Minimum Wage in the United States

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  • Topic: Minimum wage, Wage, Employment
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Minimum Wage
In the United State

U.S. Minimum Wage

A minimum wage is the lowest hourly, daily, or monthly wage that employers may legally pay to employees or workers. The debate over minimum wage in the United States has been ongoing for over 100 years. It is a hot topic in labor, human interest, and especially in economics. Is the minimum wage too low? Is it too high? Should we have one at all? Does having a minimum legal wage help those who it is intended to help, or does it actually make them worse off? Theses questions are asked on a daily basis by interested parties. While there may not be one definitive correct answer, there are compelling arguments on both sides of the issue, and those who represent their “side” are passionate about their opinions. This is one of a few social topics about which people are generally not indifferent.

Much of the adult workforce in the United States has worked a minimum wage job at some point in their career, so we can easily relate to the challenges that face today’s minimum wage workers. This paper is not intended to solve the debate over minimum wage, nor will it attempt to persuade the reader in one direction or the other regarding what should be done concerning minimum wage. The pages that follow will present a brief history of the minimum wage debate in the United States, and then present some of the arguments offered by both sides of the debate.

A Brief History of Minimum Wage

Although New Zealand was the first country to formally enact minimum wage legislation in 1896,[i] the United States was one of the first major industrialized nations to set a national wage floor for their workers. For decades during the industrial revolution, workers in the United States endured work environments that consisted of long hours, dangerous working conditions, and low wages. Small movements to develop a national minimum wage by labor unions and activist groups were met with predictable resistance from business people, and ultimately struck down by the U.S. Supreme Court.[ii] Finally, in 1938 President Roosevelt and Congress passed the Fair Labor Standards Act. This act was intended to alleviate some of the poor working conditions that mostly women and young children were subject to. Additionally, this act imposed a federally mandated minimum wage of $0.25 per hour, with some exceptions.[iii] There have been subsequent pieces of legislation that continue to address and improve workers’ rights since that time, focusing more on quality of life issues rather than eliminating abuses by employers. Additionally, individual states now have the right to enact their own minimum wage, so long as it is no lower than the federally mandated minimum wage.

Since 1938, the national minimum wage has been raised 21 times, most recently in 2009, and is currently $7.25 per hour. Today, more than 90% of countries in the world have some sort of wage floor for their work force. [iv] The Case for Minimum Wage

Those in favor of a minimum wage argue that it increases the standard of living of workers and reduces poverty.[v] Those workers that are paid minimum wage are unskilled laborers, perhaps first entering the job market. Without any marketable skills, the worker needs some protection that they will be paid a fair rate that will enable them to be self-sufficient until such time that they have learned a skill or trade that will allow them to work their way up from the low wage jobs. Without a minimum wage, employers would have significantly more market power than the workers – a monopsony – and that could result in the intentional collusion between employers regarding the wage they will offer.[vi] Absent this protection, workers would be forced to accept the artificially low wages, resulting in a very low quality of life.

Additionally, the argument can be made that paying a “livable” minimum wage incentivizes workers to not only get a job, but to work hard to keep that...
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