Economic Consequences of Minimum Wage

The minimum-wage debate has become a continual topic in the 55 years since Franklin D. Roosevelt signed the law that put a floor under wages (Bernstein, Del Valle & McNamee, 1993, p. 92.) Business, backed by most economists, believe that raising the minimum wage destroys jobs by forcing employers to scale back hiring. Proponents of minimum-wage legislation point to people who have toiled in minimum-wage jobs, receiving the same hourly wage for the past 19 years despite inflation, and how difficult it is for these people make ends meet.

As the Clinton Administration prepares a new campaign to raise the minimum wage, the debate seems to be shifting to a point in the middle. While the Administration admits that a higher minimum wage could hurt employment growth temporarily, it believes that such a setback will be outweighed as rising wages force companies to buy new equipment, improve productivity, and eventually create jobs requiring higher skills that raise the standard of living and boost the total economy.

Even minimum-wage opponents are ceding this point (Bernstein, Del Valle & McNamee, 1993, p. 92). Richard Berman, executive director of the Employment Policies Institute, opposes a higher wage floor on behalf of hotels and fast-food industries, believing that it hurts people from welfare families who cannot get jobs, but he also believes, taking the macro view, productivity gains from a higher minimum wage (Berns

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). The 1938 Act was applicable generally to employees engaged in interstate commerce or in the production of goods for interstate commerce. By 1945 it was 40 cents per hour. In 1950, it was raised to 75 cents an hour. In 1961, amendments extended coverage primarily to employees in large retail and service trades as well as local transit, construction, and gasoline service station employees. The minimum wage at that time was $1.15 an hour, and by 1965 it was $1.25 an hour. The 1966 amendments extended coverage to state and local government employees of hospitals, nursing homes, and schools, and to employees of laundries, dry cleaners, large hotels and motels, restaurants, and farms. Subsequent amendments extended coverage to the remaining federal, state, and local employees not protected in 1966, to certain workers in retail and service trades previously exempted, and to certain domestic workers in private household employment. In 1975, the wage had gone up to $2.10 an hour, and by 1989 it was $3.35 an hour. In 1990, the wage went up to $3.80 an hour, and a new category, that of the training wage was added. The training wage was paid to an employee who had not attained age 20, for a period of 90 days and for an additional
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Approximate Pages = 10 (250 words per page)

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