Minimum wage in the United States
In the United States, the minimum wage is set by U.S. labor law and a range of state and local laws. The first federal minimum wage was instituted in the National Industrial Recovery Act of 1933, signed into law by President Franklin D. Roosevelt, but later found to be unconstitutional. In 1938, the Fair Labor Standards Act established it at 25¢ an hour. In 1968, its purchasing power peaked at $1.60. As a result of inflation in the decades since, this remains the highest purchasing power the minimum wage has ever had. In 2009, Congress increased it to $7.25 per hour with the Fair Minimum Wage Act of 2007.
Employers have to pay workers the highest minimum wage of those prescribed by federal, state, and local laws., 22 states and the District of Columbia have minimum wages above the federal level. In 2019, only 1.6 million Americans earned no more than the federal minimum wage—about ~1% of workers, and less than ~2% of those paid by the hour. Less than half worked full time; almost half were aged 16–25; and more than 60% worked in the leisure and hospitality industries, where many workers received tips in addition to their hourly wages. No significant differences existed among ethnic or racial groups; women were about twice as likely as men to earn minimum wage or less.
In January 2020, almost 90% of Americans earning the minimum wage were earning more than the federal minimum wage due to local minimum wages. The effective nationwide minimum wage was $11.80 in May 2019; this was the highest it had been since at least 1994, the earliest year for which effective-minimum-wage data are available.
In 2021, the Congressional Budget Office estimated that incrementally raising the federal minimum wage to $15 an hour by 2025 would impact 17 million employed persons but would also reduce employment by ~1.4 million people. Additionally, 900,000 people might be lifted out of poverty and potentially raise wages for 10 million more workers. Furthermore, the increase would be expected to cause prices to rise and overall economic output to decrease slightly, and increase the federal budget deficit by $54 billion over the next 10 years. An Ipsos survey in August 2020 found that support for a rise in the federal minimum wage had grown substantially during the COVID-19 pandemic, with 72% of Americans in favor, including 62% of Republicans and 87% of Democrats. A March 2021 poll by Monmouth University Polling Institute, conducted as a minimum-wage increase was being considered in Congress, found 53% of respondents supporting an increase to $15 an hour and 45% opposed.
History
Minimum wage legislation emerged at the end of the nineteenth century, from the desire to end sweatshops which had developed in the wake of industrialization. Sweatshops employed large numbers of women and young workers, paying them what were considered non-living wages that did not allow them to afford the necessities of life. Besides substandard wages, sweatshops were also associated with long work hours and unsanitary and unsafe work conditions. From the 1890s to the 1920s, during the Progressive Era — a time of social activists and political reform across the United States — progressive reformers, women's organizations, religious figures, academics, and politicians all played an important role in getting state minimum wage laws passed throughout the United States.The first successful attempts at using minimum wage laws to ameliorate the problem of nonliving wages occurred in the Australian state of Victoria in 1896. Factory inspector reports and newspaper reporting on the conditions of sweated labor in Melbourne led in 1895 to the formation of the National Anti-Sweating League which pushed the government aggressively to deal legislatively with the problem of substandard wages. The government, following the recommendation of the Victorian Chief Secretary Alexander Peacock, established wage boards which were tasked with establishing minimum wages in the labor trades which suffered from unlivable wages. Campaigns against sweated labor were also underway in the United States and England at that time.
The first minimum wage legislation in the Unites States was enacted in Massachusetts in 1912, and several other states soon followed suit. These state laws, which were focused on women and children, were struck down by the Supreme Court between 1923 and 1937. The first federal minimum wage law, which exempted large parts of the workforce, was enacted in 1938 and set rates that became obsolete during World War II.
Progressive Era
As in Australia, civic concern for sweated labor developed in the United States towards the end of the Gilded Age. In New York in 1890, a group of female reformers who were worried about the harsh conditions of sweated labor in the country formed the Consumer's League of the City of New York. The consumer group sought to improve working conditions by boycotting products made under sweated conditions and did not conform to a code of "fair house" standards. Similarly, consumer leagues formed throughout the United States, and in 1899, they united under the National Consumer League parent organization. Consumer advocacy, however, was extremely slow at changing conditions in the sweated industries. When NCL leaders in 1908 went to an international anti-sweatshop conference in Geneva, Switzerland, and were introduced to Australian minimum wage legislation, which had successfully dealt with sweated labor, they came home believers and made minimum wage legislation part of their national platform.In 1910, in conjunction with advocacy work led by Florence Kelley of the National Consumer League, the Women's Trade Union League of Massachusetts under the leadership of Elizabeth Evans took up the cause of minimum wage legislation in Massachusetts. Over the next two years, a coalition of social reform groups and labor advocates in Boston pushed for minimum wage legislation in the state. On June 4, 1912, Massachusetts passed the first minimum wage legislation in the United States, which established a state commission for recommending non-compulsory minimum wages for women and children. The passage of the bill was significantly assisted by the Lawrence textile strike which had raged for ten weeks at the beginning of 1912. The strike brought national attention to the plight of the low-wage textile workers, and pushed the state legislatures, who feared the magnitude of the strike, to enact progressive labor legislation.
By 1923, fifteen U.S. states and the District of Columbia had passed minimum wage laws, with pressure being placed on state legislatures by the National Consumers League in a coalition with other women's voluntary associations and organized labor. The United States Supreme Court of the Lochner era, however, consistently invalidated labor regulation laws. Advocates for state minimum wage laws hoped that they would be upheld under the precedent of Muller v. Oregon, which upheld maximum working hours laws for women on the grounds that women required special protection that men did not. The Supreme Court, however, did not extend this principle to minimum wage laws. The court ruled in Adkins v. Children's Hospital that the District of Columbia's minimum wage law was unconstitutional because the law interfered with the ability of employers to freely negotiate wage contracts with employees. The court also noted that women did not require any more special protection by the law, following the passage in 1920 of the Nineteenth Amendment, which gave women the right to vote and equal legal status.
However, at the same time, in the United States, the late 19th century ideas for favoring a minimum wage coincided with the eugenics movement. As a consequence, many prominent Progressive economists at the time, including Royal Meeker, Henry Rogers Seager, and Edward Cummings, argued for adoption of a minimum wage for the explicit purpose of supporting the "right" sort of semi- and unskilled laborers while forcing the "wrong" sort out of the labor market and, over the longer term, impeding their ability to thrive and have families, or, in the case of women, push them out of the labor pool and back towards the home. The recognized result of a minimum wage, a contraction in a firm's labor force and societal elimination of the "wrong" sort of people, was the specific stated outcome, with a view to applying it across the entirety of the American body politic.
New Deal
In 1933, the Roosevelt administration during the New Deal made the first attempt at establishing a national minimum wage regiment with the National Industrial Recovery Act, which set minimum wage and maximum hours on an industry and regional basis. The Supreme Court, however, in Schechter Poultry Corp. v. United States ruled the act unconstitutional, and the minimum wage regulations were abolished. Two years later after President Roosevelt's overwhelming reelection in 1936 and discussion of judicial reform, the Supreme Court took up the issue of labor legislation again in West Coast Hotel Co. v. Parrish and upheld the constitutionality of minimum wage legislation enacted by Washington state and overturned the Adkins decision which marked the end of the Lochner era. In 1938, the minimum wage was re-established pursuant to the Fair Labor Standards Act, this time at a uniform rate of 25¢ per hour. The Supreme Court upheld the Fair Labor Standards Act in United States v. Darby Lumber Co., holding that Congress had the power under the Commerce Clause to regulate employment conditions.The 1938 minimum wage law only applied to "employees engaged in interstate commerce or in the production of goods for interstate commerce," but in amendments in 1961 and 1966, the federal minimum wage was extended to employees in large retail and service enterprises, local transportation and construction, state and local government employees, as well as other smaller expansions; a grandfather clause in 1990 drew most employees into the purview of federal minimum wage policy, which by then set the wage at $3.80.