What is Minimum Wage?

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  • Written By: Michael Pollick
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  • Last Modified Date: 16 April 2019
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Minimum wage is the lowest hourly wage allowed by federal and state labor laws. It generally applies to unskilled or semi-skilled laborers working in service industries or manufacturing plants. Certain occupations such as agricultural workers are usually exempt from wage requirements, as are certain service workers who receive tips or other compensation equal to the minimum wage. In the United States, Congress must approve any adjustments to the federal minimum wage law currently in effect. Because of an act passed under the Clinton administration, individual states now have the right to raise their own rates above the current federal requirement.

There hasn't always been law regarding wages to protect unskilled or semi-skilled workers. Until the 1930s, individual wages were determined largely by employers. Workers had to accept whatever compensation was offered or simply remain unemployed. This didn't necessarily mean that all employers of that time paid extremely low wages, but the laws of supply and demand often led to the most desperate workers accepting low bids. Industrialists such as Henry Ford routinely offered higher wages to skilled or trainable workers, but the working conditions could be brutal and the workday lasted 12 hours or more.


Organized labor unions, along with the Democratic politicians who supported them, began to demand a standardized minimum wage for all workers. In 1935, President Franklin Roosevelt proposed the first federal minimum wage under his National Recovery Act. This act called for every worker to be paid at least 25 cents per hour. The Supreme Court struck down the National Recovery Act as unconstitutional, rendering the wage regulation unenforceable. In 1938, the Fair Labor Standards Act reinstated the same 25 cent federal minimum wage, along with the legal mechanisms necessary to adjust it over time. At first this act only covered a few transportaion and agricultural industries, but later amendments included service workers and general laborers.

There is no mandate to change the federal minimum wage rate, but members of Congress routinely request consideration for a raise. If an adjustment is approved, it is generally raised in phases over the space of a few years. It has never been raised above the poverty level of a family of four with one working adult. The highest minimum wage based on real spending power was realized in 1968, when the average worker earned the equivalent of $18,000 by today's standards. This discrepancy between the poverty level and the real spending power has led to more than a few heated debates between lawmakers.

Opponents of the current system suggest that current wages discourage the working poor from improving their skills or seeking higher paying jobs. Certain jobs could be filled very quickly if workers were allowed to negotiate their own wages. Minimum wage workers also continue to qualify for many government programs such as food stamps, creating a dilemma for those who don't want to become reliant on social welfare programs but cannot earn a living wage. Many economists agree with this criticism, citing the long-term problems of raising other salaries across the board to compensate for a raise in the minimum wage. Certain union-backed wages are specifically determined as a percentage above the current federal minimum wage.

Those who favor the federal and state minimum wage laws claim that workers are protected from exploitation by employers. They argue that it ensures that laborers can be assured of fair compensation for their efforts. As far as increases in the federal minimum wages are concerned, a rising tide lifts all boats. Historically, few jobs have been lost due to an increased minimum wage. When other salaries are adjusted upward to compensate, the result is often a stronger economy with higher consumer spending.


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Discuss this Article

Post 14

Government tends to create more problems than solve them. You should know this. Minimum wage is pointless; raising wages just feeds a cycle of inflation. Think about it: if wages didn't rise and every product did, it would have to eventually come down in price because of supply and demand.

Post 13

Restaurant workers are not covered under the minimum wage so most restaurants only pay about $2.00 per hour and they expect the customer to pay the remainder of the employees wage. If I pay 6 times of what the food is worth I don't feel inclined to pay a restaurant worker another 20 percent. I am the customer not the employer. Those of you who do not believe in a minimum wage can follow behind me and pay these workers what ever you wish.

Post 12

RE: minimum wage and the constitution. Airplanes, radio, television, labor unions, food inspection, Medicare, Social Security, atomic energy, oil pipelines, or anything else that has developed since about 1780 isn't mentioned in the Constitution, either. The Constitution was deliberately short and general, to allow changes to deal with future events. The argument is irrelevant.

Post 11

Just to make this clear, none of you actually answered the important part of olittlewood's question. Sure the dollar fluctuates, and if a state's MW is higher than the federal then it's still following the federal MW law. But there are states that have no minimum wage, and states with lower than federal minimum wage (like $4/hr).

What is the point, then, of a federal minimum wage is a state can set a lower wage?

Post 10

Minimum wage isn't mentioned in the constitution nor the bill of rights, therefore is it unconstitutional for the federal government to enact the minimum wage law. This should be left to the states and the local municipalities if there IS going to be any minimum wage law.

Olittlewood, do some more independent research. Feds has set a minimum wage. Individual states can set a minimum wage if they want to as long as it is higher than the federal minimum wage.

Regardless, I oppose minimum wage laws.

Post 8

Where is it written in the US Constitution that the Federal Government has any right to mandate any salary between the business (job) owner, and the worker? If you read the 10th amendment, it specifically outlaws this and many other funded and unfunded mandates of the feds.

America gave up it's freedom long ago in favor a nanny state so that no one is accountable or responsible for their own decisions. The minimum wage is just another example of this. Why not a minimum wage of $20/hr, or $50, or whatever? Raising the minimum wage only raises the cost of everything to ensure that those who only do enough to get by won't.

Post 7

what is minimum wage? look under "rate" on your last paycheck stub. ;p

Post 5


There IS a good reason, actually. In different states, the value of the dollar can vary drastically. If you've ever been to New York City or Los Angeles, you might have noticed that things cost more there. Some cunning laborers even live in one of these places some parts of the year, and retire to the less expensive Midwest for the other part of the year. I've heard this can be highly profitable, and it's proof positive that the dollar fluctuates regionally, even within the U.S. Hope this helps.

Post 4

what are the differences between pension and gratuities?

Post 3


The Federal Minimum wage is absolute lowest that someone can be paid. States can have a higher minimum wage, which generally reflects on the economic situation respective to that individual state. Seasonal workers are exempt from the minimum wage in some states, but not in others. As for restaurant workers, because they earn gratuities on top of their pay, usually make more than minimum wage, therefore are subject to a specialized version of the minimum wage.

Post 2

why is it that there can be a federal minimum wage, but different states can also have their own minimum wage, which is lower than the federal? what's the point of a federal minimum wage if the states can institute their own minimum wage? while some states may have a minimum wage that is higher than the federal, many others have a lower minimum wage. and also, why is it that some professions, such as seasonal work and restaurant work get paid LESS than minimum wage? i know that they may get gratuities, but these workers are providing a service for their employer and should be compensated as such.

Post 1

"When other salaries are adjusted upward to compensate, the result is often a stronger economy with higher consumer spending."

This is only true if the prices of things aren't rising as well.

Henry Ford instituted the 8-hour workday in addition to offering higher wages for particular skillsets. This sentence seems to suggest that there was a tradeoff of longer workdays for higher wages: "Industrialists such as Henry Ford routinely offered higher wages to skilled or trainable workers, but the working conditions could be brutal and the workday lasted 12 hours or more." Historically this is true, but not only in industries like Ford's automotive work.

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