The United States has had a national minimum wage since 1938, when Congress passed the Fair Labor Standards Act. It was the result of a long, public, contentious process.
As part of his New Deal to combat the Great Depression, President Franklin Roosevelt had been trying to find a way to protect workers, to end starvation wages and intolerable hours, to guarantee rudimentary standards of decency, and to ensure a fair day’s pay for a fair day’s work.
Opponents argued that government mandates would hamper the prosperity made possible by the genius of American business. The opponents accused the president of being a tyrant and a socialist. The Supreme Court invalidated his early efforts on the grounds that they gave federal bureaucrats too much power.
After Roosevelt won re-election in 1936 by a landslide, he tried to overcome the court’s opposition by packing it with justices sympathetic to his cause. The court backed down and Congress came around, marking a turning point in America’s attitude towards labor, business and government.
The 1938 act set the national minimum wage at 25 cents an hour. It has been $7.25 an hour since 2009. Its purchasing power peaked in 1968, when $1.68 was worth the equivalent of $10.56 today.
Now 45 states have their own minimum wage laws. Alabama, Louisiana, Mississippi, South Carolina and Tennessee do not; 18 have the same minimum wage as the federal minimum, and 23 states have something higher. Massachusetts will be highest at $11 an hour, while 11 states index their minimum wages to inflation; two more are scheduled to do so in the near future.
A few cities have established their own minimum wages, too. Baltimore was first in 1994. Washington, D.C., is highest at $11.50. Maine’s state minimum wage has been $7.50 since October 2009. It automatically adjusts if the federal minimum is higher.
While the national and local minimum wages have remained constant over the past few years, economies have improved. Nationally, unemployment has been declining since October 2009, when it peaked at 10 percent. It was 6.75 percent in February and 6.1 percent in June. In Maine, unemployment was 6.1 percent in February and 5.5 percent in June. In Portland, it was 5.5 percent in February and 4.1 percent in June.
The largest increase in employment in the greater Portland area was in the leisure and hospitality sector. Distant second was a tie between the professional and business services, and the transportation and utilities sectors.
Meanwhile, Mayor Michael Brennan selected an advisory committee to consider establishing a minimum wage for Portland. It is difficult to find information about the committee or its work. The city’s website says that it has met three times. I understand that it is composed of about 17 people, including the mayor, and that it is considering a plan to raise the wage to $9.50 in 2015, to $10.10 in 2016, to $10.68 in 2017, and to index it to inflation.
In theory, proponents argue that raising the minimum wage improves workers’ lives and stimulates the economy, by putting more money in the hands of people who will spend it. It spurs business to be more efficient. They say it is the right thing to do because people deserve a decent wage just for making an effort.
Opponents argue that people have the right to the fruit of their labor and the best way to value their labor is using the market, not some central government control board. They say raising the minimum wage impairs market operation by distorting signals and inhibiting employers’ and employees’ ability to respond to those signals. It eliminates jobs, they argue, because when labor costs more, employers use less of it. It slows the economy as employers pass along higher costs.
The empirical evidence is unclear. Studies tend to reflect the biases of their authors. But the aggregate effect is not pronounced – probably because wages are just one factor in some very large and complex systems.
My friends in business tell me that they already pay more than the minimum wage. According to the Bureau of Labor Statistics, the average hourly wage for a short-order cook in the greater Portland area in May 2013 was $8.72. For a cashier it was $9.84. A personal-care aide was $9.94. A food service was $10.79. A bartender was $11.26. A salesperson was $12.18. A file clerk was $12.90.
Ideally, everyone would be employed using their potential, doing what they love, loving what they do, producing goods and providing services that other people want, and earning enough in the process to afford the lifestyle they want. The need for government regulation would be minimal.
But people don’t always live up to their potential. Their jobs are not perfect fits. Business owners and managers misjudge markets. Markets don’t operate on their own. They don’t operate perfectly. They don’t account for all values. They go in cycles. They need some government.
Setting a minimum wage is a major economic, social and political policy decision. It should be done in an open and inclusive fashion.