minimum wage

minimum wage

minimum wage, lowest wage legally permitted in an industry or in a government or other organization. The goal in establishing minimum wages has been to assure wage earners a standard of living above the lowest permitted by health and decency. The minimum has been set by labor unions through collective bargaining, by arbitration, by board action, and, finally, by legislation. Introduced (1894) in New Zealand through compulsory arbitration, it has become part of the social legislation of almost all countries. Although federal minimum-wage laws were at first held unconstitutional in the United States, a strong fight by organized labor for enactment culminated in the passage (1938) of the Fair Labor Standards Act, which set minimum wages at $.25 per hour for workers engaged in interstate commerce (with some exceptions); the act also set up industry committees to recommend rates for every industry. In 1950 the minimum wage was raised to $.75 per hour. Thereafter, it was raised several times (for example, in 1956 to $1.00, in 1963 to $1.25, and in 1968 to $1.60). In 1974, Congress passed a bill providing for a gradual increase from the prevailing $1.60 per hour to $2.30 per hour by 1976. The bill also extended minimum-wage rules to some 8 million workers not previously covered, including state and local government employees, most domestic workers, and some employees of chain stores. Additional increases raised the minimum wage to $3.10 per hour (1980), $4.25 (1991), and $5.15 (1997). Legislation passed in 2007 raised the minimum wage, in three stages, to $7.25 in 2009. Since 1989 businesses earning less than $500,000 annually have not been subject to minimum-wage rules. A number of states have minimun wages that are higher than the federal minimum wage. See also wages.

See S. Richardson, The Minimum Wage (1927); G. F. Starr, Minimum Wage Fixing: An International Review of Practices and Problems (1981); S. Rottenberg, The Economics of Legal Minimum Wages (1982).

Wage rate established by collective bargaining or by government regulation, specifying the lowest rate at which workers may be employed. A legal minimum wage is one mandated by government for all workers in an economy, with few exceptions. Privately negotiated minimum wages determined by collective bargaining apply to a specific group of workers in the economy, usually in specific trades or industries. The modern minimum wage, combined with compulsory arbitration of labour disputes, first appeared in Australia and New Zealand in the 1890s. In 1909 Britain established trade boards to set minimum wage rates in certain trades and industries. The first minimum wage in the U.S. (which applied only to women) was enacted by Massachusetts in 1912. Minimum wage laws or agreements now exist in most nations.

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