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Minimum Wage

During the depressed economic conditions of the late 1930s, the Fair Labor Standards Act was passed. The new law created a minimum wage of 25 cents an hour, roughly 40 percent of the actual average wage. The minimum wage was first enacted into law in 1938. The original minimum wage applied to workers engaged in interstate commerce and the production of goods for interstate commerce. In 1938, this applied to roughly 11.0 million workers out of a total of 54.9 million workers. Even though the minimum was very low and applied to a limited number of workers, in some areas the negative employment effects were substantial from the outset. For example:

• Needlework exports from Puerto Rico, where the law also applied, declined about 70 percent after the enactment of the Fair Labor Standards Act.

• Nationwide, a government estimate concluded that between 30,000 and 50,000 jobs were lost as a direct result of enforcing the minimum wage.

• Since the labor force has more than doubled over the years, that would be the equivalent of perhaps 100,000 jobs lost today.

Interestingly, the provisions of the Fair Labor Standards Act recognized the possibility that minimum wages could have employment effects. The basic


Many economists believe that a portion of them will become unemployed. In any case, this analysis leads the majority of economists to believe that minimum wage laws are a poor policy. Presumably they are intended to help wage-earners, but at least some wage-earners are worse off as a result of the minimum wage laws. While there has been some controversy in all this, and the controversy has been renewed in the 'nineties, it has not shaken the predominant feeling of economists that minimum wage laws have some very undesirable side-effects.

Shift into industries that pay less than the minimum wage but are not covered by the minimum wage law.

Workers still employed under the minimum wage law are presumably better off, but there are workers offering Ns-Nd labor hours who cannot find jobs in the industries covered by the minimum wage. What are they to do? They might

• More than 10% of the entire U.S. workforce lives on minimum wage, that is 11.8 million workers.

• 17.4% of workers on minimum wage are Hispanic.

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Approximate Word count = 1312
Approximate Pages = 5 (250 words per page double spaced)


  

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