Minimum wage is the lowest amount that the law requires an employer to pay a worker per hour. It is the price floor below which an employee may not sell their labor. As of June 2016, the US requires that the lowest paid worker should earn 7.25 dollars per hour.
A network of federal, state, and local statutes have set the minimum wage of US states, with Massachusetts and Washington setting the highest minimum wage at $11 per hour, which is typical in 29 of the 50 states in the US whose rates exceed the federal rates. Even though the United States has set the federal law, it allows individual states and localities to pass their wage laws.
What is the Necessity of Determining a Minimum Wage?
Setting a minimum wage raises earnings and reduces poverty. It ensures that firms have the responsibility to ensure that their workers earn enough for sustenance. It also protects the taxpayers from exploitation by companies who may want to get the most benefits at the cost of their employers. Not only does minimum wage protect the employee, but it also reduces the burden of the welfare payments on the federal. Determining a minimum wage causes a stimulus to the economy. The study shows that an increase in the minimum wage just by a dollar will increase the purchasing power of the worker's families. Such stimulus benefits the economy and increases the sales of the businesses which in turn boost profitability.
Four factors determine the setting of a minimum wage: the needs of workers and their families, the capacity to pay, comparable wages income, and requirements for economic and social development. There is a high elasticity for low-skilled workers which mean that a small change in price causes a greater impact on its demand.
History of Minimum Wage Legislation in the US
In 1938 Franklin Delano Roosevelt passed the first federal minimum wage in the US, set at 25 cents per hour, an equivalent of about 4 dollars per hour in the contemporary rates. It was part of the Fair Labor Standards Act (FLSA) which also covers aspects like youth employment overtime pay and recordkeeping. Although the US passed its first law in 1938, some individual states like Massachusetts already had their legislation in place. The wage keeps increasing over the years, and today it is 7.25 dollars per hour.
US States with the Highest Minimum Wage
The states with highest minimum wage are Massachusetts and Washington with a wage of $11 per hour.
US States with the Lowest Minimum Wage
Although the federal government takes 7.25 dollars as the minimum pay, there are some states with wages lower than that. Wyoming and Georgia states have set their wages at 5.15 dollars per hour.
US States with No Minimum Wage Limit
Five of the southern States have not configured any laws on minimum wages. They include Tennessee, South Carolina, Mississippi, Louisiana, and Alabama. In these states, it is even legal for an employer to pay a worker 25 cents, thus it contributes to the high level of poverty experienced in these states.
Effects of Minimum Wage
Proponents of the minimum wage believe that it has benefits such as increasing standards of living, minimizing poverty levels, boosting morale, reducing poverty, and reducing the inequalities in allocation of wage rates. In essence, the minimum wage is set to prevent exploitation of workers by their employers. The minimum wage helps to regulate economic vices such as the high crime rates. Studies show that an increase in minimum wage decreases the crime rates in a state. It also helps in economic growth due to the increase in wages which translates in increased spending and savings/investment. On the other hand, opponents of minimum wage say it increases unemployment and poverty. It also damages businesses since it increases the salary and wages expenses thereby heightening prices of goods and services.
Minimum Wage By State In The United States
|Rank||State||Min Wage ($/h)|
|6||Oregon||$11.25 (Portland metro); $10.25 (non-rural counties); $10.00 (rural counties)|