From Edward Silverstein,
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Minimum Wage FAQ

What is the minimum wage?

The minimum wage is the lowest hourly rate that most employers can legally pay most of their employees. The national minimum wage is set by the federal government. Some states have a minimum wage, too. One study by the Bureau of Labor Statistics, reports that about 3 percent of the U.S. workforce paid by the hour earned at or below the federal minimum wage.

Can I earn more than the minimum wage?

Yes. Many employers pay far more than the minimum wage. Some pay just the minimum. Others pay less than the minimum; it depends on certain conditions (see below).

What if the state and federal minimum wages differ?

Where an employee is subject to both state and federal minimum wage laws, he/she is entitled to the higher minimum wage rate. For example, as of early 2008, the minimum wage in the State of New York is $7.15. The employee would receive the state minimum wage of $7.15 rather than the lower federal minimum wage of $5.85 an hour. But if the federal minimum wage were to increase above the New York State minimum wage, the employee would receive the federal minimum wage.

To whom does the minimum wage apply?

According to the U.S. Department of Labor, the minimum wage law applies to employees of enterprises that have gross volume of sales or business of at least $500,000 a year. It also applies to employees of smaller firms if the employees are engaged in interstate commerce or in the production of goods for commerce, such as employees who work in transportation or communications, or who regularly use the mail or telephones for interstate communications.

Other workers, such as guards, janitors and maintenance employees who perform duties that are closely related and directly essential to such interstate activities are also covered by the minimum wage. It also applies to employees of government agencies, hospitals and schools, and it generally applies to domestic workers.

Who earns the minimum wage or less?

According to the U.S. Bureau of Labor Statistics, estimates for 2005 showed that 75.6 million American workers were paid at hourly rates. Of those, 479,000 were reported as earning exactly $5.15, the prevailing federal minimum wage at the time. Another 1.4 million were reported as earning wages below the minimum. By occupational group, the highest proportion of workers earning at or below the federal minimum were in service occupations.

Who set the minimum wage?

Under the Fair Labor Standards Act (FLSA) of 1938, the federal government has authority to set the federal minimum wage. The minimum wage does not increase automatically. Congress must pass a bill which the President signs into law in order for the minimum wage to go up. For instance, the federal minimum wage for most employees in the U.S. was $5.85 per hour as of July 24, 2007. It becomes $6.55 per hour effective July 24, 2008 and $7.25 per hour effective July 24, 2009.

Is the minimum wage a good idea?

There is a debate among economists whether it is a good idea to raise the minimum wage. Some economists say it leads to lower employment. (See for example, Brian E. Kaufman, The Economics of Labor Markets, pp. 256-258. Kaufman points out:

• Teenagers are particularly vulnerable to losing jobs after the minimum wage increases.
• They may also lose valuable work experience that could have led to a full-time job.
• Many companies may turn full-time employees into part-time ones when wages are forced to increase.
• Employees may see their number of working hours decreased.
• Higher minimum wages may also lead to higher prices, shorter business hours and smaller profits.
• According to one Congressional study, jobs lost when the minimum wage increases are mainly entry-level. Increases in the minimum wage may harm the lifetime earnings prospects of lower-skilled workers. There are fewer jobs available. Competition is stiffer.

Proponents argue an increase in the minimum wage will have only a very minor impact on jobs. The proponents say it is important to raise the minimum wage in order to improve the lives of poor workers. They also contend:

• Wages need to increase to keep up with inflation.
• The minimum wage is worth less than it used to be due to inflation.
• Evidence of job loss is weak.
• Businesses and communities will benefit if the minimum wage increases, because low-wage workers spend their raises at local businesses.
• Higher wages increase consumer purchasing power, reduce employee turnover and raise productivity.
• It appears that increases in the minimum wage may lead to increased total income earned by adults (as opposed to teenagers). Adult women appear to benefit the most from increases in the minimum wage.
• Many advocates for higher minimum wages think the hourly pay rates should increase more than they have.

The Rev. Dr. Paul H. Sherry, national coordinator of the Let Justice Roll Living Wage Campaign and co-author of A Just Minimum Wage: Good for Workers, Business and Our Future concludes:

“Even at $7.25 an hour in 2009, the minimum wage, in inflation adjusted dollars, will be more than $2 below what it was in the year 1968 -- four decades ago.”

The debate over the minimum wage will no doubt continue. What is clear is that most employers would rather pay the very minimum they can to entry-level workers and employees want to earn more. It's up to Congress and the president to figure out what the minimum hourly salary should be for most workers.