Minimum Wage Policy Brief

Date Published: 
Sat, 01/01/2011

By Stephanie Luce

The idea of minimum wage laws has been around for more than a century. As workers toiled in early factories, they fought for a floor wage that would allow them to meet their basic needs.

In the U.S., the first minimum wage law was passed in Massachusetts in 1912. A number of other states followed suit, and then in 1938, the federal government passed a minimum wage as part of the Fair Labor Standards Act (FLSA). That initial wage, set at 25 cents an hour, was not pegged to any formula but was rather a political compromise for those who opposed starting with a 40 cent an hour rate. The new law was not universal: lawmakers excluded certain workers from coverage - notably, agriculture and domestic workers. Over time there have been numerous revisions to the FLSA which have expanded coverage, though not all workers are entitled to the minimum wage, and workers who receive tips have a lower minimum wage rate. 

Many states still have their own state minimum wage laws. Some simply peg the state wage to the federal wage but may increase coverage, others have rates higher than the federal, and some have rates lower than the federal rate (which applies for those not covered by federal law). Five states have no state minimum wage law.

More recently, some cities have passed their own citywide minimum wage laws. Whether a city has the authority to do this depends on state’s homerule laws. Currently, there are citywide minimum wages in place in Washington DC; San Francisco, CA; and Albuquerque and Santa Fe, NM.

Currently, the federal minimum wage is not indexed to the cost of living, and only goes up with an Act of Congress. This differs from some other countries that have detailed formulas to determine the minimum wage on an annual basis. In recent years, minimum wage supporters have managed to get state minimum wage laws indexed to a cost of living formula in 10 states and one city.