Minimum Wage: The Basics

In 1894, the people of New Zealand enacted the first minimum wage law in the world. This ruling covered all their citizens and industries, not just a few of them. Australia was the next to get in on the act. Their laws were initially created to protect people in industries where the pay was known to be bad but was eventually enhanced to cover more businesses. The United Kingdoms passed similar laws in 1909.

The United States caught up three years later, with Massachusetts enacting the first minimum wage law in America. In 1938, the federal government passed the Fair Labor Standards Act, which made the minimum wage a reality in many states. The price was initially set at $0.25 per hour (equal to about $4.78 today). There have been several adjustments to the law and numerous increases to the minimum wage since then.

Modern Standards

The national minimum wage has remained at $7.25 an hour since 2009. However, twenty-nine states have passed laws that require employees to be paid even more. Some of the highest minimum wages can currently be found in Washington D.C. ($12.50 an hour), Washington state ($11.50 per hour), and California ($11 per hour).

On the other hand, twenty-one states simply follow the federal laws. These places often have a minimum wage that’s linked to government requirements. But others must adhere to these rules because they have no official minimum wage or the prices on their books are lower than what’s officially allowed.

It is still perfectly legal to pay wait staff and other tipped workers rates as low as $2.13 an hour. However, their employers are supposed to cover the difference if their tips don’t add up to minimum wage standards. In some places, it’s even legal to pay employees under the age of 20 as little as $4.25 an hour during their first three months; of course, there are other exemptions on the books but these are perhaps the most obvious ones.

The Fluctuating Value of Minimum Wage

The value of a minimum wage salary has fluctuated over the years. The result is that it hasn’t always kept up with current economic trends or inflation rates. The minimum wage has historically had a purchasing power of around $6.60 per hour, hitting its peak in 1968 after falling to an all-time low in 1948. According to one economist, minimum wage salaries are currently hovering about a dollar above their historic average.

However, these prices still haven’t kept up with modern inflation rates. The fact is that the cost of products and services generally increase in price over time. Average salaries generally do the same. This means that earlier figures have to be adjusted to modern standards before they are factored into any equation.

The Current Debate

With that in mind, it’s not surprising that 73% of Americans support increasing the minimum wage to at least $10. There is nonetheless debate about how much to actually raise the minimum wage. A majority Hispanics and Latinos are in favor of a $15 minimum wage, but most Caucasians are against the idea.

Since 2012, fast food workers and other minimum wage employees have organized multiple strikes to bring attention to the fact that their salaries don’t adequately cover their basic needs. So when President Obama suggested raising the minimum hourly wage to $10.10 in 2014, many people were thrilled.

Others were upset or concerned, yet the legislature agreed to the increasing public demands that they do something about the situation. As a result, minimum wages are currently on the rise.

But should they be?

That question has led to a heated debate which has split the nation and illustrated a lot of problems in this country. The fact remains that money tends to be an emotionally fraught topic at the best of times and the on-going arguments seem to have provided the American public with few if any, definite answers.


Image Credit: Monam via Pixabay.

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