The minimum wage, as a policy, was instated when President Franklin Delano Roosevelt was in office. In 1938, a federal minimum wage was included in the Fair Labor Standards Act (FLSA). The minimum wage was instated in order to prevent employers from paying their employees extremely low wages, and to help bring some stability to the economy, as this was around the time of the Great Depression (Adams, 2017). Adams states that many minimum wage workers, even by working two jobs, cannot properly pay for food, rent, and transportation.
This problem is even harder for those who are parents, as they have to take care of their children as well. Unfortunately, proposals to increase the minimum wage are usually met with opposition, and are thus difficult to pass. During President FDR’s time, those against the policy to raise the minimum wage say that it would violate the doctrine of “liberty of contract.” This is written in the United States Constitution, and states that both the employer and the employee can discuss their contract without having to worry about unreasonable economic policies.
However, the minimum wage policy was passed after President FDR’s reelection in 1936. When the FLSA was first passed, the minimum wage was set at 25 cents an hour; as of now, the current federal minimum wage would be $7.25 an hour. An interesting detail concerning the Fair Labor Standards Act was that it instated a floor for the minimum wage, not a ceiling (Reich, 2015). This meant that states and cities were allowed to raise their own minimum wage higher than the federal minimum wage. However, no state or city utilized this part of the FLSA until the 1980s.
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There is a reason behind this: when the federal minimum wage was first instated, it grew steadily on its own throughout the years. From the 1950s to the 1970s, the minimum wage’s value rose from $4 to $10. During this time, average wages along with minimum wages were growing. However, during the 1980s, the federal minimum wage plummeted. It fell far to the point of it falling below the poverty levels, and thus the states saw the need to instate their own minimum wages. State minimum wages usually were a couple dollars above the federal minimum wage; some larger cities were sometimes a couple more dollars higher than usual.
Over time, America’s standard of living has risen over the years. This is the “level of wealth available to a certain socioeconomic class in order to acquire the material necessities and comforts to maintain its lifestyle (Fuller, 2013).” Although there is economic data available to the public that shows that a minimum wage increase would cause minimal negative impact on the economy, many people are still against such a change in policy.
For those who are in support of raising the minimum wage, there are many associations that are for such a change in policy; some of those would be the National Association of Social Workers, and the American Academy of Social Work and Social Welfare (Romich, 2017). Many people associated with social work are also for the raising of the minimum wage. There are usually two key reasons for why people are in favor of raising the minimum wage: one based on a person’s civil rights, and the other based on the positive outcomes that would occur, if the minimum wage was to be raised.
For those that lean towards civil rights, they also argue that keeping the minimum wage low will greatly hinder those with such wages from being able to buy basic needs, such as a place to stay, transportation, and healthcare. For those who say that a higher minimum wage will produce positive effects, those effects would include an increase economic growth due to people having more money to spend, and also a decrease in poverty and economic inequality. However, although raising the minimum wage seems favorable, some people fear that negative consequences will occur because of it.
The most common argument against raising the minimum wage is that it would cause the price of goods and services to increase. Since businesses will have to pay their workers more, it would make sense that they would have to increase the costs of their products. It may also result in fewer people being employed, as the minimum wage is higher. Romich has also stated that, in order to try and offset the higher employment costs, employers may instate less stable work schedules, and may make their employees do extra tasks while on the job, thus contributing to a more stressful work experience.
Also, concerning low-wage workers who use programs such as the Earned Income Tax Credit (EITC) and similar programs, they may be of less help to them; this is because, due to the low-wage workers having to meet certain income requirements to utilize the programs, having a higher minimum wage will decrease the value of the programs. Some people also say that a raise in the minimum wage is unnecessary, since they believe that if you work hard and well enough, you will get a better job and social status. This is known as meritocracy; this is however, unrealistic, and is not seen to work in reality.
As with many ideas and proposals to change how things work, there are always going to be something lost when moving to a new policy. Although increases in the minimum wage have historically caused a decrease in employment, recent wage hikes have shown a much less significant impact with reducing jobs (Calandrillo, Halperin, 2017). Most people point to the 1980s when showing how minimum wage increases can cause unemployment; back then, research has shown that employment in America decreased by over 1% for every 10% increase in the minimum wage.
During this time, minorities, specifically Mexican and Black men, were hurt the most with the loss of employment. Another argument that was brought up was that a fair amount of minimum wage workers were teenagers, and thus still living with their parents, who supposedly had jobs. Because of this, many people believed that there was no need for an increase in the minimum wage at that time.
More recently, however, the loss of employment caused by wage hikes had significantly decreased as time went on. Around the latter part of the 1990s, economists gathered from their data that percentage increases in the minimum wage had less of an impact on employment rates. Data has shown that minimum wage increases in California have caused minimal negative results; and some economic studies even state that, in certain areas, wage hikes have somewhat increased employment rates. However, although employment rates did increase in those areas, data shows that employers were hiring fewer teenagers and more adults; economists deemed this as a fair exchange, as it allows more adults to support themselves, while teenagers still have their parents to support them.
Once the 2000s rolled around, economists have found that there was a net increase in the minimum wage worker’s total income gained. This meant that the extra income earned due to the wage hike had outweighed the loss of employment caused by the increase in minimum wage. This further helps support those who are in favor for a higher minimum wage. Other economists have also stated that, with the higher wages being earned, workers will possibly work harder and better, as they are being paid more “fairly.” This would increase the productivity of the employer’s business, and thus somewhat offset the increase of finances to pay the workers. This will incentivize minimum wage workers to do better with their jobs, and will then reduce the need for layoffs in businesses.
Another possible, positive effect that may occur if the minimum wage were to be increased, would be that taxpayers would have to pay less for government programs for low-wage workers. Since they are being paid enough to pay for their needs, like food and healthcare, without having to worry about having enough money to pay for other necessities, there will be fewer people having to use those government programs. This, however, has not been proven to be true yet; this was just a hypothesis that could happen, should such a policy change be instated.
An important aspect that economists stress is that these policy changes should not be instated so suddenly; the minimum wage should be slowly but steadily increasing over the span of a few years. This will allow the economy to not destabilize, and to give businesses time to plan out their spending budget. This is especially helpful for smaller businesses, as they have smaller budgets to work with. For example, the government in Seattle stated that they would slowly increase the minimum wage from around 9 dollars in 2015, to 15 dollars in 2021. As it is 2020 right now, it will be only one more year until Seattle’s policy will be fully complete.
The way Seattle did this was by making businesses who had more than 500 employees working for them, that they would slowly increase the minimum wage to 15 dollars by 2017. For those companies who had over 500 employees, but paid for their employees’ medical plans, they’d have until 2018 to increase the minimum wage to 15 dollars. And also for the businesses that had less than 500 employees, they would have until 2021 to change their minimum wage to 15 dollars. Other cities, including Chicago and Washington D.C., also followed the same pattern of implementing a higher minimum wage; they slowly increased it until a certain year, until 2019 and 2020 respectively.
From all the data discussed in this report, it is safe to say that raising the minimum wage will be of great help to the workers and the economy of America. FDR’s minimum wage policy has positively impacted the U.S. economy since it was instated back in 1938. There have already been some wage hikes instated in various states across America, with negligible negative results. Such a policy would outweigh the negatives, as long as it is implemented slowly. This will ensure that businesses aren’t negatively affected by the sudden increase in employee wages, and will allow them to prepare for the changes.
This will also help minimum wage workers be able to breathe easier, as their increase in wages will aid them in paying for necessities. As said in the report, being paid more will most likely encourage businesses to put their employees in specialized training, which will help bring stability to the worker’s job, and not have to worry about losing their job. If minimum wage levels are to remain as it is now, the economic inequality between classes will increase. It is recommended to implement a higher minimum wage, but at a graduated pace, to help keep the economy stable.
References
- Romich, J. L. (2017, October). Is Raising the Minimum Wage a Good Idea? Evidence and Implications for Social Work. Social Work, 62(4), 367-370. 10.1093/sw/swx033
- Callandrio, S. P.; Halperin, T. (2017, September 1). Making the Minimum Wage Work: An Examination of the Economic Impact of the Minimum Wage. Stanford Journal of Business and Law, Business and Finance, 22(2), 147-187. 1078-8794
- Adams, R. (2017, December 1). Standard of Living as a Right, Not a Privilege: Is It Time to Change the Dialogue from Minimum Wage to Living Wage? Business & Society Review, 122(4), 613-639. 10.1111/basr.12133
- Reich, M. (2015, October). The Ups and Downs of Minimum Wage Policy: The Fair Labor Standards Act in Historical Perspective. Industrial Relations, 54(4), 538-546. 10.1111/irel.12105
- Fuller, Abigail (2013). Introduction to Sociology. Accessed from https://learn.umuc.edu/d2l/le/content/441513/viewContent/17914868/View
