Minimum Wage And All That Jazz

The push has been on for months now for the minimum wage to be raised to $15 per hour. The result has been polarized views on whether that much of an increase in the minimum wage is prudent or fiscally responsible.

When did minimum wage come into existence?

In the United States, the Fair Labor Standards Act was introduced in September of 1938 and set a uniform national minimum wage for all non-farm, non-supervisory workers. The Act banned child labor, set the minimum hourly at twenty-five cents per hour, and created the forty-hour work week (with the maximum number of hours an employer could make an employee work being forty-four hours).

Did everyone get paid at least a minimum wage?

When the Act was passed, it only applied to twenty percent of the labor force.  The other eighty percent weren’t affected.

Was this the first Act of its kind?

No. In 1933, President Roosevelt and his advisors crafted the National Industrial Recovery Act as the world entered the fourth year of the Great Depression. Employers signed over 2.3 million agreements that affected 16.3 million American workers.

This Act established work week hours between 35 and 40 hours with a minimum wage of between $12 and $15 per hour (which translates into between thirty-four and thirty-seven cents per hour). Employers also agreed not to hire anyone under 16 years of age.

The signatory businesses were identified as blue eagle employers, and the government urged Americans to be patriotic and to buy only from blue eagle businesses.

What else did the Roosevelt government do?

Before the Fair Labor Standards Act was signed, in 1933, the Roosevelt government created four million public works jobs through the Civil Works Administration. It was a short-lived program that cost $200 million USD per month to run, which didn’t sit well with American voters.

But what about the Civilian Conservation Corps?

This employment program was primarily geared for teens and young adults aged 16 to 25 years of age, and ran from 1933 through to 1942. Strange as it may seem, minimum wage didn’t apply to the Civilian Conversation Corps with workers being paid $30 per month ($25 of which was sent home to support their families) and included room and board.

Would it be fair to say that minimum wage rates have always been a volatile discussion?

It might not be fair to say that, but it would be an accurate thing to say.

Does the minimum wage need to be increased?

The answer to that question isn’t one that can be easily answered. The federal minimum wage in 1975 was $2.00 per hour. In 2015 dollars, that translates to $9.00 per hour.

However, the current federal minimum wage in 2015 is currently $7.25 per hour with medical coverage, and $8.25 per hour without medical coverage.

Which States are paying $9.00 per hour or more as a minimum wage?

Those would be California, Connecticut, D.C., Massachusetts, Minnesota, Oregon, Rhode Island, Vermont, and Washington. In other words, the States mentioned have kept up with what the equivalent to $2.00 per hour in 1975 would be forty years later in 2015.

Those States scheduled to raise minimum wage to at least $9.00 per hour in upcoming months are Alaska, Hawaii, Maryland, Michigan, Nebraska, and New York.

If $2.00 per hour in 1975 is the equivalent of $9.00 per hour in 2015 dollars, how much is the $0.25 per hour from 1938 equal to in 2015 dollars?

Believe it or not, if the only figure taken into account was inflation, that $0.25 per hour that came into being back when Roosevelt was President of the United States of America would only be worth about $4.00 per hour in today’s terms.

How does 1938 minimum wage compare to 2015 minimum wage?

Back in 1938, $0.25 per hour meant 40-hour per week workers grossed slightly more than $650 USD per month. According to the U.S. government, in 2015, workers are netting an average of $1,150 USD per month.

Are minimum wage earners living below the poverty level?

According to the U.S. Department of Health and Human Services, a single person earning less than $11,770 is living below the poverty level. Those who are earning $7.25 (which includes health benefits) are bringing in $1,189 per month (plus health benefits) which puts them at above the poverty level.

Is it reasonable to demand companies to take a page from Gravity CEO, Dan Price when it comes to minimum wage?

Next Tuesday, I’ll share the story of the Seattle-based company CEO and his misadventure in corporate philanthropy directed at his employees. You may not like what you read so be prepared for some hard truths.

Elyse Bruce


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