Why Is Minimum Wage Important?

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The minimum wage is important because it raises wages and reduces poverty. Proponents assert that it is needed to protect workers from exploitative employment practices. Opponents of the minimum wage claim that it is an unnecessary government intrusion into the relationship between employer and employee.

The precursor to the minimum wage was passed by King James I of England in 1604. The Act Fixing a Minimum Wage established a minimum wage for textile workers. Prior to passage of the Act, there was an established maximum wage but no formal minimum.

The federal minimum wage was established by the Fair Labor Standards Act of 1938. The wage was set artificially high to render low-wage factory jobs in the South obsolete. Subsequent amendments to the Act increased its scope to cover retail and other sectors of the economy and to mitigate unintended consequence to Puerto Rico, the U.S. Virgin Islands and other territories.

As of 2014, the federal minimum wage is $7.25 per hour, but there is pressure on Congress to increase it to more than $10 per hour. Advocates for increasing the minimum wage assert that an increase is necessary to improve the wages of a large number of working women and because, after adjusting for inflation, the minimum wage for tipped employees is at its lowest level since 1966.