Today’s Wonder of the Day was inspired by Anonymous. Anonymous Wonders, “why does minimum wage exist” Thanks for WONDERing with us, Anonymous!
What do you dream of being when you’re older? Do you want to be an astronaut? A detective? An actor? Many people want to be teachers, architects, and engineers! Whatever your dream is, surely you’ll want fair pay for what you do.
Have you ever WONDERed who decides how much people are paid? In many jobs, the employer has most of the say. For a long time, employers could pay workers however much they wanted. Many bosses abused this power. They paid people less than they could live on. This was a big issue during the Great Depression.
During the Great Depression, the unemployment rate in the US was 25%. That meant one in four people was unemployed. Because of this, it was easy for employers to take advantage of workers. They could pay less because people were so desperate for work. That meant workers had an even harder time getting by.
To fix this problem, many people wanted a federal minimum wage. A minimum wage is the smallest sum of money an employer can pay a worker. The first minimum wage was put in place by New Zealand in 1894. Decades later, the United States hadn’t set one. However, the idea gained support during the Great Depression. In 1938, President Franklin Delano Roosevelt signed it into law through the Fair Labor and Standards Act (FLSA).
The FLSA made many laws for labor. It outlawed child labor and set a 44-hour work week. It also set a federal minimum wage. This first minimum wage was 25￠ an hour. That may not seem like much money. By today’s standards, it isn’t! Luckily, the minimum wage has risen 22 times since 1938. In 2019, the minimum wage is $7.25 an hour, and the work week has been reduced to 40 hours.
People who were against the minimum wage worried that it would cost businesses too much money. They believed more people would be unemployed when companies couldn’t afford to pay them. However, that wasn’t the case for many businesses. Some places had to cut jobs, but others saw job growth. Workers who made more money started buying more necessities. This caused companies to need more help, leading to more jobs. That helped the unemployment rate drop!
Nowadays, many people think the US should increase the minimum wage. They argue it needs to catch up with today’s cost of living. Cost of living is the price of everyday items like housing, transportation, and food. Cost of living varies from place to place. For instance, the cost of living in a large city is often higher than in a small town. For that reason, some states and cities have their own higher minimum wages. For example, the minimum wage in Chicago is $12 an hour, much higher than the federal minimum.
Do you think $7.25 is a fair minimum wage? Is that enough to meet the cost of living where you live? Do you think raising the minimum wage would help or hurt the economy? We’d love to hear what you think!