A Brief History of Minimum Wage

With two exceptions (New Zealand, 1894; Australia, 1896), no country had a minimum wage law until the 20^th Century.  Instead, employers paid what they contended were “just (or fair) wages” on the purported mutual consent of their workers. If employees agreed to labor at the take-it-or-leave-it rates business offered, U.S. courts ruled they were powerlessto challenge the sanctity of that private contract.

With the Progressive Era (1896 to the 1920s), religious and political groups attacked such “just wages” arguing that the vast majority of employees lacked the bargaining power to negotiate a livable wage.  In the United States and throughout the industrialized world, factory conditions were also notoriously harsh and workdays long.  Not uncommonly at the time, American businesses hired woman and children for lower wages than men.  By 1910, two million children worked up to 20 hours a day in this country.  Exhausted, many were killed or injured on the job.

In the 1920s, American lawmakers sought to improve working conditions in their states.  By 1925, fifteen states had passed minimum wage laws, including California at 16 cents an hour.

President Roosevelt’s New Deal fundamentally changed the nationwide employment landscape.  The 1938 Fair Labor Standards Act (FLSA) – overcoming an earlier Supreme Court invalidation of federal labor conditions legislation — established the first federal minimum wage at 25 cents an hour. The law also imposed overtime pay (“time and a half”) after a mandated 40-hour regular workweek.  The Act also introduced the classification of “exempt (from overtime)” and “non-exempt” employees as well as outlawed many forms of child labor.

By 1943, the Labor Department had raised the federal minimum wage to 40 cents an hour.  It hit $1.00/hour in 1955.  Federal minimum wage has been $7.25 an hour since 2009. Although each U.S. state has the power to set a higher minimum wage than the federal rate, none can set a lower one.

The FLSA, American wage regulations, and state enactments have evolved into a complex body of state and federal employment law requiring that employers take careful measures to ensure compliance.

At least ten nations still lack minimum wage standards for private business employment, including Ethiopia, Qatar, Singapore, Somalia, United Arab Emirates and Yemen.

See also:

• Workplace Rhythm & Cues – Our Employee Policy Handbook & Forms for 2021(January 21, 2021)
• What’s New In 2021: California Minimum Wage Rate Increases (December 23, 2020)

For more information on such matters, please contact Tim Bowles, Cindy Bamforth or Helena Kobrin.

Tim Bowles
April 2, 2021