Why Were Minimum Wage Laws Established?

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Minimum wage laws were established to address issues faced by American workers. The first minimum wage law was signed by President Franklin D. Roosevelt in 1938 as part of the Fair Labor Standards Act, which is the cornerstone of the U.S. labor system. The FLSA also introduced regulations to prevent the exploitation of American workers. The value of the federal minimum wage in real dollar terms has risen and fallen on political tides, and it is currently set at $7.25 per hour.

Labor Unions and Fair Pay

Labor unions tried to get a minimum wage passed in 1923 to ensure workers received a fair rate of pay for their labor. The majority of the work force labored long hours in sweatshops and factories, under horrible conditions, and for only pennies a week, according to the Minimum-Wage.org website. Unions were also the first entities that sought to improve working conditions. The U.S. Supreme Court struck down these attempts.

FLSA and Minimum Wage Standards

The Fair Labor Standards Act passed by the Roosevelt administration in 1938 had a profound effect on the wages paid to American workers. The FLSA set a 25-cent-per-hour minimum wage and a 44-hour workweek ceiling for most employees, according to Time magazine online. The act states that wages must ensure a minimum standard of living necessary for health, efficiency and general well-being, without substantially curtailing employment. It also bans child labor.

Minimum Wage Exemptions

Certain minimum wage exemptions were established to benefit businesses where employees receive tips in addition to their wages, such as restaurants, bars and private clubs, because it is expected that the tips will make up the difference in pay. Some jobs, like baby-sitting, which are often paid by individual consumers utilizing the services of teens, may also be exempt. (See the minimum wage FAQs page on the Minimum-Wage.org website).

Cost of Living and Minimum Wages

The purchasing power of workers making minimum wage went from $10.04 worth of goods in 1968 to $7.25 worth in 2010, according to statistics on the Let Justice Roll website. The federal poverty level, the decrease in purchasing power and the higher cost of living in some areas resulted in 19 states and Washington, D.C., having already set a minimum wage of $7.25 an hour or more before 2010. This is referred to as a living wage.

Poverty and the Minimum Wage

Laura Fitzpatrick wrote in the July 24, 2009, issue of Time magazine online, that the minimum wage translates into a yearly increase of $4,400 for a full-time worker, just nudging a family of four above the poverty line. Economists have noted that the minimum wage has been passed on to consumers and rarely affects business profits. The high poverty rate in 1923 also influenced labor union attempts to establish a minimum wage.