Rebecca Dawson
BUS412
Professor Nutter
Final-Minimum Wage
Spring Term 1, 2017
Minimum Wage
Abstract: Minimum Wage is a highly debatable topic, and has been for some time. Although,
many do not know, nor comprehend, the history, they rely on it heavily. There is also a whole
economic basis that is not understood as well, only that they believe that a wage increase is
necessary in our country. In this research paper, we will discuss what it is, and why we have it.
We look at the history, as well as what different opinions and studies have shown. In the next
section, we will look at how minimum wage effects our economy. Finally, we will determine if
the rate should be adjusted, and why.
Introduction
Minimum wage policies are held in 185 out of 193 countries within the United Nations,
by either statutes or embedded in collective labor management agreements (Reich, 2015). The
United States first enacted the Federal Labor Standards Act in 1938. According to the
Department of Labor, the last federal minimum wage increase was on July 24, 2009 to $7.25
per hour. One year before that increase it was raised to $6.55, and $5.85 the year before that.
There had not been a previous increase since September 1, 1997, when the wage had been
raised to $5.15. However, upon looking at the data, there was a raise two years in a row in the
late 90’s, as well two in the early 90’s, two in the early 80’s, 5 throughout the 70’s, 4 in the 60’s,
2 in the 50’s, 1 in the 40’s, and one in the very year after it came out. Significantly over time,
the statistics show that increases were provided. This is a vast difference than what we are
seeing in today’s figures. Is this because the wage rose too high for it to keep growing? Is this
because our economy is too stagnant to withhold any rise in wage? Are there other factors
that we are not seeing? Without digging further in to the understanding of what exactly the
wage is, why it exists, and what effects it has on our economy, it is hard to determine exactly
why these changes have occurred.
What is Minimum Wage, and Why Do We Have It?
When the Fair Labor Standards Act (FLSA) was passed by Congress in 1938, it passed
with an initial minimum wage of $.25 per hour. The most common misconception, and easily
misunderstood part of federal minimum wage, is that it was put in place to establish a floor for
employers, not a ceiling (Reich, 2015). When instituted, it replaced 25 different state minimum
wages, most of which applied to women, but excluded agriculture and retail workers (Reich,
2015). The FLSA was largely supported by economists, who understood the logic; with demand
curves sloped downward, and labor markets being imperfect, workers lacked bargaining power
(Krueger, 2015). Economists understood that no one was benefiting from employers setting
wages, and the economy would function better if there was a wage floor that the wages could
not fall under (Krueger, 2015). Before signing the bill, President Roosevelt knew of its
