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Minimum Wage Law

MINIMUM WAGE LAW


A minimum wage law is a piece of legislation that prevents businesses from hiring workers for hourly wages that fall below a specified level. The first minimum wage laws were passed in Australia and New Zealand in the 1890s. In 1912 Massachusetts became the first U.S. state to pass a minimum wage law, and in 1918 Congress authorized the Wage Board to set minimum wage levels for female workers in the District of Columbia. Five years later, however, the U.S. Supreme Court ruled in Adkins v. Children's Hospital (1924) that minimum wage laws violated the Fifth Amendment of the Constitution because they infringed on the freedom of businesses and workers to form contracts as they saw fit. The three dissenting justices claimed that Congress did have the constitutional power to correct social injustices. In 1933 in the depths of the Great Depression (19291939), President Franklin D. Roosevelt (19331945) convinced Congress to pass the National Industrial Recovery Act (NIRA), which gave the newly formed National Recovery Administration (NRA) the authority to establish national minimum wages. Although several states had passed minimum wage laws by the mid-1930s hope for a lasting federal law seemed doomed when the Supreme Court ruled in 1935 that the NRA was unconstitutional.

Two years later, the Supreme Court unexpectedly reversed its decision and gave states the constitutional right to establish minimum wage laws, setting the stage for the Fair Labor Standards Act (FLSA) of 1938. The FLSA set the national minimum wage at 40 cents an hour, an amount that was increased in 1949, 1956, 1961, 1968, 1974, 1991, 1996, and 1997. The 1997 increase brought the minimum wage to $5.15, which was estimated to affect about 10 million U.S. workers. Some economists have argued that minimum wage laws have an unintended negative effect on the employment rates of the poorest segments of society, many of whom are minorities. These critics argue that raising minimum wage rates encourages businesses to rely more and more on automation to reduce their labor costs, which discourages them from hiring unskilled workers who might otherwise find jobs if the minimum wage were lower.

See also: Fair Labor Standards Act, National Recovery Administration

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