Minimum Wage 101

By: Keaton Fletcher

The U.S. federal minimum wage is currently $7.25 per hour, a standard that was set in 2009. The minimum wage for work covered by federal contracts, however, is $10.35 per hour. 29 of the 50 states have a minimum wage higher than the federal minimum, ranging from $7.50 (New Mexico) to $14 in D.C. or $12 in Massachusetts and California. Some cities in the United States have even higher minimum wages (e.g., Seattle at $15.45; SeaTac, Washington at $15.64; and Emryville, California at $15.69). As of 2013, roughly 1.5 million US workers over the age of 15 made the federal minimum wage, and another 1.8 million earned below the federal minimum wage. Half of minimum wage workers are under the age of 26, 62% are women, 47% reside in the South, 24% live in the Mid-West.

The first federal minimum wage ($0.25/hour) in the United States was set in 1933 as part of the National Industrial Recovery Act under Franklin Delano Roosevelt in attempt to revitalize the struggling economy. This was ruled unconstitutional in 1935 and abolished. In 1938, as part of the Fair Labor Standards Act, the federal minimum wage was re-introduced, along with protections for underage employees, standardized overtime pay, a 40 hour work week, and workplace safety standards, among other things. This came 26 years after Massachusetts was the first state to set a minimum wage (for women and children) and 44 years after New Zealand became the first nation to set a minimum wage. Since its introduction, the U.S. Federal minimum wage has increased 22 times, with the greatest percent increase occurring in 1950, when the wage increased from $0.40 per hour to $0.75 per hour, and the greatest dollar increase occurring with each of the last three increases (2007, 2008, 2009) at $0.70 per hour, per increase.

There are exceptions to minimum wage laws, however. Administrative and professional employees, outside sales employees, seasonal employees, farmworkers, babysitters or companions for the elderly are exempt from the minimum wage. Because gigworkers (e.g., rideshare drivers) are independent contractors and not employees, they, too, are exempt from minimum wage laws (as well as other protections employees typically have). Further, The Youth Minimum Wage Program allows for a lower minimum wage of $4.25 per hour to be paid for the first 90 days of employment to individuals under the age of 20, full-time students can be employed at 85% of the minimum wage as part of the Full-Time Student Program or 75% of the minimum wage if they are attending a vocational school.

Recently, there has been a push for the federal minimum wage to be raised to $15 per hour by 2024. In November 2012, over 100 fast-food employees in New York City went on strike for higher wages, improved working conditions, and the ability to unionize. This was followed by similar strikes in 2013 in New York, Chicago, Detroit, St. Louis, Milwaukee, Seattle, Flint, and Kansas City. In December 2013 and September 2014, national strikes occurred, calling for a $15 per hour minimum wage. In April 2015, a protest including fast-food employees, child and home care aides, airport workers, adjunct professors, and Walmart employees echoed the earlier calls for $15 per hour. In 2018 and early 2019, gigworkers for companies like Instacart, Uber Eats, Postmates, Grubhub, DoorDash, and Amazon Flex teamed with an advocacy group based in Washington state to demand a $15 per hour minimum wage for gig workers.

From a psychological perspective, a major increase in minimum wage could have consequences (positive and negative) for employees. On the one hand, an increased wage could help employees satisfy basic needs from their work, and to feel as if they are being rewarded adequately for their efforts. On the other hand, an increase in wages may come with a simultaneous decrease in jobs. With many companies (e.g., McDonalds) investing in technology-based alternatives to human employees, or exploring opportunities to outsource work to nations with lower wage standards, a federal increase in minimum wage may actually increase job insecurity for many workers. The jobs that might be at greatest risk for automation or outsourcing would likely be entry-level jobs that allow individuals to enter the workforce with minimal technical skills or education.

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