The minimum amount of compensation an employee must receive for performing labor. Minimum wages are typically established by contract or legislation by the government. As such, it is illegal to pay an employee less than the minimum wage.
Investopedia Says:
The minimum wage attempts to protect employees from exploitation, allowing them to afford the basic necessities of life. The minimum wage rate fluctuates between countries, and sometimes between states or provinces.
Minimum wages have drawn strong criticism from many economists, since it establishes a price floor on wages. Price floors can lead to a dead weight loss in the economy, which means that inefficiencies exists. In this case, the minimum wage might force companies to hire less employees, thus increasing unemployment.
As of May 2007, the U.S. federal minimum wage rate was $5.15/hour. However, in states where the state minimum wage is higher than the U.S. federal minimum wage, workers must be paid the higher minimum wage.
