LIFT Act Mandates $17 Minimum Wage, Ends Subminimum Pay, and Boosts EITC for Younger Workers

The Labor Income Fairness and Transparency Act, or LIFT Act, is a major overhaul of federal wage standards designed to boost paychecks for low-wage workers and strengthen financial support for working families. It sets a clear path for the federal minimum wage to hit $17.00 an hour within three years of the effective date (which is one year after the bill is signed), and then permanently links future increases to median wage growth. This means after the initial phase-in, the minimum wage will automatically adjust yearly based on how much the typical worker’s salary is increasing, ensuring it doesn't fall behind rising costs. This change is rooted in Section 2, which phases in the increases from an initial $10.25 to $17.00, then uses a ratio comparing median hourly wages to calculate future rates, always rounding up to the nearest $0.05 increment.

The End of Subminimum Wages

One of the biggest shake-ups in the LIFT Act is the scheduled end of subminimum wages (Section 3). If you’re an employer who hires student-learners, full-time students, or apprentices under special certificates, you need to pay attention. The bill phases out the ability to pay these groups less than the standard minimum wage over a 36-month period, eventually requiring them all to be paid the full rate. For example, the minimum wage for student-learners starts at $9.29 an hour on the effective date, but must reach the standard minimum wage rate within three years. This removes regulatory flexibility for businesses that rely on these programs but guarantees that workers, regardless of their student status or age, are paid the same minimum rate as everyone else after the phase-out.

Tipped Workers Get a Raise and Keep Their Cash

For anyone working in the service industry—your barista, your server, your delivery driver—Section 4 is huge. The LIFT Act dramatically increases the required direct cash wage employers must pay tipped employees, starting at $7.09 per hour and reaching the full standard minimum wage ($17.00) within four years. Crucially, the bill makes it crystal clear that employees get to keep all the tips they receive, and employers are explicitly forbidden from using tips to cover credit card processing fees. This means that after the phase-in, the federal minimum wage for a server will be the same as for a retail worker, with tips serving as extra income, not a replacement for a living wage. This provision also doubles the civil penalties for violations of the Fair Labor Standards Act (FLSA) to $2,200 (Section 5), putting real teeth into enforcement.

EITC Boost for Younger Workers and Families

Beyond direct wages, the LIFT Act makes permanent and enhances several improvements to the Earned Income Tax Credit (EITC) that were temporarily in place during the COVID-19 era (Section 9). This is a big deal for younger people just starting out. The bill lowers the minimum age to claim the EITC from 25 down to 19, or 18 for students and former foster or homeless youth. It also completely eliminates the maximum age limit. Furthermore, it significantly increases the credit rate and raises the income thresholds where the credit starts to phase out. For a busy single person or a young couple, this means more money back at tax time, offering a meaningful financial cushion. These EITC enhancements take effect for tax years starting after December 31, 2025.

The Real-World Impact on Your Budget

For the millions of people currently making close to the federal minimum wage, this bill represents a substantial raise. If you’re currently making $7.25 and work full-time, hitting $17.00 means your annual income before taxes jumps by over $20,000. For employers, especially those in the low-margin service and hospitality sectors, this rapid phase-in represents a significant labor cost increase. While the bill aims to reduce poverty and boost consumer spending, businesses will face pressure to adjust pricing or staffing. To help manage this transition and enforce the new rules, the bill also provides grants to state and local governments to improve wage law enforcement (Section 7) and establishes a new advisory committee focused on the hospitality industry (Section 8), recognizing the unique challenges this sector faces.