The Raise the Wage Act of 2025 amends the Fair Labor Standards Act to raise the federal minimum wage in a multi-year schedule that reaches $17.00 an hour after five years and then moves to an annual, BLS-based index tied to the median hourly wage. The bill also phases up the cash wage for tipped workers and young newly hired employees under 20, gives tipped workers an explicit right to retain tips, requires employer notice, and clarifies penalties for misappropriated tips.
Separately, the bill phases up wages under FLSA section 14(c) for workers with disabilities to reach the full federal minimum within five years, forbids issuance of new special certificates, requires the Department of Labor to provide transition assistance, and sunsets the special-certificate authority once parity is reached. The statute sets publication requirements and timing rules for increases and uses a single effective-date rule (first day of the third month after enactment unless a provision says otherwise).
At a Glance
What It Does
Phases federal minimum wages from $9.50 to $17.00 over six scheduled steps, then indexes the wage annually to changes in the median hourly wage as measured by the Bureau of Labor Statistics, rounded up to $0.05. It phases up a separate cash wage for tipped employees and a lower starting wage for newly hired workers under 20, then repeals those separate subminimum schedules once parity with the regular minimum is reached.
Who It Affects
Low-wage hourly employees (including tipped servers and newly hired workers under 20), employers in retail and hospitality, employers holding FLSA section 14(c) special certificates, the Department of Labor (for administration), and consumers who may face higher prices. State and local minimum wages above the federal floor remain operative.
Why It Matters
This bill moves the federal floor substantially upward and replaces periodic congressional hikes with an automatic, BLS-based index; it also ends long-standing subminimum pay tracks for certain groups on a schedule and forces administrative and operational adjustments for many employers.
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What This Bill Actually Does
The bill replaces the current federal minimum-wage provision in the Fair Labor Standards Act with a step-up schedule: an initial rate (specified in the text) followed by annual increases that reach $17.00 per hour after five years. After six years from the effective date, the Secretary of Labor (using BLS data) will set the minimum wage each year by applying the annual percentage increase in the median hourly wage of all employees, ensuring the wage never falls below the previously set amount and rounding up to the nearest nickel.
For tipped employees the bill establishes a parallel cash-wage schedule that rises over six years to the regular minimum; it gives tipped employees an explicit statutory right to retain their tips and requires employers to inform workers of that right. Once the tipped cash wage reaches parity with the main minimum, the separate tipped-wage provision is repealed so that tipped workers are paid the standard minimum wage.Newly hired employees under age 20 receive a temporary lower wage at enactment, with annual increases capped at $1.75 until the youth rate equals the main minimum, at which point that separate provision is repealed.
The bill also amends enforcement language to clarify that employers who 'keep or use' tips face liability under existing penalty provisions.On disability employment, the bill raises the special-certificate (section 14(c)) wage schedule in stages to reach the full federal minimum within five years, prohibits the Department of Labor from issuing new special certificates after enactment, and requires the DOL to provide technical assistance to employers and referrals to competitive integrated employment resources. When the 14(c) wage reaches parity with the general minimum, the authority to issue special certificates expires and existing certificates lose legal force.Administrative steps include timing rules for when increases take effect (generally the first day of the third month after enactment for most provisions, with some repeal or trigger dates tied to when parity occurs), and a requirement that the Secretary publish notice in the Federal Register and on the DOL website at least 60 days before any scheduled increase.
Certain amendments affect how and when notice is published and remove obsolete references as subminimum schedules repeal themselves.
The Five Things You Need to Know
The bill sets a phased schedule that moves the federal minimum wage from $9.50 at its first effective date to $17.00 an hour in year 6, with specific annual steps at $9.50, $11.00, $12.50, $14.00, $15.50, and $17.00.
Beginning six years after the effective date, the Secretary of Labor will annually adjust the minimum wage by the annual percentage increase in the median hourly wage (BLS data), never below the current rate and rounded up to the nearest $0.05.
Tipped workers receive a rising cash-wage floor (starting at $6.00 then reaching parity) and an explicit statutory right to retain tips; employers must notify workers of that right and face clarified penalties if they keep or use tips.
The bill raises wages under section 14(c) in stages to reach the full federal minimum within five years, forbids issuance of new special certificates after enactment, and sunsets the entire certificate authority once parity is achieved.
The Secretary must publish notice in the Federal Register and on the DOL website at least 60 days before any increase; the Act generally takes effect on the first day of the third month after enactment unless a provision ties its timing to a parity or step date.
Section-by-Section Breakdown
Every bill we cover gets an analysis of its key sections.
Short title
Gives the Act the public name 'Raise the Wage Act of 2025.' This is purely stylistic but establishes the bill's reference name for citations and cross-references in regulations and guidance.
Phased increases and indexing of the federal minimum wage
Rewrites 29 U.S.C. 206(a)(1) to set a six-step schedule that reaches $17.00 and then adds a new subsection (h) requiring the Secretary to determine subsequent annual increases based on the annual percentage increase in the BLS median hourly wage. Practically, DOL must compile BLS hourly-wage data, compute year-over-year median increases, ensure the statutory floor never declines, and round the result up to the nearest $0.05 before publishing the new rate at least 90 days prior to its effective date.
Tipped employees: cash-wage schedule, tip retention, employer notice, and repeal trigger
Alters 29 U.S.C. 203(m) to give tipped employees a rising statutory cash-wage floor (a multi-year schedule that culminates in parity with the main minimum) and strips language that permitted employers to count tips as part of wages in the same way. The bill declares that employees have the right to retain tips and requires employers to inform workers of that right. It also amends penalty language to capture employers who 'keep or use' tips and includes a repeal mechanism: the separate tipped-wage paragraph is removed the day after the scheduled subminimum reaches parity with the general minimum, folding tipped workers into the standard minimum-wage regime.
Newly hired employees under 20: temporary lower wage and phaseout
Revises 29 U.S.C. 206(g)(1) to create a temporary lower wage for newly hired workers under 20 that begins at a specified hourly rate, increases annually (by up to $1.75 per year) until it equals the main minimum, and then triggers repeal of the separate youth-wage provision. The mechanics mean employers must track age- and hire-date–based pay eligibility during the phase-in and prepare for the administrative change when parity is reached.
Publication requirement for scheduled increases
Adds a statutory requirement that the Department of Labor publish in the Federal Register and on its website a notice announcing any increase under the Act at least 60 days before the effective date. The provision aligns transparency and notice for employers and payroll systems with the new indexing and step schedule, and it removes obsolete cross-references as subminimum tracks repeal themselves.
Transition and sunset for section 14(c) special certificates (workers with disabilities)
Amends 29 U.S.C. 214(c) to raise permissible special-certificate wage rates on a step basis to reach the full federal minimum within five years, prohibits issuance of new 14(c) certificates after enactment, requires the Secretary to provide technical assistance and referral information to affected employers and workers, and inserts an explicit sunset: once the 14(c) wage equals the general minimum, the authority to issue certificates expires and existing certificates lose legal effect. The provision creates a finite transition period and a compliance/transition assistance duty for DOL but does not appropriate funds.
General effective date and trigger rules
States that, unless otherwise specified, the Act and its amendments take effect on the first day of the third month after enactment. Several repeal or trigger events across the bill instead take effect relative to when parity dates occur or when specified step increases become operative, so practitioners must map both the general effective date and the parity-triggered dates to payroll and operational timelines.
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Explore Employment in Codify Search →Who Benefits and Who Bears the Cost
Every bill creates winners and losers. Here's who stands to gain and who bears the cost.
Who Benefits
- Low-wage hourly workers (retail, food service, care work) — receive a predictable, multi-year increase in hourly pay and then annual adjustments tied to median wages, raising baseline take-home pay if employers maintain hours.
- Tipped employees (servers, bartenders) — gain an explicit right to retain tips, an increasing cash-wage floor during the phase-in, and eventual protection under the standard minimum-wage regime once parity is reached.
- Workers with disabilities currently employed under section 14(c) — receive scheduled increases in the special-certificate wage and new DOL assistance aimed at preserving employment opportunities and facilitating transitions to competitive integrated employment.
Who Bears the Cost
- Small and independent employers in hospitality and retail — face higher direct payroll costs, potential need to change staffing or pricing, and compliance costs to implement staged increases and notice requirements.
- Employers relying on section 14(c) certificates — must plan for increasing wage obligations, cannot obtain new certificates, and will need to engage with DOL technical assistance to preserve placements or adapt business models.
- Payroll vendors, HR and compliance teams — must implement step schedules, age- and tip-based rules, publish notices, track parity-triggered repeals, and update systems for annual indexing based on BLS data.
Key Issues
The Core Tension
The central dilemma is simple but stark: raise wages to improve earnings and reduce reliance on tips and subminimum pay, versus the economic and administrative costs employers must absorb (and the risk of reduced hours, staffing, or prices). The bill removes long-standing subminimum pathways for vulnerable workers to achieve parity, but that transition may reduce some on‑the‑job training or placement options without clear, funded alternatives — balancing fairness and job opportunity is the bill's fundamental trade-off.
Indexing the minimum wage to the annual percentage change in the BLS median hourly wage is unusual compared with CPI-based or fixed-percentage indexing. Median-wage indexing ties increases to overall wage growth rather than consumer prices, which preserves relative wage progress but can lag or outpace inflation in different economic environments.
The bill attempts to avoid backsliding by prohibiting reductions below prior statutory rates and by rounding up to $0.05, but the methodological choices (BLS median calculation, data lags, and rounding) leave room for administrative discretion and timing mismatches with payroll cycles.
Phasing out subminimum rates for tipped employees and for those under 20, and eliminating new 14(c) certificates while sunsetting existing ones at parity, advances equity goals but raises operational and transitional questions. Employers and workers currently relying on subminimum models will face discrete trigger dates tied to parity rather than a single uniform repeal date, complicating planning.
The DOL is charged with providing technical assistance but the bill contains no appropriation; enforcement of tip-retention rights and of the expanded penalty language will therefore require agency capacity that is not funded in-text. Finally, the interaction with higher state or local minimum wages is not explicitly addressed beyond the fact that this is a federal floor — employers must reconcile the federal schedule, indexing, and parity triggers with state/local obligations.
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