Current news and politics are filled with discussion on the minimum wage. Most of the talk concerns raising the minimum wage to a level where the average person making minimum wage is making a living wage. When considering changes to minimum wage, it’s helpful to examine its history, original purpose and how it has changed over the decades.
Creation of the Minimum Wage
The first minimum wage law in the US was created as part of the Fair Labor Standards Act of 1938. This law created minimum wage and set several important standards for employment such as recordkeeping, overtime pay and employment of minors. At that time, the minimum wage was just 25 cents per hour, equivalent to over $4 in today’s economy. The purpose of the minimum wage at its creation was to create a minimum standard of living to protect workers and help stabilize the post-depression economy.
The United States was not the first nation to create a minimum wage. New Zealand created the very first minimum law in 1894. Since that time, many other countries around the world have adopted similar legislation.
In the United States, minimum wage laws are a balance of state and federal laws. Nine states have either no minimum wage law or an amount lower than the federal level, so federal law applies. Twenty states have minimum wage laws equal to the federal amount, and twenty-one states have a minimum wage law higher than the federal level, so the state amount applies.
Changes to Minimum Wage
Unlike some budget and money laws, the federal minimum wage is not automatically set to adjust for inflation. In order to raise the wage, the law must be manually changed by presidential order. This has happened 22 times by order of various presidents. The changes to minimum wage were gradual at first, with large increases in later years. There are also significant times where there was no increase. The last increase to minimum wage was in 2009.
Creating a Fair Comparison
While the federal minimum wage has never been decreased, that doesn’t mean the value of the wage has never gone down. In fact, the value of the minimum wage after inflation adjustments has decreased dramatically from its highest point. People earning minimum wage in 1968 only earned $1.60 an hour, but that’s over $10/hour after inflation adjustments and represents the highest ever real-value of the minimum wage.
In order to adjust for inflation and create the same value of minimum wage, it stands to reason that the wage needs to be periodically raised. While the 2009 adjustment brought the minimum wage in line with current inflation, minimum wage earners today are making less wealth overall compared to previous years. There remains a question as to whether the minimum standard of living that the wage was originally intended to protect is still being protected by modern standards. Considering that question should be integral to any discussion of raising the minimum wage.