History the Minimum Wage

Minimum wage laws remain controversial in our current politics. Many people would like raise them and many others would like to abolish them. Even economists are split. In an attempt to better understand the current issues I investigated the history of the minimum wage. The following includes a couple of interesting items that I found.

The US Department of Labor has a chart covering the history of the Federal minimum wage. The chart shows the periodic increases in the minimum wage, but the thing that I found most interesting was the notes at the bottom of the page. It turns out that the Federal minimum wage, which began in 1938 originally only covered "employees engaged in interstate commerce or in the production of goods for interstate commerce." I assume that this had something to do with the US Constitution. Of course then in 1961 the minimum wage started applying to "employees in large retail and service enterprises as well as to local transit, construction, and gasoline service station employees." Then in 1966, the minimum wage started applying to "State and local government employees of hospitals, nursing homes, and schools, and to laundries, dry cleaners, and large hotels, motels, restaurants, and farms." So eventually everyone was covered even if they only had a peripheral relationship to interstate commerce.

Also interesting was that prior to 1937, the U.S. Supreme Court had consistently struck down minimum wage laws on the grounds that the government could not interfere with private contracts. Of course this position changed when FDR proposed a court packing plan in an attempt to stop the Supreme Court from blocking his New Deal legislation. This shift on the Supreme Court ultimately enabled minimum wage legislation for the purpose of benefiting workers in a time of economic turmoil.

But where did the idea of a minimum wage originate. The idea of a minimum wage originated with Progressives at the turn of the 19th century. The interesting idea that I found in this research paper is that the Progressives did not intend for the minimum wage to benefit all workers but to keep undesirable workers out of the labor force. Specifically this included women, children, and minorities whom the advocates of a minimum wage believed took jobs from deserving workers. Their thinking was that by setting a minimum wage higher than the wage a business was willing pay for women, children, or minorities the law would lead to lower employment for these groups and higher employment for white men. Tellingly, all of the early minimum wage laws that the Supreme Court struck down were specifically women's minimum wage laws. So over the past century the politics of the minimum wage has shifted from attempts to keep people out of the labor force to attempts to benefit the labor force.