The last several months have seen continuous protests and reports of companies like Walmart and McDonald's treating their employees unfairly, including the ostensibly unfair rate of pay (and of benefits) doled out to employees. It's easy to imagine that raising minimum wages constitutes a simple answer, but some argue that there are economic disadvantages to doing so. I'm certainly no economist, but I thought I would do a small amount of digging around to see what I could see about the history of minimum wage in the US and its current implementation. I'm not sure about the best way to fix low pay rates for those working at megalo-companies like MacD's and Wally World. Is it a pay raise? (Maybe. Almost certainly, in the short-term.) Is a path up the corporate ladder? (Goodness no.) Is it the re-thinking of our entire society? (YES! in my dreams, that is.) Maybe it's more about conceptualization of what minimum wage is there for, how raises should be implemented, and incentives like time and money for employees to take part-time courses. In any case, here's what I learned.
A (small amount) of historical background
The minimum wage for labor in the United States was first put forth in 1938 in the Fair Labor Stands Act (FLSA [1]). To put this in perspective, the first country to enact such labor standards was New Zealand, in 1894 [3]. Although typically-cited reasons for minimum wage laws include providing a sum commensurate with a frugal lifestyle and protecting sweatshop workers, the institution of such wage laws in the United States has a darker history. In 1938, the first national minimum wage of 25¢ was so high that it must have wiped out many of the industries currently paying lower wages, at the time. David Bernstein and Thomas Leonard write that such laws were often “…designed to exclude immigrants, women, and African Americans... [and] demanded the exclusion of various so-called “defective” groups from the American labor market” (p. 177 [2]). More specifically, Bernstein and Leonard point to acts created during the Great Depression, such as the Davis-Bacon act of 1931, which had a disproportionate effect on African Americans’ ability to procure work in certain industries; and many state-specific minimum wage laws formed specifically for women, who were de jure considered to be unequally deserving of pay for men’s work.
The federal minimum wage is currently set at $7.25, and there is no overt discrimination based on gender or race in its terms (though I hesitate to even mention the current state of affairs of minimum wage and immigration). Even so: the current rate does not apply to all full-time or part-time employees across the United States. In some cases, a higher state minimum wage will apply. In others, the federal wage may supersede the state wage, if the state wage is lower. But when exactly must the federal rate be considered? From the Fair Labor Standards Act of 1938 (FLSA): “The Act applies to enterprises with employees who engage in interstate commerce, produce goods for interstate commerce, or handle, sell, or work on goods or materials that have been moved in or produced for interstate commerce. For most firms, a test of not less than $500,000 in annual dollar volume of business applies (i.e., the Act does not cover enterprises with less than this amount of business). However, the Act does cover the following regardless of their dollar volume of business: hospitals; institutions primarily engaged in the care of the sick, aged, mentally ill, or disabled who reside on the premises; schools for children who are mentally or physically disabled or gifted; preschools, elementary and secondary schools, and institutions of higher education; and federal, state, and local government agencies.” The FLSA goes on to list individuals who are not covered, including people working at telephone companies, newspapers, “recreational establishments”, teachers, computer professionals, amongst others. I am not a lawyer. I likely am missing some of the jargon in here. But the FLSA, from the start, makes it clear that not everyone is treated equally.
Minimum wage by state today
Let’s get a sense of the spread of minimum wage across states. As with federal wage laws, each state may impose its own laws on when these wages apply. A total of 22 states have imposed wages higher than the federal minimum wage of $7.25. The top payers include Washington state ($9.32) and Oregon ($9.10). An additional five states also boast minimum wages above $8.00 (Connecticut, Illinois, Nevada, New Jersey, Vermont) along with Washington, D.C., currently clocking in at $8.25, but with a promise to increase its minimum wage to $11.50 by the year 2016 [2]. Another five states (California, Colorado, Massachusetts, New York, and Rhode Island) have their minimum wages set at $8.00.
Which states have opted to impose set minimum wages, but below the federal rate? Only four. Arkansas and Minnesota have rates of $6.25 and $6.15, respectively, and Georgia and Wyoming are perhaps stuck in another decade with rates as low as $5.15. The remainder of the states who impose a minimum wage (a total of 20) sit right at the federal minimum wage of $7.25.
Before doing some background reading for this post, I had no idea that there are currently states which do not impose their own minimum wage at the state level. Geographically, these are all southern states east of the Mississippi River: Alabama, Louisiana, Mississippi, South Carolina, and Tennessee.
One thing that seems immediately clear is the resistance of southern states to conform to the national standards of minimum wages. Considering the deep roots of the system, since its inception, discriminating against groups performing particular jobs in those regions (read: minority groups performing low-wage employment in the South [2]), perhaps this modern trend should not be surprising.
Interim summary
So, here’s what I’ve learned so far: States vary considerably in what they consider to be a fair minimum wage. Federal laws don’t include everyone, even today. Historically speaking, stamping on a minimum wage was a good way to quit paying people doing “lesser” jobs, and it likely had a hand in wiping out certain industries. But of course, there is a quite defensible side to enacting minimum wages, and that is to ensure that people make at least a living wage.
I’d be interested to hear about the parents, each making $15k (what the federal rate would put you at, roughly), raising two kids on that wage. Not to mention the single parent tasked with the same set of circumstances. Skilled labor markets are so nearly obsolete that I scarcely dare say they are “on the decline”. Folks who don’t have the resources and privileges (and sometimes, luck) to embark on a path (academic or otherwise) to a different lifestyle and/or career are without many options from the days of skilled labor and industry. And what are many left with? Jobs in the service industry that rely on the minimum wage. Maybe that’s enough of my ranting for now, but I think of this post as a “Part 1.”
Sources:
1. United States Department of Labor. Minimum Wage Laws in the States. Accessed 20 January 2014. Available online: http://www.dol.gov/whd/minwage/america.htm
2. David E. Bernstein & Thomas C. Leonard. 2009. Excluding unfit workers: Social control versus social justice in the age of economic reform. Law and Contemporary Politics, 72(3), 177-204. Accessed 20 January 2014. Available online: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1533570
3. Gerald Starr. 1993. Minimum Wage Fixing: An international review of practices and problems. Accessed 20 January 2014. Available online: http://www.ilo.org/public/libdoc/ilo/1981/81B09_266_engl.pdf
4. Ned Resnikoff. “D.C. raises its minimum wage.” MSNBC. Accessed 20 January 2014. Available online: http://www.msnbc.com/all/washington-dc-minimum-wage-hike
I remember arriving in Boston 20 years ago and landing my first ever service industry job, bringing home a whopping $5.50 an hour, maxing out 2.5 years later at $7.00. A lateral move into a more specialized retail field offered a significantly better pay rate, and just as importantly, room for advancement and the acquirement of new skills, which was huge in imparting a sense of job security, in that the investment my employers were making in me was A. benefiting them as well as myself, and B. said skills would be valued by other employers in similarly specialized fields. After 18 years, my compensation is about par with perhaps the lower end of what a skilled laborer could expect. By no means extravagant, but certainly enough to meet my needs and even those of a family. I can remember, in those lean early years, being seduced by the notion of applying myself to learn a trade (something more tangible than a fine arts degree) in order to yes, earn more money, but also to feel more needed and useful than manning a cash register-- a position where there was certainly a body needed, but where a body which presented a more convenient or economical alternative to my employer could easily be found. Stressful days, and a time when I learned to make any number of personal sacrifices for the privilege of maintaining my barely-living wage. The societal paradigm shift that you mentioned existing in a dream perhaps, to me feels something like this-- A moving away from thinking of employees as an inventory of replaceable parts, each with a set of limited responsibilities and proscribed expectations, to fostering work environments less reliant on conformity measures such as mission statements, and gargantuan employee handbooks full of do's and dont's. For the sake of homogenization and "quality control," we are stifling creativity, ingenuity, and generally lessening the expectations we have of our work force.
ReplyDeleteNo easy answers anywhere, but good stuff to think about. We have the power as consumers to seek out and reward with our patronage places of business that foster a healthy, educational, and ultimately much more beneficial environment for both its patrons and its employees. On that note I'd like to reaffirm my gratitude to my employers of most of my adult life of doing just that.
Thanks for the well written article and for putting in the research. I'm intrigued by what were considered "defective groups" of the labor market, and why you say skilled labor is approaching obsolescence. Automation, clearly, but what other forces do you see at play there?
Thank you for your thoughts, Ed (this blog's first comment!). I'm no expert on this topic by any means, but I find it interesting and complex to think about what the ideal scenario for something like a minimum wage might be. The paper I referenced by Bernstein & Leonard discusses discrimination in broader terms than the FLSA of 1938 alone, and when they say "defective groups", they are referring to how many such laws affected groups including immigrants, African Americans, and women (some of these were more explicit than others--some laws, for instance, might say that jobs should give preference to residents of a state over non-residents).
Delete"Skilled labor" is probably not the most precise term for what I meant. Many types of jobs involving skilled labor (both low-paying and relatively well-paying) have been outsourced to other countries--textiles, automobiles (to some extent), steel mills, and many others that I probably couldn't name by type. The authors of that paper specifically point to low-paying jobs in the south, where wages were often lower than in the north (often leading to employment of marginalized groups who might have found it more difficult to find employment than more privileged groups).
Interesting to think about the past of these laws when considering how they work in the present.
Outsourcing, of course. That's something obvious I should have thought of. Wrote that before dinner, I blame low blood sugar levels. I immediately think of things like construction and maintenance of infrastructure over manufacturing when I think of skilled labor, but clearly that's my industry bias. I just illustrated a point to myself-- we tend to go gaga over and celebrate someone who delivers a nifty software app, over someone who hones their craft for riveting steel bridges, for example. A shiny new toy vs something we take for granted. Having lived in cities most of my life and servicing the sectors of industry which serve them, it just leaped to mind. In my admittedly hasty mulling on skilled labor I totally glossed over manufacturing. I've never lived in a factory town, or really known people who work in those fields. I go to stores and buy what I want without giving much thought to how it got there.
ReplyDeleteWe, all of us, glamorize as a culture certain kinds of work and under appreciate others. How great it would be to have a less myopic view of the value of all the pieces that make up the whole.
...and compensate them accordingly! (was the last thought I meant to tack on to that last sentence) Should stop posting to blogs before coffee.
ReplyDelete