Purpose of Minimum Wage

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The Purpose of Minimum Wage


July 9th, 2012

Minimum wage has always been seen as the cornerstone of the United States of America’s labor system. It was initially introduced in the 1930s to maintain a minimum standard of living necessary for health, efficiency and general well being without curtailing employment (Minimum-Wage, 2009). In theory this means the purpose of minimum wage is to ensure that workers can receive a decent standard of living and to make sure employers are not paying workers too little. The federal minimum wage in the United States is $7.25 (USDL, 2012). The poverty guideline of the majority of states for a family of one in the year 2012 is 11,170 a year (HHS, 2012). If a fulltime worker is paid the federal minimum wage they receive $15,080 a year which is barely over the poverty line in the United States. Minimum wage has not increased nearly enough over the years as the cost of living has increased drastically over time.

Minimum wage began in 1938 when President Roosevelt signed the Fair Labor Standards Act which first introduced minimum wage of 25 cents an hour. It had increased overtime to keep up with the inflation of the dollar. In the 1930s, 25 cents an hour would be considered as receiving $4.00 an hour considering the value of the dollar during this time (BLS, 2012)! From this time minimum wage has steadily increased each year until the 1990s. In 1991 the minimum wage was $4.25 and remained the same until 1996 when it increased .50 cents to $4.75 (DOL, 2012). At this point the poverty levels had increased and minimum wage was not perceived as a fair wage.

There have been many concerns involving the effects that minimum wage can have on the economy and employment. The main argument against increasing minimum wage is that although higher wages can stimulate the economy by giving people more money, that overall it will decrease small business employment. They believe that it will reduce the amount of jobs available so...