Securing the Wage Floor: Indexing Would Maintain the Minimum Wage's Value and Provide Predictability to Employers

Publication Date: October 2006

Publisher: Economic Policy Institute

Author(s): Michael Ettlinger

Research Area: Labor

Type: Brief

Abstract:

In 1938 Congress enacted the federal minimum wage, originally setting it at 25 cents per hour, as part of the Fair Labor Standards Act (FLSA). From the beginning, it was clear that the minimum wage would have to be raised periodically to keep up with rising prices and wage levels.

Original proposals for the FLSA provided for a commission that would set the minimum wage after a public hearing and consideration of cost-of-living estimates provided by the Bureau of Labor Statistics (BLS). By this procedure, the wage would have been updated according to changes in the standard of living and inflation. The version of the FLSA that became law, however, left action on future increases to Congress and the president.