Why Was Minimum Wage Created?

The minimum wage refers to the rate of pay that’s the minimum employers are required to pay their employees. The federal minimum wage in 2021 is $7.25. However, here in California, the minimum wage has been increased to $14 for employers with 26 or more workers and $13 for those who have fewer employees. Individual cities and counties also have their own minimum wage rate. For example, in the city of Los Angeles, the minimum wage rate is $15. So, an employer in this city must pay their workers the higher local minimum wage rate.

What is the Purpose of the Minimum Wage?

The main reason a minimum wage exists is to prevent unscrupulous employers from exploiting workers. The purpose of the minimum wage is to provide sufficient income to afford a living wage – the amount of money that is required for individuals and families to pay for food, clothing, shelter, and utilities such as water and electricity.

Sadly, while the minimum wage is intended to protect workers from exploitation, it has not kept pace with inflation. In many states, particularly in California where the rents and cost of living are sky high, it is impossible for a family or even an individual to survive just on one minimum wage job. This is why you see people cobbling together two or three minimum-wage jobs just to eke out a living.

When Was the Minimum Wage Created?

The Fair Labor Standards Act (FLSA) set the first U.S. minimum wage back in 1938. President Franklin D. Roosevelt passed it as part of the New Deal to protect workers during the Great Depression, which caused wages for many to drop to pennies a day. At the time, Roosevelt set the minimum wage at 0.25 per hour.

The minimum wage was also intended to curb child labor. Roosevelt called a special session of Congress in 1937 to address the issues that led to the creation of minimum wage stating that the “exploitation of child labor and the undercutting of wages and the stretching of the hours of the poorest paid workers in periods of business recession has a serious effect on buying power.” At this time, the FLSA not only established the minimum wage, but banned oppressive child labor and limited the workweek to 44 hours. The federal minimum wage has stayed at $7.25 since 2009.

Arguments to Raise Minimum Wage to $15

An April 2021 Pew Research Center study shows that the majority of U.S. adults – 62% — are in favor of raising the minimum wage to $15 an hour. Specifically, 89% of Black adults and about 75% of Latino and Asian American adults are in favor of this increase. There are several arguments in favor of raising the minimum wage.

Experts say it boosts productivity because those who earn more have better morale and are likely to be more productive at work. Economists also believe that a higher minimum wage can help reduce income inequality and give workers more incentive to work. The minimum wage can also help spur economic growth by giving people more purchasing power. This increases demand and revenue for businesses.

Also, workers with more time and money can better invest in their education. Minimum wage laws also benefit businesses by improving employee retention because workers are less likely to leave for a higher paying job. This reduces turnover and expensive retraining costs.

Role of Minimum Wage Today

Today, the minimum wage law serves the purpose of establishing a living wage mostly for families that depend on manual labor jobs and employment in the service industry, which often pay the least. The federal minimum wage still equates to an annual salary that falls below the poverty line.

According to the Economic Policy Institute, the minimum wage aims to help more than those facing extreme poverty. Workers of all economic backgrounds and jobs and expect to make the same minimum salary, which is fair and values the dedication of working a full-time jobs. Most importantly, a minimum wage prevents companies from exploiting those with fewer employment options.

Workers whose employees are shortchanging them or not paying minimum wages due, have legal rights under federal and state labor laws. An experienced Los Angeles wage and hour attorney will be able to help employees better understand these laws and how the protect workers’ rights.

Brett Sartorial

Brett is a business journalist with a focus on corporate strategy and leadership. With over 15 years of experience covering the corporate world, Brett has a reputation for being a knowledgeable, analytical and insightful journalist. He has a deep understanding of the business strategies and leadership principles that drive the world's most successful companies, and is able to explain them in a clear and compelling way. Throughout his career, Brett has interviewed some of the most influential business leaders and has covered major business events such as the World Economic Forum and the Davos. He is also a regular contributor to leading business publications and has won several awards for his work.