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Thursday, January 23, 2014

Birth of the Minimum Wage

Today, most debates about the minimum wage are over wage rate should be and what the economic consequences are of having a minimum wage. In the not too distant past, however, the debate was whether we should even have one. The first attempt at establishing a national minimum wage occurred in 1933, when a $0.25 per hour standard was set as part of the under the FDR Administration's National Industrial Recovery Act, but two years later the Supreme Court declared it unconstitutional, and it was abolished. Not to be deterred, in 1938 FDR re-established a minimum wage of $0.25 per hour ($4.10 in 2012 dollars) as part of the Fair Labor Standards Act), and this time the Supreme Court upheld it, ruling that  Congress had the power (under the Commerce Clause) to regulate employment conditions.

But the story behind it's birth is much more complicated than that, and it's the subject of a recent Planet Money podcast ("Birth of the Minimum Wage"). The folks at Planet Money are planning a follow-up podcast on the economics of the minimum wage. I'll post a link to that when it appears.

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