Federal Minimum Wage Set to Hit $17.00 by 2030, Phasing Out Tipped and Youth Wages

The Raise the Wage Act of 2025 is looking to drastically overhaul the federal minimum wage structure, not just by hiking the rate but by eliminating several long-standing lower wage tiers. If this passes, the standard federal minimum wage will climb steadily over five years, reaching $17.00 per hour.

The Five-Year Climb to $17.00 and Beyond

For anyone currently earning the federal minimum, the boost is immediate and significant. The bill sets a clear schedule: the rate jumps to $9.50 per hour on the effective date, then steadily increases each year—$11.00, $12.50, $14.00, $15.50—until it hits $17.00 per hour five years later (Sec. 2). This is a predictable, multi-year plan that gives businesses a clear runway to adjust their budgets.

But the real long-term change kicks in after that five-year phase-in. Starting in year six, the minimum wage will no longer be a fixed number set by Congress. Instead, it will automatically adjust every single year based on the percentage increase in the median hourly wage for all workers, as tracked by the Bureau of Labor Statistics (Sec. 2). This means that the minimum wage will be permanently tied to overall wage growth, ensuring it doesn't lose value to inflation or stagnate while the rest of the economy moves forward. For workers, this offers a level of economic stability that the current system simply doesn't provide.

The End of the Tipped Wage

If you work in a restaurant or any job where tips are part of your income, this bill is a game-changer. Currently, employers can pay a much lower cash wage, relying on tips to make up the difference. This bill phases out that system entirely (Sec. 3). Over six years, the minimum cash wage employers must pay tipped workers will increase annually, starting at $6.00 an hour in Year 1 and reaching $15.00 an hour in Year 6. Crucially, after Year 6, the separate tipped minimum wage structure is repealed, meaning tipped employees will be guaranteed the full standard minimum wage—the same $17.00 (or higher, thanks to the automatic adjustments) that non-tipped workers receive.

The bill also tightens rules around tips, making it crystal clear that employees have the right to keep every tip they receive, and it strengthens penalties for employers who improperly withhold wages or tips (Sec. 3). For a server or bartender, this translates to a much more reliable paycheck and less financial risk tied to a slow shift.

Fairness for Young Workers and Workers with Disabilities

Two other groups currently subject to lower minimum wages are also brought into the standard wage structure. The bill phases out the special minimum wage for workers under 20 years old, increasing their rate annually until it matches the standard minimum wage, at which point the lower youth wage is repealed (Sec. 4).

The most significant change affects workers with disabilities who are currently paid subminimum wages under special certificates (Sec. 6). The bill immediately stops the issuance of any new special certificates and starts a five-year phase-in to bring the wages of these workers up to the standard minimum wage. For example, it starts at $5.00 an hour, steps up to $7.50, $10.00, $12.50, and $15.50, and then hits the standard rate five years after enactment.

This final step is a massive policy shift. To help employers who rely on these certificates—often organizations providing vocational training—the Secretary of Labor is required to provide technical assistance and information to help them meet the new wage requirements and keep offering jobs to these individuals. The goal is to transition these workers into competitive, integrated employment (Sec. 6).

What This Means for Businesses and Paychecks

For businesses, especially those in service, retail, and hospitality, these changes mean a substantial increase in labor costs over the next few years. A restaurant that currently relies on the subminimum tipped wage will need to completely restructure its payroll to accommodate the full standard wage for all staff. Similarly, organizations employing workers with disabilities must find ways to absorb the cost of paying the full minimum wage.

However, the bill provides a clear, multi-year schedule for these changes, which is far better than an immediate, massive jump. The effective date for most provisions is the first day of the third month after the bill is signed, giving everyone a short window to prepare before the first wage hike kicks in (Sec. 7). The Department of Labor is also required to publish advance notice of all future wage increases at least 60 days before they take effect, ensuring transparency and predictability for both workers and employers (Sec. 5).