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Minimum wage from 1938 to now (with inflation)

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Minimum wage from 1938 to now (with inflation)

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If someone works 40 hours / week at a minimum wage job ($7.25/hr), they would make $15,080/year before taxes.

After taxes are taken out, salary would equal to roughly $13,926.

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History of Minimum Wage
The federal minimum wage, introduced in 1938 during the Great Depression under President Franklin Delano Roosevelt, was initially set at $0.25 per hour. The federal minimum wage has been increased by Congress 22 times, most recently in 2009 from $6.55 to $7.25 an hour. Most states plus DC have a minimum wage higher than the federal minimum wage, though several states do not have minimum wage laws (which means workers in those states default to the federal minimum wage). Read more history...

Pro & Con Arguments

Pro 1

Raising the federal minimum wage would not only allow minimum wage workers to afford basic living expenses, but would also reduce income, gender, and racial inequalities.

The current minimum wage is not high enough to allow people to afford housing. According to the National Low Income Housing Coalition, "In 2022, a full-time worker needs to earn an hourly wage of $25.82 on average to afford a modest, two-bedroom rental home in the U.S. This... is $18.57 higher than the federal minimum wage of $7.25.... A full-time worker needs to earn an hourly wage of $21.25 on average in order to afford a modest one-bedroom rental home in the U.S."

Further, 35% of families with full-time year-round employment do not earn enough to pay for essentials including food and childcare. 59% of Hispanic families, 52% of Black families, 25% of white families, and 23% of Asian families that work full-time year-round cannot cover basic needs. Overall, families would need to earn $11 more an hour to cover basic costs, with Black and Hispanic families needing $12 more an hour.

Approximately 91% of workers who would benefit from a raised minimum wage are over 20 years old, with 68% over the age of 25. Most are the primary wage earners for their families, averaging about 52% of their family's income, and most are women and people of color. The current federal minimum wage prevents these individuals and families from meeting basic needs like shelter and food, as well as creating significant obstacles to healthcare, finances for an emergency, and other expenses such as car upkeep.

Increasing the minimum wage would not only bring relief to workers struggling to make ends meet, it would also raise the incomes of people who make slightly more than minimum wage. The Brookings Institution found that increasing the minimum wage would result in higher wages for the 3.7 million people earning minimum wage and up to 35 million workers who make up to 150% of the federal minimum wage.

The White House Council of Economic Advisors (CEA) found that an increase to just $10.10 an hour would raise wages for 28 million Americans-about nine million of those due to the ripple effect.
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Pro 2

Raising the minimum wage to match inflation and productivity would benefit the economy by increasing consumer activity and spurring job growth while lowering the federal deficit.

As journalist Megan Cerullo summarizes, "The federal minimum wage of $7.25 buys less today than it has at any point over the past 66 years.... The current value of the minimum wage in real dollars is at its lowest level since February 1956, when the lowest U.S. wage was 75 cents - the equivalent of $7.19 in June 2022 dollars." Raising the minimum wage and indexing it to inflation would ensure that low-wage workers could adopt a standard of living commensurate with the current economy.

Further, while the estimates of how much the minimum wage should be increased vary, many economists agree that if the wage had kept pace with rising productivity and incomes, it would be higher than the current $7.25 an hour. [14] [17] [18]

With an economic boom and more securely employed workers, the federal deficit would decrease. According to James K. Galbraith, Professor of Government at the University of Texas in Austin, "[b]ecause payroll- and income-tax revenues would rise [as a result of an increase in the minimum wage], the federal deficit would come down."

Further, raising the minimum wage would help reduce the federal budget deficit "by lowering spending on public assistance programs and increasing tax revenue. Since firms are allowed to pay poverty-level wages to 3.6 million people - 5 percent of the workforce - these workers must rely on Federal income support programs. This means that taxpayers have been subsidizing businesses, whose profits have risen to record levels over the past 30 years," according to Aaron Pacitti, Associate Professor of Economics at Siena College.
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Pro 3

Increasing the minimum wage would have numerous social benefits including reducing poverty and crime, and increasing school attendance and the healthy population.
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Con 1

Raising the minimum wage would increase housing and consumer goods costs for everyone and greatly disadvantage minimum wage workers.

Raising the minimum wage could decrease employee benefits and increase tax payments, further costing the employees. According to James Sherk, MA, Senior Policy Analyst at the Heritage Foundation, a single mother working full time and earning the federal minimum wage of $7.25 an hour would be over $260 a month worse off if the minimum wage were raised to $10.10: "While her market income rises by $494, she loses $71 in EITC [earned income tax credit] refunds, pays $37 more in payroll taxes and $45 more in state income taxes. She also loses $88 in food stamp benefits and $528 in child-care subsidies."

Raising the minimum wage also creates more jobs for more skilled workers, disadvantaging teenagers, young adults, and those with less education and experience. If employers have to pay an employee more, they will expect the employee to have a more experienced skill set, essentially removing the job from the tier of jobs available to minimum wage workers.
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Con 2

Raising the minimum wage, instead of allowing the free market to determine an appropriate rate, will decrease employee compensation, while forcing businesses to close, use automation, or outsource jobs.

Increasing the minimum wage increases costs for businesses. If a business cannot or will not support the increased cost, the first method of cost correction is to cut hours or lay off employees. Researchers found that "For every $1 increase in the minimum wage, ...the total number of workers scheduled to work each week increased by 27.7%, while the average number of hours each worker worked per week decreased [sic] by 20.8%. For an average store in California, these changes translated into four extra workers per week and five fewer hours per worker per week - which meant that the total wage compensation of an average minimum wage worker in a California store actually fell by 13.6%." The decrease in hours also meant erratic schedules that are difficult for employees to maintain and a decrease in eligibility for benefits such as retirement packages and healthcare.

Businesses that cannot or will not pay a higher minimum wage may also turn to more robots and automated processes to replace service employees. Oxford University researchers explain "robots are already performing many simple service tasks such as vacuuming, mopping, lawn mowing, and gutter cleaning" and that "commercial service robots are now able to perform more complex tasks in food preparation, health care, commercial cleaning, and elderly care."
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Con 3

Raising the federal minimum wage would exacerbate income disparities and the cycle of poverty.

Cost of living varies wildly in the United States. For example, living in New York, California, and Hawaii costs significantly more than living in Mississippi, Kansas, or Montana. If the federal government raises the minimum wage significantly, the wage will be proportionately much higher in lower income states, meaning employers will not be able to afford the costs of paying employees and residents will not be able to afford the cost of living increases necessary to make up the difference. Small rural communities would especially suffer from the disparity.
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Did You Know?

1. America's minimum wage law was signed in 1938. The minimum wage was set at 25 cents, which is equivalent to $5.19 in 2022 dollars.

2. 44% of minimum wage earners are under 25 years old.

3. 30 states and DC have set minimum wages above the federal minimum of $7.25 an hour. As of Jan. 12, 2023, the highest is DC, at $16.50 an hour, followed by Washington state at $15.74 an hour.

4. The federal minimum wage has been increased by Congress 22 times, most recently in 2009 from $6.55 to $7.25 an hour.

5. The first state minimum wage laws, introduced between 1912 and the early 1930s, only covered women and minors. The first to cover men was introduced in 1937 in Oklahoma.

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Should the Federal Minimum Wage Be Increased?

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History of Minimum Wage The federal minimum wage, introduced in 1938 during the Great Depression under President Franklin Delano Roosevelt, was initially set at $0.25 per hour. The federal minimum wage has been increased by Congress 22 times, most recently in 2009 from $6.55 to $7.25 an hour.

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Think about how the quote above applies to the world today.  Do you agree/disagree with what FDR is saying? Has our discussion today changed your beliefs?

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In 1938, U.S. Department of Labor introduced the Fair Labor Standards Act (FLSA).

Implemented by FDR at .25 cents an hour (~$4 today)

Since 1938, minimum wage has been raised 22 times

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Minimum wage is a hot topic in the United States and around the world. Today, most of the world's countries have some type of minimum wage.

Why was minimum wage introduced in the first place? Which country had the world's first minimum wage? Where is minimum wage going in the future? Today, we're going to explain the history of minimum wage in the United States and around the world.

The World's First Minimum Wage

New Zealand passed the world's first national minimum wage laws way back in 1894.This minimum wage law covered all businesses and all industries across the entire country.

Australia (specifically, Victoria), was the second jurisdiction in the world to pass minimum wage laws. At first, Victoria's minimum wage laws only covered certain industries: they only covered six industries that were notorious for paying low wages. By 1904, these minimum wage laws had grown to cover 150 industries. New South Wales and Western Australia had also passed their own minimum wage laws two years earlier in 1902.

Following the "minimum wage experiment" in Australia and New Zealand, other countries began considering enacting minimum wage in their own borders.

As a result, the UK passed its own set of minimum wage laws in 1909.

Minimum Wage in the United States

Minimum wage in America isn't as old as you might think: the first federal minimum wage was first introduced by Franklin Delano Roosevelt in 1938. Minimum wage was set at 25 cents an hour, which works out to about $4 per hour in today's money.

That minimum wage was introduced as part of the Fair Labor Standards Act (FLSA). The FLSA also covers things like youth employment standards, overtime pay, recordkeeping, and standards for government employees at the local, state, and federal levels.

The first federal minimum wage laws were passed in America in 1938. But prior to that, at least one state had passed its own minimum wage laws. Massachusetts passed minimum wage laws in 1912 (although they only covered women and children).

Since FDR's first federal minimum wage in 1938, the minimum wage has been raised 22 times by 12 different presidents.

US minimum wage is purposely set up not to rise with inflation. Minimum wage can only rise with congressional action. In other words, if the 12 presidents never raised minimum wage over the years, then we would still be getting paid a minimum of 25 cents per hour for our work.

Minimum Wage Increases Over the Years

October 1938 (FDR): $0.25/hr ($4.15/hr in 2014 dollars)

October 1939 (FDR): $0.30/hr ($5.05/hr)

October 1945 (Truman): $0.40/hr ($5.20/hr)

January 1950 (Truman): $0.75/hr ($7.29/hr)

March 1956 (Eisenhower): $1/hr ($8.61/hr)

September 1961 (Kennedy): $1.16/hr ($8.97/hr)

September 1963 (Kennedy): $1.25/hr ($9.56/hr)

February 1967 (Johnson): $1.40/hr ($9.80/hr)

February 1968 (Johnson): $1.60/hr ($10.75/hr)

May 1974 (Nixon): $2/hr ($9.49/hr)

January 1975 (Ford): $2.10/hr ($9.13/hr)

January 1976 (Ford): $2.30/hr ($9.47/hr)

January 1978 (Carter): $2.65 ($9.51/hr)

January 1979 (Carter): $2.90/hr ($9.34/hr)

January 1980 (Carter): $3.10/hr ($8.80/hr)

January 1981 (Carter): $3.35/hr ($8.62/hr)

April 1990 (Bush): $3.80/hr ($6.82/hr)

April 1991 (Bush): $4.25/hr ($7.30/hr)

October 1996 (Clinton): $4.75/hr ($7.08/hr)

September 1997 (Clinton): $5.15/hr ($7.51/hr)

July 2007 (GW Bush): $5.85/hr ($6.61/hr)

July 2008 (GW Bush): $6.55/hr ($7.12/hr)

July 2009 (Obama): $7.25/hr ($7.80/hr)

Above statistics come courtesy of Time.com.

As you can see, the minimum wage has increased in a linear fashion in terms of dollars, but in terms of real dollars, minimum wage has declined sharply from its highest point in February 1968.

Of course, the above rates only cover the federal minimum wage. Most states - and even some cities - have minimum wages significantly higher than the federal level.

San Francisco's minimum wage, for example, rose to $12.25 on May 1, 2015. On July 1, 2018, minimum wage will rise once more to $15 per hour.

Washington has the nation's highest minimum wage, clocking in at $9.47, while Oregon has a minimum wage of $9.25 in second place. California plans to raise its minimum wage to $10 per hour in 2016.

Minimum wage increases have been fairly steady since 1938. There have been two major breaks in minimum wage increases. The first large break took place between January 1981 and April 1990. Then, the second major break took place between September 1997 and July 2007, which was the longest period during which the minimum wage was not adjusted.

Minimum Wage Averages At 60% of the Poverty Level

Another important thing to recognize about minimum wage is its relation to the poverty level. Using a work year of 50, 40-hour work weeks, we can get the annual earnings expected from a minimum wage worker.

In 1968, minimum wage as a percentage of the poverty level was at 99%. In other words, someone working a minimum wage job full-time for one year would be just 1% under the poverty line.

Since 1989, minimum wage as a percentage of the poverty level has averaged around 60%.

Minimum Wage Laws from State to State

All US states but 5 have their own minimum wage laws:

Five southern states have no minimum wage laws, including Louisiana, Mississippi, Alabama, Tennessee, and South Carolina.

Four states have a state minimum wage lower than the federal minimum wage, so the federal minimum wage automatically applies (Wyoming, Minnesota, Arkansas, and Georgia)

20 states have laws that lock the state's minimum wage with the federal minimum wage

21 states and the District of Columbia set their rates higher than the federal minimum wage.

Characteristics of Minimum Wage Workers

To understand how minimum wage laws work in the United States (and also around the world), it helps to understand who, exactly, mime wage workers actually are. In 2013, the Bureau of Labor Statistics compiled data about the millions of minimum wage employees across the country:

In 2013, approximately 1.5 million US workers aged 16 and over earned exactly the federal minimum wage of $7.25 per hour.

Another 1.8 million US workers received wages below the federal minimum wage.

Together, the above two groups make up 4% of all hourly paid workers in America

In 1979, 13% of US wage workers received minimum wage. In 2012, that number had dropped to 5%. The 2013 figure of 4% is an all-time low.

Half of all minimum wage workers are age 25 or younger. Approximately 20% of all hourly paid workers are age 25 or younger.

20% of employed teenagers earned minimum wage or less, compared to about 3% of workers over age 25.

62% of minimum wage workers are women and 38% were men. 5% of women in America earned minimum wage or less, compared to 3% of men.

64% of minimum wage workers are part-time workers while 36% are full-time workers.

47% of minimum wage workers were in the South while 24% were in the Mid-west, 18% were in the Northeast, and 12% were in the West.

64% of minimum wage workers are in service occupations, with 47% in food preparation and related serving professions.

The two states with the highest percentage of hourly paid workers earning federal minimum wage or lower are Tennessee and Idaho (both at around 7%).

The states with the lowest percentages of hourly paid workers earning minimum wage or lower are Oregon, California, and Washington, all of which are under 2%.

Annual Earnings for Full-time Minimum Wage Workers

Full-time earnings for minimum wage earners are estimated based on a 40-hour work week and 50 working weeks per year.

The current federal minimum wage is $7.25 per hour, which leads to a full-time minimum wage of $15,080 per year.

In 2012, the poverty threshold for a single person was $11,945 and $22,283 for a family of four with two children.

An individual who works minimum wage for a full year will make enough to live above the poverty line. However, if that individual is the sole provider for a family of four, then that individual is only earning 65% of the federal poverty guideline according to research collected by the UC Davis Center for Poverty Research.

Minimum Wage Laws Around the World

New Zealand, Australia, and the United Kingdom were the first countries in the world to pass minimum wage laws.

Since then, most countries around the world have passed minimum wage laws of some form or another. Here's a brief overview of minimum wage history in other nations around the world:

Australia was the second country in the world to pass minimum wage laws. After Victoria, New South Wales, and Western Australia passed laws in 1902 and 1904, the country of Australia passed a "basic wage" act with the Harvester Judgment of 1907.

The Harvester Judgment provided a fair living wage for workers across the country and was considered a case with "national ramifications" and "international significance".

Today, Australians earn the highest minimum wage in the developed world, earning $17.29 per hour as of 2015.

Brazil's national minimum wage is adjusted every year by federal law. In 2012, minimum wage was R$ 622 ($173.57 USD) per month, which works out to R$ 20.7 ($5.78 USD) per day and R$ 2.59 ($0.72 USD) per hour.

Canada's minimum wage laws vary between provinces and territories and there is no federal minimum wage law.

Minimum wage varies from $10.20 to $11 in provinces across the country (Alberta and Saskatchewan have the lowest minimum wage at $10.20 while Ontario has the highest at $11 per hour).

The territories, meanwhile, have the highest minimum wages in the country, including $10.86 per hour in the Yukon, $12.50 per hour in the Northwest Territories, and $11 in Nunavut.

According to 2012 statistics from Stats Canada, the average full-time retail wage across Canada was $19.03 and the average part-time retail wage was $11.94 per hour.

Certain Canadian provinces also have restrictions where certain professions - like liquor servers - earn a lower minimum wage, while other professionals - like homeworkers - earn a higher minimum wage.

China's history of minimum wage legislation is very short. The country passed its first minimum wage law in 2004 as part of the Regulations on Enterprises Minimum Wage. The country now has two minimum wages: one monthly minimum wage for full-time workers and a separate hourly minimum wage for part-time workers.

Minimum wages also vary widely throughout China because different parts of China have very different standards of living. For a full list of minimum wages across China, click here.

European Union

18 of the 27 member states in the EU have national minimum wages.

Certain countries (Sweden, Finland, Denmark, Switzerland, Austria, Italy, and Cyprus) have no national minimum wage laws but rely on unions, trade groups, and employer groups to set minimum earnings through collective bargaining.

Other countries - like Germany - just recently passed minimum wage laws early in 2015.

France introduced its first minimum wage law in 1950 as part of the Interprofessional Guaranteed Minimum Wage act. That act established two minimum wages: one wage was enacted for the Paris region and another wage applied to the rest of the country.

Today, France's national minimum wage is €1,457.52 per month.

France also updates its minimum wage every January. However, the increase in minimum wage cannot be lower than the rate of inflation for the current year. In most recent years, the increase was about twice as much as inflation (5% per year compared to average inflation of around 2%).

Many people are surprised to learn that Germany did not have a minimum wage law until January 1, 2015. Germany just recently set its national minimum wage law as part of the MiLoG - Mindestlohngesetz.

That law requires Germany to update its minimum wage every other year according to the results of a Minimum Wage commission. Today, Germany's minimum wage is set at €8.50 per hour.

Ireland's minimum wage was introduced in 2000. The country has some of the most unique minimum wage laws in the world, with certain reductions applying to different workers (particularly young workers).

For example, as of 2011, the minimum wage in Ireland was €8.65 per hour. However, certain groups receive minimum wage reductions:

30% reduction for all employees under 18

20% reduction for employees over 18 in their first year of employment in any job since they turned 18

10% reduction for employees over 18 in their second year of employment in any job since they turned 18

That minimum wage can be reduced even further by up to €7.73 per day if lodgings or food are provided as part of the job.

Trainees also receive a lower minimum wage during training, ranging from 25% for the first third of the course to 10% on the last third of the course.

Japan's minimum wage varies according to the industry and region. Industries and regions both have their own unique minimum wages. In situations where one minimum wage is higher than the other, the higher minimum wage of the two will apply.

As of 2011, Japan's minimum wage was ¥645 to ¥837 ($5.30 to $6.88 USD) per hour, depending on the region.

New Zealand

New Zealand was the world's first country to pass a minimum wage law and has strong minimum wage laws to this day. New Zealand passed its minimum wage law across the country with the Industrial Conciliation and Arbitration Act of 1894.

Today, New Zealand has a countrywide minimum wage of $14.75 per hour. However, there is no minimum wage for employees under 16 years of age, and the minimum wage for employees between 16 and 17 is $11 per hour.

United Kingdom

The United Kingdom often claims to have had the world's first local minimum wage laws. Starting in 1524, certain towns in the UK began regulating local wage levels.

More recently, the country created the National Minimum Wage (NMW) in 1999 at a rate of £3.60 per hour. That wage only applied to workers 22 years of age and older.

Today, minimum wage in the UK stands at £6.50 per hour for workers aged 21 and over, £5.12 for workers between ages 18 and 20, and £3.79 for workers under age 18.

Apprentices also have their own minimum wage of £2.73 between ages 16 and 18. That wage also applies to apprentices over 19 or over who are in their first year.

OECD Rankings of Minimum Wage in Countries Around the World

The Organization for Economic Co-Operation and Development (OECD) recently released a chart showing minimum wage laws around the world in terms of US dollars per hour after taxes at purchasing power parities:

As mentioned above, Australia leads the way with the world's highest minimum wage. To view a complete list of minimum wage laws in countries around the world, check out this Wikipedia article for a good summary.

Countries with No Minimum Wage Laws

Certain countries in the world have no minimum wage laws. As you might expect, many of these countries are in poorer parts of the world, like sub-Saharan Africa and parts of the Middle East.

A rare few developed countries also have no minimum wage laws, including Hong Kong, Saudi Arabia, Chile, Denmark, Singapore, and United Arab Emirates.

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History of The US Minimum Wage - From The Very First Minimum Wage

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Minimum wage is a hot topic in the United States and around the world. Today, most of the world's countries have some type of minimum wage. Why was minimum wage introduced in the first place? Which country had the world's first minimum wage? Where is minimum wage going in the future?

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By state

Click on each state in the map below to see what a woman, on average, made for every dollar made by a man in 2014 (the ratio of female to male median earnings for full-time, year-round workers), and the difference that makes annual and over the course of a 40-year career. The map uses 2014 data from the American Community Survey, as collected and analyzed by the National Women's Law Center, an advocacy group ( download the data here).

Figures are based on women's and men's 2014 median earnings for full-time, year-round work over a 40-year career, and are not adjusted for inflation.

Leading the pack was Washington D.C., where female full-time workers made, on average, 89.5 cents for every dollar male workers made. In California, which ranked eighth, women made 84.1 cents for every dollar made by men. Louisiana took up the rear: women there made a mere 65.3 cents for every dollar made by men.

When the Equal Pay Act was passed in 1963, full-time working women made, on average, about 59 cents for every dollar made by men. By 1973, the gap had actually grown wider: women made 57 cents for every dollar men made. Since then, however, the gap has gradually narrowed, although it's remained fairly stagnant since 2000.

Why does the wage gap persist?

Reasons vary widely. Some academic studies argue that the disparity is due mainly to non-discriminatory factors related to division of labor in the home -- including childcare -- that often falls more heavily on women. Because of family-related circumstances, like giving birth, women overall are also more likely than men to have interrupted careers and work part-time, which can result in less-senior positions and lower wages. Additionally, women are still more likely than men to be employed in lower-paying service and support professions.

Some studies, however, point to evidence that the gender wage gap persists even after variables like family leave are taken into account, concluding that systemic discrimination remains a primary factor. This is especially notable for women of color, whose average pay is significantly less than white male counterparts. For every dollar that the average white man made in 2014, the average African-American woman made only 60.5 cents, and the average Latina made only 54.6 cents, according NWLC.

By profession

Even within the same professions, women today are still paid significantly less, on average, than men. But the pay gap varies dramatically by job, according to NPR's Planet Money team, which analyzed at Bureau of Labor Statistics data from 2012. The chart below, by Lam Thuy Vo, shows jobs where the wage gap is smallest and largest (based on comparisons of full-time workers). Part of the gap in pay, Vo notes, results from professional decisions some women voluntarily make. She writes: "Among physicians, for example, women are more likely than men to choose lower-paid specialties (though this does not explain all of the pay gap among doctors)." It's also interesting to note, writes Vo, that the jobs where the gap is biggest are the one's that pay more.

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MAP: It's Equal Pay Day! How Big Is the Gender Wage Gap Where You Live?

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By state Click on each state in the map below to see what a woman, on average, made for every dollar made by a man in 2014 (the ratio of female to male median earnings for full-time, year-round workers), and the difference that makes annual and over the course of a 40-year career.