Wednesday, November 14, 2012

The Minimum Wage

The Fair Labor Standards Act of 1938 was signed into law on Saturday, June 25, 1938, nine days after Congress adjourned.  It banned oppressive child labor and set a minimum hourly wage of 25 cents an hour and a maximum workweek of 44 hours.  Before signing the law President Roosevelt said:  “Do not let any calamity-howling executive with an income of $1,000 a day, … tell you… that a wage of $11 a week is going to have a disastrous effect on all American industry.”[1]  There is an interesting history in the Department of Labor web site.  The story was written in 1978, but it is amazing to see the same arguments made by today’s administration as President Roosevelt made, the language is just a little courser today.
Well here we are 74 years later and the debate about minimum wage still rages on.  At the time of the act the minimum wage covered a small portion of the total workforce.  Over the intervening years it has become the law for all employment. 
So, now in retrospect, looking at the decline in the manufacturing industries of the US, the textile mills, the steel mills, the furniture industry, glass, garment, automobile and countless others -- the question is does having a minimum wage have a disastrous effect on American Industry, or is minimum wage just the most public of the government rules that drive industry and in turn our economy elsewhere?
As someone pointed out, you really are not able to survive on a minimum wage, and if the minimum were raised to a living wage what would the impact be on employment?  I used to believe that minimum wage was something akin to an apprenticeship.  A business would hire you at minimum until you were trained and demonstrated your ability to perform, then you could expect increased compensation.  In today’s work place I wonder if that holds true anymore?
As small business struggles under the increasing burden of new government regulations, reporting, oversight and mandates, will part time employment and minimum wage jobs become the new normal for the average worker in a service industry like banking, retail and food service?

[1] Franklin Roosevelt, Public Papers and Address, Vol. VII (New York, Random House, 1937), p.392.

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