What Is the Federal Minimum Wage?
In 1938, Congress passed the Fair Labor Standards Act. This legislation affirmed that workers are entitled to a certain amount of compensation for their labor by instituting the first federal minimum wage in the United States. But the conversation didn’t stop there. In fact, since its introduction, the federal minimum wage has been raised 22 times. Even today, minimum wage — which isn’t inherently adjusted to reflect higher costs of living — remains a hotly debated topic.
While the 1938 legislation marked an important first in U.S. history, laborers’ push for a fair minimum wage actually had its modern-day origins in France a century earlier. In 1831, silk industry workers in Lyon went on strike, demanding a livable minimum wage. Over 60 years later, New Zealand became the first nation to institute a federal minimum wage with its 1894 Industrial Conciliation and Arbitration Act. In observance of National Poverty Awareness Month, we’ll discuss the history of the federal minimum wage and its numerous changes.
The History of the Federal Minimum Wage in the United States
New Zealand’s actions helped inspire minimum wage advocates in the United States. According to History, “Samuel Gompers, founding president of the American Federation of Labor, publishe[d] an article entitled ‘A Minimum Living Wage,’ in which he advocates not just setting a legal threshold for wages, but also requiring it to be enough for workers to live.” Needless to say, this article marked a turning point in the U.S.
Finally, 14 years after Gompers‘ article cracked the conversation wide open, Massachusetts enacted the first minimum wage law in the U.S. By the following year, eight other states, from California to Minnesota, followed suit. However, a setback came in 1923 when the U.S. Supreme Court ruled that a state government could not set a minimum wage; according to the Court, doing so would violate a precedent set forth in the Fifth Amendment.
Just a decade later, Americans found themselves navigating the Great Depression. In an effort to help workers and rebuild the economy, President Franklin D. Roosevelt rallied Congress to support the National Industrial Recovery Act (NIRA), which “suspends antitrust restrictions and allows industries to enforce their own fair-trade codes” (via History). Additionally, FDR encouraged employers to pledge to offer $12 to $15 weekly wages; in exchange, employers would be able to display “We Do Our Part” badges, reinforcing the sense of pride and patriotism the federal government was hoping to inspire in the face of the Great Depression (and, later, World War II). In the end, these efforts encouraged various industries to enact minimum wage codes.
In 1935, the NIRA codes faced pushback from the Supreme Court, which, in turn, made minimum wage the hot-button issue of the upcoming presidential election. However, things took a real turn in 1937 when Elsie Parrish, a maid at the Cascadian Hotel in Wenatchee, Washington, sued her former employer on the grounds that she was owed back pay in accordance with Washington’s weekly minimum wage law. Since the Court had previously ruled that “any form of law establishing wages” was unconstitutional, the ruling on West Coast Hotel Co. v. Parrish came as a shock. Described by historians as the “big switch,” the Court ruled in favor of Parrish — and Washington’s minimum wage laws.
This landmark ruling opened the door for Congress to pass the Fair Labor Standards Act, which formally established a federal minimum wage. At the time, that minimum wage was 25 cents per hour; by 1949, Congress raised the minimum to 75 cents, marking the first of the 22 increases.
What Is the Federal Minimum Wage Today?
Today, the federal minimum wage applies to workers who are employed by businesses that make at least $500,000 in revenue as well as folks who work in schools, hospitals, nursing homes, and government agencies. Additionally, workers who are involved in “interstate commerce” are also subject to minimum wage protections (via U.S. Department of Labor).
Although things have certainly changed over the years, many feel the fight for establishing a fair federal minimum wage is far from over. As mentioned above, much of this feeling comes from the fact that the minimum wage doesn’t automatically adjust based on increased costs of living. As of January 2022, the federal minimum wage is still set at $7.25 — and has been since 2009. Meanwhile, the cost of living in the U.S. continues to climb.
More recently, attempts to account for these cost of living increases have been undertaken on a state-by-state basis. In 2016, both California and New York raised the minimum wage to $15 per hour (though it should be noted this increase to $15 is happening gradually). In total, 29 states (and Washington D.C.) have a higher minimum wage than the minimum set forth by the federal government, and, of those states, eight of them raise those wages in accordance with increases in the cost of living.
Now, the COVID-19 pandemic has further emphasized the fact that many workers do not make enough money to afford basic necessities, like rent, food and healthcare-related expenses. So, what’s being done? On February 27, 2021, the U.S. House of Representatives passed the American Rescue Plan Act of 2021, a $1.9 trillion COVID-19 relief package that aims to extend unemployment benefits; provide aid to small businesses and nonprofits; cut $1,400 relief checks to Americans; and, perhaps surprisingly, introduce a $15 federal minimum wage.
Reportedly, this increase, which would happen gradually until being fully realized in 2025, would have “boosted pay for some 32 million workers” (via CNBC). We say “would have” because in the first few days of March, as the American Rescue Plan Act moved to the Senate, the minimum wage provision was scrapped. According to Senate parliamentarian Elizabeth MacDonough, the provision did not comply with the rules of budget reconciliation.
While some Democrats have urged Vice President Kamala Harris to overrule MacDonough, it doesn’t seem like the White House will do so, despite previously supporting a minimum wage increase. For now, it seems like a federal minimum wage increase is off the table, but it’s clear that lawmakers — and everyday Americans — won’t stop fighting for it. Moreover, many states are raising their minimum wage rates irrespective of federal policies.
