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Minimum Wage

Congress is currently considering raising the minimum wage by $1.50, from $5.15 to $6.65 per hour in three installments. Congress last enacted legislation in 1996, increasing the minimum wage by 90 cents from 1996-1997.

The minimum wage was first enacted in 1938 as part of the Fair Labor Standards Act (FLSA). It is enforced by the U.S. Department of Labor's Employment Standards Administration. Initially just 25 cents per hour, the minimum wage has been raised several times in the decades since. In real (inflation-adjusted) terms, the minimum wage reached its peak in 1968, when it was worth $6.92 in 1998 dollars.

Efforts to increase the minimum wage are generally supported by unions and liberal anti-poverty organizations, who say it will help the nation's working poor. A full time minimum wage worker makes just $10,712 per year, well below the poverty line for a family of three. 

Opponents include conservative organizations and the business community, especially small businesses and retailers, who argue that increasing the minimum wage will simply increase unemployment, as small businesses who pay such wages are forced to make layoffs. Some argue that every ten percent increase in the minimum wage results in a loss of 100,000 jobs.

Supporters point to a controversial study by Princeton economists David Card and Alan Krueger of minimum wage employees in New Jersey, which found little or no impact on employment. Economist Robert Solow, an MIT Nobel Laureate, wrote in a 1995 New York Times article that the “main thing about the research is that the evidence of the job loss is weak.... And the fact that the evidence is weak suggests the impact on jobs is small.”

Opponents argue that many minimum wage workers are teenagers or entry level workers with few skills who need these jobs to break into the labor force, and who are not the primary bread winners within their households. Supporters say that most of those affected by a minimum wage increase are adults aged 20 and over, and more than half of all teenagers earning the minimum wage are in households with below-average incomes.

- Updated 9/1/02

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