wage Act of 2021, citing how much restaurants were already struggling in the wake of COVID-19, and that tipped restaurant employees typically earn between $19-$25 an hour. Empirical research on raising the minimum wage to $15 an hour in Seattle did find some evidence of prices increasing at restaurants but no impact on prices increasing for gas, groceries, or other goods indicative of inflation.

Minimum-wage workers can also be found in many jobs outside of restaurants. These jobs include counter workers and ticket takers, parking lot and lobby attendants, classroom assistants, home care aids, lifeguards and ski patrol workers, and game room table dealers among other occupations. It should be noted that only workers in the lowest percentile make the federal minimum wage, which is at the very bottom of the range.

industries with the most minimum wage workers in 2023

Which states have the most federal minimum-wage workers?

When it comes to the number of workers making at or below the federal minimum wage, the Bureau of Labor Statistics reports a small percentage in every state including all 29 states where the state minimum wage is higher than the federal minimum wage. Estimates come from the Current Population Survey (CPS), which provides information on the labor force, employment, and unemployment and is conducted monthly using a nationally representative sample of about 60,000 eligible households in all 50 states and the District of Columbia.

The BLS notes that the CPS does not determine whether workers are covered by the minimum-wage provisions of the federal Fair Labor Standards Act (FLSA) or by individual state or local minimum-wage laws. The estimates are based on what respondents report. This does not include overtime pay, tips, or commissions, so it is possible that some workers reporting hourly earnings below the federal minimum wage or below their state minimum wage actually do earn the minimum wage. In addition, some workers may not be subject to federal or state minimum wage laws because of exclusions and exemptions in the statutes.


State % of hourly workers at or below min wage % of hourly workers at min wage % of hourly workers below min wage
Alabama 1.8% 0.5% 1.3%
Alaska 0.6% 0.0% 0.6%
Arizona 0.4% 0.0% 0.4%
Arkansas 0.6% 0.2% 0.4%
California 0.5% 0.1% 0.4%
Colorado 0.4% 0.0% 0.4%
Connecticut 0.5% 0.0% 0.5%
Delaware 2.4% 0.3% 2.1%
District of Columbia 2.5% 0.6% 2.0%
Florida 2.3% 0.1% 2.2%
Georgia 2.2% 0.3% 1.9%
Hawaii 1.0% 0.1% 0.9%
Idaho 2.1% 0.7% 1.4%
Illinois 1.0% 0.1% 0.9%
Indiana 1.8% 0.3% 1.5%
Iowa 1.1% 0.1% 1.0%
Kansas 1.6% 0.2% 1.4%
Kentucky 2.0% 0.5% 1.5%
Louisiana 3.2% 0.6% 2.6%
Maine 1.3% 0.0% 1.3%
Maryland 1.2% 0.0% 1.2%
Massachusetts 1.6% 0.1% 1.6%
Michigan 1.4% 0.2% 1.2%
Minnesota 1.0% 0.2% 0.8%
Mississippi 2.2% 1.0% 1.3%
Missouri 1.4% 0.2% 1.2%
Montana 0.8% 0.1% 0.8%
Nebraska 1.2% 0.2% 1.0%
Nevada 0.9% 0.2% 0.7%
New Hampshire 2.3% 0.0% 2.3%
New Jersey 1.6% 0.0% 1.6%
New Mexico 1.6% 0.0% 1.6%
New York 0.8% 0.2% 0.7%
North Carolina 1.7% 0.3% 1.4%
North Dakota 1.4% 0.1% 1.3%
Ohio 1.3% 0.2% 1.1%
Oklahoma 2.0% 0.5% 1.4%
Oregon 0.3% 0.0% 0.3%
Pennsylvania 1.9% 0.6% 1.3%
Rhode Island 1.2% 0.0% 1.2%
South Carolina 2.0% 0.4% 1.6%
South Dakota 0.9% 0.0% 0.9%
Tennessee 1.3% 0.4% 0.9%
Texas 2.4% 0.5% 1.9%
Utah 1.5% 0.6% 0.9%
Vermont 1.1% 0.1% 1.0%
Virginia 2.2% 0.5% 1.7%
Washington 0.6% 0.1% 0.6%
West Virginia 1.4% 0.1% 1.3%
Wisconsin 1.6% 0.4% 1.1%
Wyoming 1.9% 0.5% 1.4%



Top 10 states with the highest percentage of workers making $7.25 an hour or less


The states with the highest percentage of workers earning at or below minimum wage include those where $7.25 is the minimum wage as well as those with significantly higher minimumwage thresholds. For example, Louisiana has a minimum wage of $7.25, while the District of Columbia (D.C.) has the highest minimum wage at $17. Again, this does not mean that employers are violating minimumwage statutes by paying workers $7.25 or less in these states, as workers who reported their earnings may be exempt from the statutes or earning more through commission or tips.

What is the minimum wage by state?

In 2023, 30 states and the District of Columbia have a minimum wage that is higher than the federal minimum wage. However, 20 states either do not have a minimum wage or do not have a minimum wage that is higher than the federal minimum wage. States with the highest minimum wages include the District of Columbia (DC), Washington state, California, and Massachusetts. It should also be noted that many cities have their own minimum-wage laws, and many of these are above $15 an hour. For example, California has over 40 cities with their own minimum-wage laws in 2023.

It can be interesting to compare the minimum wage in a state with the median hourly wage in that same state. This gives an indication of how workers who are far below the median hourly wage are faring in these states as well as what wages hourly workers should be striving for to make a decent living compared to other state residents. Many states make regular reviews of their minimum wage, with increases often happening at the start of the calendar year or, occasionally, midway through the year.  Some states index their minimum wage to either the cost of living or the median hourly wage so that it automatically increases. As of 2023, the states that index the minimum wage to automatically increase include Alaska, Arizona, Colorado, Maine, Minnesota, Montana, Ohio, South Dakota, and Washington state. 

State Minimum Wage 2023 Median Hourly Wage 2022
Alabama $7.25 (Federal minimum wage; no state minimum) $28.47
Alaska $10.85 $33.71
Arizona $13.85 $30.23
Arkansas $11.00 $25.74
California $15.50 $37.44
Colorado $13.65 $34.47
Connecticut $15.00 $34.67
Delaware $11.75 $29.65
District of Columbia $17.00 $50.16
Florida $12.00 $29.50
Georgia $5.15 ($7.25 when subject to FLSA) $29.76
Hawaii $12.00 $33.59
Idaho $7.25 $27.88
Illinois $13.00 $32.78
Indiana $7.25 $28.93
Iowa $7.25 $28.18
Kansas $7.25 $28.59
Kentucky $7.25 $26.94
Louisiana $7.25 (Federal minimum wage; no state minimum) $27.48
Maine $13.80 $28.98
Maryland $13.25 $34.23
Massachusetts $15.00 $39.32
Michigan $10.10 $30.25
Minnesota $10.59 $34.58
Mississippi $7.25 (Federal minimum wage; no state minimum) $23.98
Missouri $12.00 $28.75
Montana $9.95 $27.96
Nebraska $10.50 $29.59
Nevada $10.25 with healthcare; 11.25 without healthcare $28.59
New Hampshire $7.25 (Federal minimum wage; no state minimum) $32.64
New Jersey $14.13 $33.93
New Mexico $12.00 $27.04
New York $14.20 $35.82
North Carolina $7.25 (Federal minimum wage; no state minimum) $29.96
North Dakota $7.25 (Federal minimum wage; no state minimum) $30.79
Ohio $10.10 $29.26
Oklahoma $7.25 $26.97
Oregon $14.20 $32.47
Pennsylvania $7.25 (Federal minimum wage; no state minimum) $29.88
Rhode Island $13.00 $32.06
South Carolina $7.25 (Federal minimum wage; no state minimum) $28.20
South Dakota $10.80 $27.34
Tennessee $7.25 (Federal minimum wage; no state minimum) $28.21
Texas $7.25 (Federal minimum wage; no state minimum) $29.96
Utah $7.25 (Federal minimum wage; no state minimum) $31.56
Vermont $13.18 $30.14
Virginia $12.00 $32.69
Washington $15.74 $37.75
West Virginia $8.75 $26.76
Wisconsin $7.25 (Federal minimum wage; no state minimum) $30.07
Wyoming $5.15 ($7.25 when subject to FLSA) $28.58

The impact of minimum-wage increases on organizations

Keeping track of minimumwage legislation and when it takes effect by state and city is difficult for HR leaders and compensation professionals who manage pay for hourly workers. There are 50 states 51 if you count the District of Columbia as well as hundreds of cities with their own minimumwage requirements, which change every year. 

The gap in minimum wage between states with their own minimum-wage legislation versus states that abide by the federal minimum wage gets wider every year. The variance in minimum wage can place an administrative burden on organizations when it comes to developing compensation strategies for hourly workers that are highly distributed across the country, especially when it comes to pay increases and maintaining pay equity across the workforce. 

Minimum wage does not only affect minimum-wage workers. When the minimum wage is raised, it also affects the competitiveness of the floor wage offered by the organization, which many businesses try to keep above minimum wage to adhere to market demand and attract more talent. It also affects employees who have been given pay raises to make above minimum wage, which need to be maintained when the minimum wage increases. It can also affect managers who oversee minimum-wage employees. 

Nevertheless, according to Payscale’s 2023 Compensation Best Practices Report (CBPR), the majority of organizations (71 percent) say that their compensation strategy is not greatly affected by minimumwage increases or proposed legislation. Only 23 percent of organizations expressed that minimumwage changes impact their compensation strategy. Unsurprisingly, this rises with company size, but only to 36 percent for organizations with 50,000 or more employees.

Note: The top industries represented in the survey from CBPR are Manufacturing, Technology (including software), Healthcare and Social Assistance, and Finance & Insurance. See the full report for a breakdown of respondent firmographics. 


When the minimum wage is raised, organizations have to respond by raising pay for employees. According to our survey of HR leaders and compensation professionals, 68 percent of organizations respond to minimum-wage hikes by setting their pay floor above the new minimum wage. This methodology ensures that organizations remain competitive and can continue to attract the best talent. This is notable because it shows that raising the minimum wage would not only impact workers who make the minimum but would also provide a pay bump for the lowestpaid workers in nearly 70 percent of impacted organizations. 

Pay compression is one of the challenges that impacts HR and compensation professionals when the minimum wage is raised. Also referred to as wage compression or salary compression, Pay compressionis when employees who have been in a job for a long time make less than new hires in the same position. Raising the minimum wage can create pay compression by eroding the pay increases employees have earned through experience, skills, performance, or seniority. 

According to our survey, over half (55 percent) of organizations were concerned about pay compression going into 2023. Pay compression was a particularly challenging problem during the Great Resignation when both wage growth and inflation were skyrocketing. Organizations have to balance raising pay to attract new hires in competitive market conditions with keeping pay fair for current employees and also not blowing up the salary budget.


The best way to address pay compression is to avoid the possibility of it happening by proactively monitoring the market and frequently adjusting pay. However, only 10 percent of organizations do this — a practice that is slightly more common for very small organizations with less than 100 employees (12 percent) than very large ones with over 50,000 employees (8 percent). This rarity makes frequent, proactive pay adjustments a differentiator when it comes to retaining and engaging talent, particularly when combined with pay communications. Small and frequent pay increases can be incredibly valuable to hourly wage workers in particular, especially lowwage or minimumwage workers.

The employer perspective on raising the federal minimum wage

Most employers are in favor of raising the federal minimum wage.

According to Payscale’s Compensation Best Practices Report, 72 percent of organizations agree that the federal minimum wage should be raised. Participants in the Compensation Best Practices Report are HR leaders and compensation professionals who are responsible for managing pay strategies and pay increases for employees and represent organizations large and small.

Although opponents to minimumwage increases believe that raising it will hurt small businesses, our survey indicates small organizations with fewer than 100 employees are actually more in favor of raising the minimum wage (73 percent) than very large organizations with over 50,000 employees (69 percent). This is likely because large organizations have more minimumwage workers to manage, so the impact to salary budgets can be correspondingly significant. 

Opponents also often cite the negative impact it could have on hours, prices, or the overall economy. However, businesses that have raised their wage floor above minimum wage have anecdotally shared that, although they experience a surge in labor costs temporarily, it is rapidly offset by a reduction in turnover and increased engagement and morale, leading to more and better business. In addition, empirical studies of minimum wage hikes to $15 an hour in Seattle in 2014 showed that surviving businesses were able to absorb the cost with minimal impact to total payroll and adapted without cutting hours or losing revenue. As payroll costs increased, newer businesses chose leaner business models that were less labor intensive, and labor was valued more. Findings from empirical minimum-wage increase studies were summarized in a testimony to the CBO, which helped to inform the Raise the Wage Act.

The employer perspective on automating federal minimum-wage increases

When it comes to raising the minimum wage, it is important to consider the degree and frequency.

Part of the problem with the federal minimum wage not having been raised in 14 years is the growing gulf between what it is now ($7.25) and the living wage required to keep workers out of poverty. This gulf has been widening for years, but has become even steeper recently due to rapidly rising inflation. Closing this gap must be done incrementally, as the market may not be able to bear the burden of doubling the minimum wage overnight. The more time that goes by without raising the federal minimum wage, the longer this would take or the larger the incremental hikes would have to be. 

Because passing minimumwage legislation can be riddled with political pitfalls, some states and municipalities have begun indexing the local minimum wage to the cost of living or the median hourly pay, with minimumwage hikes taking place automatically so that minimumwage workers do not lose purchasing power due to inflation. This strategy sidesteps the situation currently inhibiting a minimumwage increase at the federal level due to disagreements on what the raise should be.

In Payscale’s Compensation Best Practices Report, we asked organizations if the federal minimum wage should be automatically increased each year. Although fewer organizations agreed with this strategy than a general consensus that raising the federal minimum wage is overdue, a majority (64 percent) said yes. Another 22 percent were unsure, suggesting that more education on the benefits, impact, and methodology of this approach would be useful.

Frequently asked questions about the minimum wage

The minimum wage can be a contentious topic, and there are many nuances to understanding the minimum wage in the United States. Although many experts feel that raising the federal minimum wage would be advantageous, there is some ambiguity around the impact to the economy, particularly concerning inflation and unemployment. The Congressional Budget Office (CBO), which provides nonpartisan analysis for the U.S. Congress, has published recommendations for raising the federal minimum wage in accordance with the Raise the Wage Act of 2021 as well as predictions of the impact.

What is the difference between minimum wage and living wage?

Minimum wage is the lowest wage permitted by law or special agreement (such as with a labor union), but some employees are exempt. The living wage is what you need to earn to maintain a normal standard of living. The minimum wage used to be synonymous with a living wage, at least in its original design, and still is in many countries around the world. However, in the Unites States, the federal minimum wage has fallen far below what would be required to maintain a standard of living for any location in the United States. Due to stagnation, the conversation has shifted to what constitutes a living wage.

The minimum wage differs for hourly workers who make tips. In 17 states, tipped workers can earn a base pay of as little as $2.13 an hour. These states include Alabama, Georgia, Indiana, Kansas, Kentucky, Louisiana, Mississippi, Nebraska, North Carolina, Oklahoma, South Carolina, Tennessee, Texas, Utah, Virginia, and Wyoming. Other states have minimums for tipped workers above $2.13 an hour but below the state minimum. Most states have a total minimum wage for workers that include tips, which comes out to a higher minimum wage of at least $7.25 an hour. How much tipped workers actually make in tips varies considerably.



When the minimum wage is raised, other hourly workers may also receive a pay increase to retain the differentiation they have earned against the minimum wage through experience, tenure, skills, performance, or seniority. In addition, organizations may want to differentiate themselves in the labor market by offering higher pay than their competition, which would necessitate paying above the minimum. Therefore, when the minimum wage increases, pay for hourly workers making above minimum wage is also more likely to increase.

Opponents to raising the minimum wage express concern that employers will respond by raising prices, which will lead to inflation. Although this is certainly possible, empirical research conducted in Seattle following the raise to $15 an hour in 2014 found that the cost of living (gas, utilities, groceries) did not increase when the minimum wage was raised. Price increases were seen in restaurants and select other businesses. Managing inflation is one reason why hikes to the minimum wage are typically done incrementally over years. 

Raising the minimum wage can increase unemployment. Employers may adapt to wage increases by allotting hours to more productive workers and laying off underperforming employees. Employers may also respond by investing in automation or AI to replace workers. This could lead to a reduction in the workforce, which could put young, inexperienced, disabled, or uneducated workers more at risk for unemployment. 

However, raising the minimum wage could have a positive impact on business growth, leading to increased employment. There could also be provisions in the law that allow for paying a temporary wage reduction to workers with disabilities or who are under a certain age until they learn the skills needed to perform job duties at minimum wage or higher. 

An analysis on the predicted impact of raising the federal minimum wage on unemployment was released by the Congressional Budget Office (CBO) in 2019.

Payscale provides an online salary survey to individuals researching pay for their current job or a job offer. Although more collegeeducated, whitecollar workers use Payscale’s survey to research salaries, bluecollar hourly workers can also create salary profiles to learn what their peers have reported making. Lowerwage jobs have pay ranges too.

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Payscale also provides salary data, compensation management software, and related solutions to employers. Payscale’s compensation management tools MarketPay and Payfactors include minimumwage trackers. Additional solutions include pay equity analysis and compensation planning services to help organizations manage the impact of minimumwage increases on pay compression and pay equity. 

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