Tuesday, February 13, 2007

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.

5 comments:

DOBBER said...

so, bangert, should there be a minimum wage law? i think no. i like to brake things down real simply. consider: let's assume you believe that there should be a minimum wage law, and it should be, say, $6 per hour. if i hire a high school kid on my block to mow my grass for an hour, for $5.75, then, you think i should be thrown in jail. i say - "who the hell are you?"

Michael Bangert said...

Dobber,

No there should not be a minimum wage law. Minimum wage laws curtail freedom and reduce employment. Our government should never do either of those two things. The interesting thing that I noticed in the article on the original Progressives is that they wanted minimum wage laws to specifically reduce the employment of people whom the considered undesirable - not to improve the lot of workers as modern Progressives argue.

Bangert

Lori said...

When I was in high school I got paid $20 for the whole lawn. It took me about 1 hour. Adjusted for 12 years of inflation I suspect that a lawn mow would go for $30 now. I don't think you're going to find a high school kid to mow your lawn for $5.75, but even if you could why are you such a cheap skate?

C Shif said...

The argument that minimum wage applies to teens mowing a lawn, etc. shows a misunderstanding of labor laws. Teens who go around their neighborhood mowing lawns are independent contractors, and minimum wage laws do not apply to independent contractors. A similar untrue analogy was recently used by talk show host Larry Elder about a homeless friend of his not being allowed to clean the parking lot for $5.00 when he saw it was dirty and needed cleaning. Mr. Elder should know better since he is an attorney, which I suspect no one who has commented above has that education. But at least now you know that these arguments are not based on any facts or law.

C Shif said...

The argument that minimum wage applies to teens mowing a lawn, etc. shows a misunderstanding of labor laws. Teens who go around their neighborhood mowing lawns are independent contractors, and minimum wage laws do not apply to independent contractors. A similar untrue analogy was recently used by talk show host Larry Elder about a homeless friend of his not being allowed to clean the parking lot for $5.00 when he saw it was dirty and needed cleaning. Mr. Elder should know better since he is an attorney, which I suspect no one who has commented above has that education. But at least now you know that these arguments are not based on any facts or law.