100th Anniversary: Looking Back on the Minimum Wage

American Icons, Americana, Featured Article, Finance, History
on January 6, 2014

Earning a decent wage and participating in the consumer economy — that’s America. In honor of the 100th anniversary of Henry Ford’s bold move to pay his factory workers a standard $5 per day wage, consider these milestones in minimum wage in the United States.

1912 — Preliminary State Action
Massachusetts introduced the first minimum wage legislation in 1912. It established a board to oversee what the cost of living was and pay to that amount. The law made special provisions against child labor and allowed for training wages at less-than-minimum levels. The law had little power against noncompliant businesses, though.

January 5, 1914 — Henry Ford and the $5 Day
Master businessman and herald of industrialized production Henry Ford introduced an unheard-of $5 per day wage in 1914, more than double the going rate for factory workers. Ford had a problem in 1913. Worker turnover rates were astronomical, and no-shows on the factory floor slowed down the entire process. Increasing pay to $5 per day (with some restrictions about moral living) increased worker retention. And with higher wages, the Ford workers could now purchase the Model Ts they were building, thus opening a new consumer market for the company.

1933 — National Industrial Recovery Act
One of the New Deal’s premier pieces of legislation, the National Industrial Recovery Act encouraged more hiring, provided for more jobs through the Public Works Administration, and established a minimum rate of pay. The Supreme Court deemed the act unconstitutional in 1935 due to qualms over interstate commerce, executive branch overreaching and questionable competition.

1938 — Fair Labor Standards Act (FLSA)
Future Supreme Court Justice Hugo Black proposed the first successful national minimum wage bill. The Fair Labor Standards Act guaranteed a minimum wage, provided for overtime pay and protected children from unsafe labor. The FLSA would be amended to include more workers under its purview and increase wages incrementally. The hourly rate in 1938 was a whopping $0.25.

1963 — Equal Pay Act
Branching from the FLSA, the Equal Pay Act prohibits businesses from paying workers differently on the basis of sex alone, coining the term “equal pay for equal work.”

1996 — Youth Minimum Wage Amended
The 1996 amendment to the FLSA made the “youth-rate” for employees under age 20 no less than $4.25 per hour for the first 90 calendar days of their employment. The amendment also included recourse against employers who hired young people solely for the cheaper pay.

2007 — Fair Minimum Wage Act
President George W. Bush signed this stepped increase of the minimum wage into law. The first increase in 10 years, the rate climbed from $5.15 to $5.85 in 2007, to $6.55 in 2008 and currently sits at the 2009 level of $7.25. Some 13 states already had rates higher than $7.25, and were thus unaffected.

2013 — Obama Proposes $9 Wage
At his 2013 State of the Union address, President Barack Obama proposed to raise the national minimum wage to $9 per hour by 2015. During his 2008 campaign, Obama suggested to raise the wage to $9.50 by 2011. Washington currently holds the highest state minimum wage at $9.19 per hour.