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What is Minimum Wage?

Updated on November 20, 2009

Minimum wage is the lowest wage permitted to be paid to workers by legislative authority. The minimum wage may apply to a nation, a state or other political subdivision, or to an industry or trade. Historically, governmental minimum wage setting has been directed at the elimination of oppressive wages and sweatshop conditions, particularly as they affected female and child workers. By mid-20th century, a secondary purpose developed in terms of governmental interest in all workers receiving a fair wage or reasonable value for the work performed.

While there were instances of governmental minimum wage regulations in France and England as early as the 13th and 14th centuries, the modern concept of minimum wage by legislative fiat dates from the late 19th century. The first significant experience was in Australasia, where New Zealand in 1894 and the colony (later state) of Victoria, Australia, in 1896 adopted minimum wage regulations. In 1910, England followed the Victorian example by authorizing the establishment of trade boards to fix minimum wages in any trade in which the prevailing rate was "exceptionally low as compared with other employments." The first minimum wage legislation in the United States was passed in Massachusetts in 1912, to be followed shortly by similar legislation in 14 other states and the District of Columbia, and for Puerto Rico. It was not until 1937 that the constitutionality of these state laws was finally established by the Supreme Court of the United States. The minimum wage movement also spread to Canada, the European continent, South America, Mexico, and South Africa. It is also subject matter considered by the International Labour Organization.

Photo by Gareth Weeks
Photo by Gareth Weeks

In the United States an experiment in wage regulation of a rather novel character was part of the New Deal legislative program in the 1930's. The National Industrial Recovery Act of 1933 included a provision for industry codes for minimum wages to be paid in certain industries in an effort to shore up the economy by increasing the amount of purchasing power in the hands of the consumer. The NIRA was declared unconstitutional in 1935, so the results of this experiment were inconclusive. Minimum wages for work performed on contracts with the United States government for construction, alteration, or repair of public buildings or public works were established by the Davis-Bacon Act of 1931 and on government contracts of all kinds in excess of $10,000 by the Walsh-Healey Public Contracts Act of 1936. The Fair Labor Standards Act of 1938 firmly established the federal government as a regulator of wages in the United States by establishing a minimum hourly wage for all employees engaged in interstate commerce or in the production of goods for interstate commerce. The minimum wage was 25 cents an hour in 1938, and was increased over the years. In 1966, new legislation raised the minimum to $1.60 in 1968 for workers already covered. For most workers newly covered, the minimum was to rise to $1.60 in 1971.

Minimum wage legislation uses two basic approaches in the establishment of wage rates: (1) the setting of a flat rate in the law which applies to all covered industries in the particular political jurisdiction, or (2) the establishment of wage boards or commissions consisting of representatives of the employers, employees, and the public, to conduct investigations and recommend minimum wages in a particular trade or industry to an administrator, whose responsibility it is to act on the recommendations of the board or commission.

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