The History and Understanding of the Concept of a Minimum Wage
The concept of a minimum wage is self-explanatory: employees are guaranteed a pay rate that their employers cannot legally reduce. Today, minimum wage laws play a critical role in our economy; but this was not always the case. The first minimum wage laws were enacted in New Zealand in 1894 but did not come to the United States until 1938. The 1930s were defined by the Great Depression, an economic catastrophe that crippled the world, resulting in monumental levels of widespread unemployment and poverty. After the presidential election of 1932, Franklin D. Roosevelt was elected president, promising the American people a New Deal, vowing to use the federal government’s extensive powers to combat the crippling effects of the shattered economy. In a speech given during 1933, President Roosevelt famously proclaimed, No business which depends for existence on paying less than living wages to its workers has any right to continue in this country By living wages, I mean more than a bare subsistence level – I mean the wages of a decent living. In 1938, Congress passed The Fair Labor Standards Act of 1938, establishing a minimum wage of $0.25 an hour; the first in the history of the United States. Since then, it has remained an essential part of our economy.
Minimum wage laws guarantee all employees a base wage. One of the reasons that the Great Depression was so devastating, and poverty was so prevalent was the fact that since employment was so low, workers were willing to compete against each other by offering to work for lower wages. This drove wages down, and in conjunction with low employment, contributed to widespread poverty; the intention behind The Fair Labor Standards Act of 1938 was to prevent this situation from occurring again. The purpose of The Fair Labor Standards Act of 1938 was to prevent one of the situations that was critical to the widespread devastation caused by the Great Depression.
How it works
Minimum wage laws are surrounded by politics and charged emotions. Minimum wage laws help combat poverty by creating a level playing field. For those that have lived in poverty, the inability to reliably acquire the basic necessities to live from one day to the next is soul crushing. For those that do not have this experience, it is more of a privilege than one could possibly imagine. The concept of making money is the crux of capitalism; a winner of capitalism is able to accumulate as much capital as possible, using any means necessary. With this in mind, a situation in which workers compete against each other by offering to work for lower wages is exactly how capitalism is supposed to work, and the people that save money by being able to pay workers less and less certainly won’t complain. In this sense, minimum wage laws violate the core principles of capitalism (which is, of course, the basis of our economy); this begs the question: are minimum wage laws justified?
Since its introduction, the concept of a minimum wage has always been at the center of debate. The objections against having a minimum wage revolve around the ideas that having a minimum wage hurts business, reducing employment, and that a minimum wage is a government mandate which interferes with the free market. President Roosevelt offered an emotional argument in support of a minimum wage. He essentially argued that human life was more valuable than corporate profits and believed that fighting for every person’s right for a decent living was essential to our prosperity. President Roosevelt was a rich man that never experienced the soul crushing hopelessness of poverty; but one quality that solidified his place in history as one of the most admired presidents that the United States has ever had was his ability to empathize with the people he led, and recognize that regardless of one’s economic status, crippling poverty was something that no person should be sentenced to. Objections to having a minimum wage often fail to consider the humanity behind its purpose.
One of the most pressing questions regarding the minimum wage is how high it should be. President Roosevelt believed that if a business was unable to pay employees high enough wages to support a decent living, they are not worthy of existing. But what constitutes a decent living? Having just enough money to afford basic necessities, like food, water, and a place to live? What about education? Healthcare services? The purpose of the minimum wage as it was conceived was to guarantee workers a decent living. What that means exactly, and how to stay true to that intention, is up to interpretation.