Q&A: Understanding wage terminology

Q: What is the difference between the terms minimum wage, living wage, and prevailing wage?

A: Minimum wage refers to the federal minimum wage established by the Fair Labor Standards Act. All Texas school districts are subject to the federal minimum wage requirement which is currently $7.25 an hour. Some states have set their own minimum wage at a level higher than the federal wage but Texas law defers to the federal standard.

Living wage ordinances, which began in 1994 in Baltimore, are local or state initiatives that aim to strengthen the area economy and protect resident workers by setting minimum wages that meet or exceed the poverty level. Most living wage ordinances use the federal poverty guidelines as a starting point and set the minimum living wage somewhere between $8 and $12 per hour. There are about 100 localities in the United States with living wage ordinances in effect. Although few localities in Texas have passed a living wage ordinance, there are ongoing initiatives at local, state, and federal levels.

Prevailing wage applies only to employers with federal contracts subject to the Davis-Bacon Act, the Walsh-Healey Public Contracts Act or the McNamara-O’Hara Service Contract Act. None of these apply to Texas school districts. Prevailing wage, which typically exceeds the federal minimum wage, requires any employer who is awarded certain government contracts to pay its employees a “prevailing” or median wage for similar work in the area. These laws reflect efforts to keep local workers employed by preventing employers from recruiting lower-wage workers from outside the area or state.