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  url http://wwwdolgov/esa/minwage/charthtm
  publisher Department of Labor
  title History of Federal Minimum Wage Rates Under the Fair Labor Standards Act, 1938 - 1996
  date March 31, 2006


  url http://wwweurofoundeuint/emire/FRANCE/MINIMUMWAGEGUARANTEED-FRhtml
  publisher European Foundation for the Improvement of Living and Working Conditions
  title MINIMUM WAGE (GUARANTEED)
  date March 31, 2006


  url http://wwwdtigovuk/er/nmw/nmwhisthtm
  publisher dti
  title National Minimum Wage
  date March 31, 2006




History


The first moves to legislate wages did not set minimum wages, rather the laws created arbitration boards and councils to resolve labour conflicts before the recourse to strikes.

The established similar boards

In the United States and other countries, minimum wage laws were a common demand of Labor Unions .


Consequences of minimum wage laws

If the law is successfully enforced, and if they are high enough in Real terms (or relative to the average wage), minimum wage laws are alleged to have various benefits and costs.


Hypothetical costs and benefits

Minimum wages may have the positive effect of:


On the other hand, minimum wages may have the negative effects of:


The effects of minimum wage laws, both positive and negative, may be increased by 'knock-on effects'. Where unions are not strong, wages for those earning slightly more than the minimum may be reduced, while those earning less than the minimum are forced to compete for work at pay levels above their experience, skill or education. Strong unions may be able to demand wage increases for workers already earning above the minimum wage. For example, some Labor Union contracts are based on a fixed percentage or dollar amount above the minimum wage. Certain public grants or taxes are based on a multiple of the minimum wage. (For example, a worker may have an exemption if his earnings are below 2.5 minimum wages.)


Debate

  url http://wwwmackinacorg/archives/1998/sp1998-01pdf
  publisher Mackinac Center for Public Policy
  title Great Myths of the Great Depression (page 10)
  date April 22, 2006



The more common debate is on changes to minimum wages. This unified view was challenged by empirical research done by . Also, these authors reexamine the existing literature on the minimum wage and argue that it, too, lacks support for the claim that a higher minimum wage cuts the availability of jobs.

  url http://wwwcatoorg/pubs/journal/cj15n1-8html
  publisher Cato
  title Myth and Measurement: The New Economics of the Minimum Wage
  date April 22, 2006


  url http://instruct1citcornelledu/~jma7/minimum-wages-youthpdf
  publisher Cornell
  title Minimum Wages and Youth Employment in France and the United States
  date May 1997


From the other side, some leading economists, including the Nobel prize winners, accept the Card/Krueger works and agree with their results


Theoretical arguments

As is usual in serious social science, any empirical conclusion is subject to doubt and is simply the basis for further questions and research. One key question is the possible theoretical explanation of the different results.

The traditional view that minimum wages have significant negative effects on employment is straightforward if one assumes that labor markets for low-skill workers can be characterized as fitting the model of a Perfectly Competitive market, where the only role of wages is as a cost. If Monopsony exists, then an increase in the minimum wage can raise employment. Alan Manning's 2003 book, ''Monopsony in Motion: Imperfect Competition in Labor Markets'' (ISBN 0691113122) suggests that this kind of market is common if not ubiquitous in labor markets.

Even if Card and Krueger's results are accurate, there may be a " Tipping Point " above which their conclusions do not apply and the standard economic consensus does apply. The possible validity of their research may be the result of political forces: in the United States, business political pressure on legislatures and Congress may have kept the minimum wage so low that it has little negative employment effect. Further, the Federal minimum wage has moved away from the presumed tipping point, becoming less relevant. It has fallen from about 59% of the average hourly wage in manufacturing during the late 1960s to less than 41%.

Some argue that minimum wage laws "lock-out" the poorest individuals from obtaining employment by legally forbidding them to compete for jobs by offering to work for lower wages. This argument of course does not apply to the Black Market Economy . The idea that a lack of a minimum wage naturally directs employment opportunities to the most needy is viewed by some as a moral justification for the elimination of minimum wage laws. On the other hand, the fact that the working poor often struggle to support themselves without government support (e.g., food stamps), under the assumption that the minimum wage is a net benefit to these people, is a moral argument in favour of it.


Wage subsidies

If they do exist, it is clear that some of the adverse effects can only occur when minimum wages are implemented and successfully enforced by government fiat: either these effects are a consequence of the cost of Wage Regulation or they do not exist. If, however, a floor on wages is implemented indirectly by providing ''wage subsidies'', there would not be decreased employment. However, since this program is not a "free lunch", some other economic damage may be created instead, as with an Externality . On the other hand, it is possible that there are already externalities contributing to unemployment, and that subsidies at the right level would merely be Pigovian solutions to these and would not actually cause any further harm after all. Research would need to be done to determine this.

While straightforward (e.g "the Prisoner's Dilemma " or "the Tragedy Of The Commons ").

Alternatively, in the United States, many economists see the Earned Income Tax Credit (EITC, a wage subsidy) in the Federal income tax as providing the poverty-fighting benefits of the minimum wage without the non-budgetary costs, while being superior to most welfare state anti-poverty programs. One problem has been that many of the working poor (the target of this program) have a hard time with the tax forms needed to receive the EITC payment. There may also be long delays between when the money is needed and when the EITC payments are received. That is, a person might become eligible for the EITC in April but then get laid off for the rest of the year. But this person would not get help from the credit until nearly a year later (since Americans pay their taxes sometime between January and April). Further, like with the minimum wage, those people working at home taking care of children and other loved ones do not receive any benefits; only those doing paid labor are rewarded.

Finally, if these kinds of "complications" do not exist, it is possible that the benefit of the tax credit is received by the employer: assume that for low-skill workers the equilibrium market wage equals "X." Before the EITC is introduced, all of this wage is paid by their employers. After the EITC is instituted, the workers receive Y + '''Z''', where Y is the new wage paid by employers and '''Z''' is the tax credit. If the labor market returns to the same equilibrium, then '''X''' = Y + '''Z'''. This means that the low-skill workers receive exactly the same amount as before the EITC was introduced and that the employer is paying less to the employees. This issue needs to be examined further...


United States

The first attempt at establishing a minimum wage in the United States came in 1933 , when a $.25-per-hour standard was set as part of the National Recovery Act . However, in 1935 the United States Supreme Court declared the National Recovery Act unconstitutional, and the minimum wage was abolished.

The minimum wage was re-established in the United States in 1938 (pursuant to the Fair Labor Standards Act ), once again at $.25 per hour ($3.22 in 2005 dollars.) It had its highest purchasing value ever in 1968, when it was $1.60/hour ($9.12 in 2005 dollars.)

During his presidency, Bill Clinton gave states the power to set their minimum wages above the federal level. As of 2004 , 12 states had done so; and on November 2 of that year two additional states ( Florida and Nevada ) approved increases in statewide Referendum s. Community Organizing efforts initiated by ACORN were responsible for the Florida and Nevada increases. Some government entities, such as counties and cities, observe minimum wages that are higher than the state as a whole. Another device to increase wages, Living Wage ordinances apply only to businesses that are under contract to the local government itself. Santa Fe's $9.50-per-hour minimum wage is the highest in the nation, and there are plans to increase this wage to $10.50 in 2008.

Many progressive politicians in the United States advocate linking the minimum wage to the Consumer Price Index , thereby producing small annual increases rather than the larger hikes that tend to be adopted when legislation to do so is passed. The vast majority of conservatives oppose this, but a few actually favor it, on the grounds that this would stop their opponents from, in their view, periodically exploiting the issue.

In 2005, John Edwards and the Community Organization ACORN organized a national tour to promote both city, state, and national increase of minimum wages.

On Tuesday, January 17th, 2006, Maryland became the 18th state in the nation to enact a law that will make Maryland's minimum wage higher than the federal. In a ''Baltimore Sun'' article related to the change, U.S. Represenative Steny H. Hoyer, a Maryland Democrat applauded Maryland lawmakers for overriding the veto on the increase and urged Congress to adopt legislation that would increase the federal minimum wage to $7.25. Massachusetts Senator Edward M. Kennedy, a ranking member of the Senate Committe on Health, Education, Labor and Pensions also commended Maryland for increasing its minimum wage, in a statement issued on January 17th, he stated that "Maryland is one of many states and communities across the country to recognize that no one who works for a living should have to live in poverty." Source .

''See also: List Of U.S. State Minimum Wages ''




United Kingdom


Municipal regulation of wage levels began in some towns in 1524. Later, the Trade Boards Act of 1909 (introduced by Winston Churchill) initially created 4 Trades Boards that set minimum wages (which varied from trade to trade) for a number of sectors where 'sweating' was generally regarded as a problem, and where collective bargaining was not well established. This system was extended considerably after the Second World War; in 1945 Trades Boards became Wage Councils, which set minimum wage standards in many sectors of the economy, including the service sector as well as manufacturing. Wage Councils were finally abolished in 1993, having fallen into decline due, in large part, to Trades Union opposition. A pay floor was regarded as threatening the voluntary system of collective bargaining favoured in the UK. Government had first made a serious attempt to abolish Wage Councils in 1986, having abandoned existing legislation that tried to extent voluntary agreements to include those firms that had not taken part in negotiations, such as the Fair Wages Resolutions. These required that government contractors pay fair wages and respect the rights of their employees to be members of trades unions.

A national minimum wage (NMW) was introduced for the first time by Tony Blair's Labour government in April, 1999, at the rate of £3.60 per hour for those workers aged over 22. It took the recommendation of this rate from the Low Pay Commission, an independent body that the government had appointed in July, 1997. The LPC exists to this day to maintain the NMW, and consists of three members with a trades union background, three members with an employer background, and three academic labour market relations experts. The commission is widely regarded as a successfully example of 'social partnership'. The current minimum wage in the UK for adults aged 22 or older is £5.05 or approximately $9, as compared with $5.15 in the US. Despite a much higher minimum wage, the UK has lower unemployment than the US.

For workers between the age of 18-21, or who are in the first six months of their job and receiving accredited training, the minimum wage is £4.25 per hour. The minimum hourly wage for workers aged under 18 is £3.00, provided that they are no longer of compulsory school age and are not apprentices.

These values are tentatively scheduled to increase in October 2006, with 22-year olds and older receiving £5.35 hourly and 18-21 year olds receiving £4.45.

''See also: National Minimum Wage Act 1998 ''


Australia





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