South By North Strategies, Ltd.

The Economic Policy Institute recently commemorated the July 24th birthday of the minimum wage.

On the wage floor’s history:

The federal minimum wage was first established in the Fair Labor Standards Act of 1938. Since then, Congress has periodically increased the minimum wage as prices in the overall economy increased. In 2006, before the most recent three-part increase, the federal minimum wage was $5.15, the same level it had been for the previous 10 years. Because Congress had ignored the minimum wage for such a long time, inflation eroded much of its purchasing power. Adjusting for inflation, the minimum wage in 2006  was worth less than at any other time in the previous 50 years. Congress finally acted in 2007 to help low-wage workers, and passed a three-step increase to the federal minimum wage. The first increase to $5.85 took place on July 24, 2007, the second increase to $6.55 on July 24, 2008, and the final increase to $7.25 on July 24, 2009. Although this final step restored some of the purchasing power of the minimum wage, it is still well below the peak of close to $9.00 reached in 1968.

On current objections to the minimum wage:

Lately, opponents of the minimum wage have suggested that decreasing it would help to boost employment. This is a terrible idea for a variety of reasons. First, the minimum wage is not high by historical standards – today, the real value of the minimum wage is less than what it was from 1961 to 1981. Second, research on the disemployment effects of the minimum wage give mixed results – many indicate that a small change to the minimum wage would have no impact on employment. Furthermore, even if there is a disemployment effect, it is small and far outweighed by the fact that low-wage workers on average will see a net benefit from most minimum wage increases (Shierholz 2009). Finally, one of the biggest problems during a recession is the decrease in consumer demand – when consumers cut back on spending, employers respond by cutting back on jobs. Reducing the wages of already low-wage workers will only make this problem worse, and will hurt those who are least well off.