The federal minimum wage in the United States was first introduced at the end of the 19th century as a result of industrialization, as more factories had been created in order to produce more goods. During this period, there was substantial growth in mass production, and as a result of the many Americans who left farms and small towns to work in factories, workers created unions in order to lobby for better working conditions. The Fair Labor Standard Act of 1938 put forth national minimum wages and a maximum number of hours workers can be required to work. President Franklin D. Roosevelt passed this legislation as a part of the New Deal, which was created as a response to the Great Depression. In order to prevent continuous exploitation, Roosevelt created a national minimum wage.
Cost of LivingThe intended purpose of minimum wage was to provide a basic standard of living for workers, as well as to prevent the exploitation of low-wage workers. The issue of minimum wage has grown controversial in the U.S., with the subject of increasing federal minimum wage sparking ongoing political debates. Many in support of a higher rate have cited its important role in poverty reduction and economic growth, as well as arguing that, as it stands, the hourly rate is insufficient for individuals to support themselves. While the wage itself has not fallen, it no longer provides the same support it once did. It has been estimated that, if the minimum wage were to have grown with productivity, it would have reached 22.88 U.S. dollars in 2021. Such disparities are particularly present within major U.S. cities. For example, the minimum annual income required for an individual to attain a comfortable life in New York City, New York was 105,742 U.S. dollars for renters, and 151,390 U.S. dollars for homeowners in 2022. Despite the city’s minimum wage being more than double the federal rate in 2023, full-time workers earning minimum wage would have made around 30,000 U.S. dollars that year.
In 2021 the inflation rate in the U.S. surpassed the country’s monthly wage growth, reaching a 40 year high in June 2022 of 9.1 percent.. Despite monthly wages climbing, they continued to lag behind inflation, leaving many Americans vulnerable to rising costs. 2022 saw a cost-of-living crisis sweep across U.S. states, making it increasingly difficult for people to sustain themselves, as well as afford housing. As of 2022, the hourly wage required to afford a two-bedroom apartment was considerably more than the average minimum wage of every U.S. state, spanning from 14.89 U.S. dollars in Arkansas, up to 40.63 U.S. dollars in Hawaii. In the United States, the monthly average rent in 2021 was estimated to be 1,800 U.S. dollars, which is three times greater than what it was in 2000. The rising cost of living has had major implications across the country, with more than one third of U.S. consumers struggling to make ends meet in 2022.
Characteristics of Minimum Wage WorkersThe number of wage and salary workers in the United States being paid the federal minimum has decreased significantly in the last fifty years, due in part to individual states accommodating the demand for higher hourly pay. In 1979, nearly four million workers were earning hourly rates at the federal minimum. In comparison, the total number of workers paid the federal minimum wage in 2021 was 181,000. Despite the minimum wage remaining relatively low over the last years, there were still around 910,000 thousand workers in the U.S. who received hourly wages below the federal minimum wage in the same year. Minimum wage violation cases in 2022 saw an increase from the previous year, with a total of 7,948 cases reported due to employers failing to pay a fair minimum wage.
About 484,000 workers between the ages of 16 and 24 years old were earning hourly rates at the federal minimum wage or less in 2021, making up the majority of workers paid at this rate. Comparatively, there were approximately 117,000 workers aged between 35 and 44 earning the same hourly rates. In the same year, the number of women being paid below the federal minimum wage was nearly twice that of men. The share of employees earning hourly wages at or below the minimum can also vary greatly depending on their level of education. For example, there were around 376,000 wage and salary workers in the U.S. who graduated high school but did not attend college that were being paid hourly rates at or below minimum wage. Those who had attended some college but had not attained a degree also made up a considerable amount of the U.S. workforce paid rates at or below the minimum wage.
In 2021, there were approximately 77,000 workers in the education and health services industry making an hourly wage at or below minimum wage. However, the majority were found among the leisure and hospitality industry, with 715,000 workers in the industry earning hourly rate at or below the minimum wage that year, with the majority working in food preparation and serving related jobs. As workers earning the minimum have struggled to cover their basic expenses, many in the service industry have continued to grow increasingly reliant on tips to supplement their income. This has led to an increase in tipping rates, and has prompted many service establishments to automatically add a gratuity onto the price of the service provided. In 2023, around 57 percent of Americans tipped between five and 25 percent of the price of a service. The shift in tipping culture in the U.S. has been met with mixed emotions by the public, with around 31 percent of people reporting having felt pressured to tip, compared to 29 percent having felt excited about tipping. Despite the range of emotions, around 76 percent of Americans reported tipping often or always in 2023.