It ends the longest span without a federal minimum wage increase since the pay floor was enacted in 1938. The last previous increase came in September 1997, when President Clinton signed a bill raising the minimum 40 cents to $5.15 an hour.
Legislation signed by President Bush in May increases the wage 70 cents each summer until 2009, when all minimum-wage jobs will pay no less than $7.25 an hour.
Government figures show about 1.7 million people earned $5.15 or less in 2006.
The increase is one of the few major legislative successes of the new Democratic-controlled Congress. They added the increase to the $120 billion Iraq war spending bill, which Mr. Bush initially vetoed because the Democrats insisted on a troop-pullout date. Mr. Bush signed the bill May 25 after the Democrats removed their pullout provision.
To help make the minimum wage provision palatable for Republicans, Democrats added $4.84 billion in tax relief for small businesses to help them hire new workers and offset any cost associated with an increase in the minimum wage.
Democratic presidential candidates are making further increases in the minimum wage an issue in their primary campaigns. If the minimum wage were linked to the real purchasing power of a dollar, it would already have reached $9.05 in January 2006, a Congressional Research Service report says.
At Monday's Democratic presidential debate, the candidates were asked whether they would take the presidency at minimum wage..
"Well, we can afford to work for the minimum wage because most folks on this stage have a lot of money," Sen. Barack Obama said. When Connecticut Sen. Chris Dodd tried to protest that he wasn't in the same league, Obama said, "You're doing all right, Chris."
More than two dozen states and the District of Columbia already have minimum wages higher than the federal level.
Critics of the federal increase say it might force some businesses to stop hiring entry-level employees. They also contend that beneficiaries of a higher minimum wage likely will be teenagers working part-time jobs, not the working poor.
But advocates for the poor argue that making minimum wage won't keep adults out of poverty.
A person working 40 hours per week at the current minimum wage of $5.15 makes about $10,700 a year. A raise to $5.85 an hour would increase that to $12,168 a year before taxes. An increase to $7.25 would boost that to just over $15,000 a year.
The federal poverty level for singles is $10,210, couples is $13,690 and $17,170 for families of three.