Recounting the Journey of the Federal Minimum Wage

The minimum wage is a wage floor designed to ensure equitable payment to employees, regardless of the free-market equilibrium wage. This form of market correction bolsters a country’s social welfare, and provides a baseline for organizations to pay their employees. Although the minimum wage has played an indispensable role in the United States’ history, its origin dates back to New Zealand in 1894. In its early stages, the progressive wage floor encompassed all businesses and industries and was implemented across the entire country.

Nearly four decades later, President Franklin Delano Roosevelt proposed the brainchild of a 25 cent minimum wage as part of the New Deal-Era National Industrial Recovery Act of 1933. To his dismay, the legislation was ruled unconstitutional in 1935, and was not reinstated until the Fair Labor Standards Act of 1938, which established not only the minimum wage, but also overtime pay, record keeping, and other vital human resource statutes. Roosevelt’s 25 cent minimum wage was just the beginning of this economic policy’s journey.

In the years to follow, America lifted itself out of the most devastating recession the country has ever seen. It endured a brutal war, and elected one of the youngest presidents to the Oval Office. The liberal political climate of the 1960s kindled a higher minimum wage. Constant increases were implemented to keep up with rising prices. Although various presidential administrations recognized that the minimum wage must be adjusted for inflation in order to avoid the erosion of consumer purchasing power, the wage floor was never indexed to inflation; therefore, it did not automatically increase with rising prices. The only circumstance in which a raise to the federal minimum wage takes place is when it is passed through Congress.

As the country progressed, so did the economic policies that influenced the people. In 1973, the United States saw rapid increases in oil prices due to the Arab oil embargo that began in October. Following the Iranian revolution, a second energy crisis shocked the U.S. economy in 1979. Fiscal imbalances, energy shortages, and outrageous inflation lead the American people to elect more conservative leadership in 1980. During this time, the minimum wage remained stagnant from 1981-1990 at $3.35. Throughout the 90’s it incrementally rose, and by July 2009, the current wage was $7.25, which was implemented as a result of President George W. Bush’s legislation.

During the 2013 State of the Union Address, President Obama advocated for a $9.00 minimum wage by the year 2015. His proposal centered around tying the minimum wage to inflation so that its value would rise each year in relation to prices. In 2013, the 113th Congress introduced The Fair Minimum Wage Act that would amend Roosevelt’s Fair Labor Standards Act of 1938. The four main goals of this provision were to 1) raise the minimum wage to $8.20 an hour on the first day of the third month after the act is passed as law; 2) implement a $9.15 wage after one year of employment; 3) introduce a $10.10 wage after two years and 4) increase employees’ wages annually after three years of employment. The bill has not advanced further than its introduction onto the Senate floor, but as the country ventures into a new political climate with the 2016 election, the minimum wage will assuredly continue its progression through American history.