Possible Indexation of the Federal Minimum Wage: Evolution of Legislative Activity

Publication Date: January 2007

Publisher: Library of Congress. Congressional Research Service

Author(s):

Research Area: Labor

Type:

Abstract:

Indexation of the minimum wage (linking the minimum wage to an outside economic variable) in a variety of forms has been a subject of discussion at least since the early years of the 20th century. When early proponents of a wage floor began to consider the matter as public policy within the United States, they established a series of state wage boards. These boards were given the authority to fix a reasonable rate below which most workers were not permitted to be paid. The powers of the boards varied from one state to the next and, where they were reasonably effective, there was the constant fear that the courts would intervene and overturn whatever authority the boards may have had.

The boards wrestled with a variety of methods for setting the minimum wage. Some made surveys of the cost-of-living for low-wage employees and tried to render a measure of equality between such costs (however defined) and income derived from work. But surveys proved difficult and, gradually, a reliance developed upon governmental agencies. It was not necessarily a neat fit -- and questions remained.

In 1938, largely moving beyond the state boards, Congress passed the Fair Labor Standards Act (the FLSA). The act established the federal minimum at 25 cents an hour for those relatively few workers actually covered. Since 1938, Congress has revisited the act in a sporadic fashion. The result, through the years, has been a series of gradual expansions of the act and some variation in wage rates -- but, generally, since the 1960s, a downward spiral in the real value of the minimum wage has set in. During the Reagan era, no new increases were made, and only two (the 1989 and 1996 amendments) have been made in subsequent years.

At present, at least four states (Washington, Oregon, Vermont, and Florida) index their state minimum wage standards. Several others are in the process of implementing new laws in that regard: Arizona, Colorado, Missouri, Montana, Nevada, and Ohio. In the 109th Congress, two bills dealing with indexation were introduced -- S. 2725 (Clinton) and H.R. 5731 (Al Green).

Following a preliminary introduction of the topic, this report reviews the several relatively distinct periods during which indexation, in one form or another, was before the Congress. These include (a) the early experimentation with indexation through the 1940s and into the early 1970s, (b) the 1970s, when the first serious initiatives were undertaken, (c) the Reagan Presidency, (d) the renewed interest and controversy over indexation during the late 1980s, and (e) the more current initiatives of the 1990s and beyond.

A closing segment of the report suggests certain issues that have emerged through prior debates and which may still be useful to consider. If events seem to warrant, this report will likely be updated.