Minimum Wage Thesis

Minimum Wage has been the foundation of America’s labor system since 1938. The Fair Labor Standards Act (FLSA), signed by President Franklin D. Roosevelt during The Great Depression in the United States. Since then, it has been an immense law topic that workers, employers, and legislators have been changing and amending for decades.

A wide variety of living standards existed among the workers of the latter part of the nineteenth century and by the end of the 1880’s an annual household income of $550 a year would be necessary for a family of five in a middle-sized industrial town to enjoy any of life’s amenities. The largest group if workers, some forty five percent had incomes precariously above the poverty level. Factory discipline and

The full effect of the FLSA was postponed by the advent of the Second World War and the ensuing economic inflation, which lowered wage values below the level outlined in the Act. In October 1949 the Fair Labor Standards Amendment 736 raised the minimum wage from forty to seventy five cents per hour and extended the child labor restrictions. In 1955 it was amended again increasing the minimum wage to one dollar an hour. In 1961 the FLSA was amended to provide enterprise coverage that applies when a business is involved in interstate commerce and it’s gross annual business volume is a minimum of $500,000 per year. The amendment specified that the coverage was automatic for schools, hospitals, nursing homes and other residential care facilities. The minimum wage also increased again to one dollar and twenty-five cents an hour. The last minimum wage increase occurred in 2007when Congress raised the rate in steps from $5.15 an hour that year to $7.25 an hour in July 2009. The District of Columbia and nineteen other states have minimum wages higher than the federal hourly rate. The highest state minimum wage is in Washington State where the rate is $9.19 an hour, the average throughout the Unites States being $7.75 an hour. Over the last sixty-five years the minimum wage has varied in it’s inflation adjusted buying power ranging from a low of $3.09 an hour in late 1948 to a high

Until the mid 1990’s labor economists believed that a 10 per cent increase in minimum wage would reduce employment of impacted groups by about 2 per cent. David Card produced a research paper that challenged this conclusion stating that the minimum wage had no adverse effect on employment. This controversial paper caused an explosion of research on the subject and coincided with a number of states raising their minimum wages above the federal level. Two-thirds of the studies came to the same conclusion as before that higher minimum wages reduce the employment of less-skilled workers. Recent studies by Reich, Dub end Allegretto contend that finding negative employment effects can be eliminated when you control for regional trends however, Neumark in his study states that it take application of very specific controls to make these trends go away and that using the more general controls preferred by the majority of economists produces the standard conclusion that minimum wage increases cost