A Short History of the Minimum Wage Fight

Matthew Cooper

The country had had enough. In 1936, after the Supreme Court had struck down President Roosevelt’s attempt to impose a federal minimum wage, the country was livid. For years, the Court had been striking down minimum-wage laws. The first state minimum-wage law was enacted in 1912 in Massachusetts, and by the end of the 1920s, 17 state and local minimum wage laws had been passed. Five were repealed. Seven were found unconstitutional, and the rest were enforced selectively under judicial threat.

Even the Republican Party was fed up with a Court that saw an expansive right of contract in the Fifth Amendment that couldn’t be violated. When Republicans met in Cleveland to choose a presidential nominee, they came up with a platform that offered full-throated support for such laws and, in a rebuke to the Court, declared that the authority came from the Constitution. But more liberal parts of the party—yes, there were such parts—wanted a stronger statement still. The party’s presidential nominee, Gov. Alf Landon of Kansas, dramatically dispatched a telegram to the convention taking things further, vowing to amend the Constitution to protect minimum-wage laws if the Supreme Court didn’t see fit to change its ways.

The melodrama turned out to be unnecessary. Landon got trounced. The Supreme Court got the hint: It reversed its previous rulings on the minimum-wage laws. By 1938, there was a federal minimum wage.

The lessons of history are an important reminder. First, the minimum wage is a relatively new part of the nation’s—and the world’s—economic landscape. George Washington would not have recognized the term, nor would Abe Lincoln. The idea of a just-wage theorem, between an individual and an employer, had dominated for centuries. It was only in the late-19th century that Catholics, Fabian socialists, labor unions, and others argued that the poor really were in no position to negotiate a just wage and that one had to be established.

It was a seismic shift both ideologically and economically. The minimum wage mattered much more in Depression-era America when far more of the country was at the bottom of the income scale, before the vast expansion of the middle class. It matters today, too, of course—see my Atlantic colleague Jordan Weissmann here and my National Journal colleague Catherine Hollander here and here.

But the debate among economists takes place within a pretty narrow spectrum. Does a minimum wage slightly hurt employment, or not? Does it raise wages much at higher income levels, or not? No one with a straight face can argue that it could pummel the economy or dramatically reduce income inequality. It’s a modest economic measure but a big political one—a proxy for larger discussions of freedom and justice even as its economic significance diminishes.

To understand its resonance, you have to go back to the 19th century. If you think of the minimum wage that was something born from Dickensian London, you’d be wrong—but not too far off. The minimum wage came later than you might think (1894), and not in Lloyd George’s England but in agrarian New Zealand. The Australians adopted it a few years later, and it didn’t migrate to Britain and the Northern Hemisphere until 1909. Mexico had a national minimum wage in 1931, eight years before the United States. France didn’t have a national minimum wage until 1950.  

Today minimum-wage laws exist in 90 percent of member states of the international labor relations organization. It’s a staple of global economic policy, although it obviously varies greatly from nation to nation in its relation to average wages. Setting such a wage is also often done by sector rather than across the board. And it’s hardly a fast path to higher living standards. Sudan’s strongman ruler just doubled the country’s minimum wage. Still, at least the principle is pretty universal now.

For something that’s gone from unheard-of to ubiquitous, the minimum wage remains remarkably controversial. Each time a president proposes raising it, as President Obama did this week, a certain Kabuki ritual repeats itself as economists haul out data to show that it’s either constructive or destructive, and each party reverts to its talking points. Still, there was at least a consensus between World War II and the President Reagan years that the minimum wage ought to go up—just as there was a consensus on things like a heavy hand in federal regulation of banking, telecommunications, energy, and transportation.

The consensus was clear in 1954, when President Eisenhower considered the first hike in the minimum wage of his presidency. About 12 years ago, The Wall Street Journal noted that Eisenhower's Cabinet debated how much to raise it, with 50 cents seeming too low and a dollar too high. (Vice President Richard Nixon liked the idea of a dollar.) Ike settled on 90 cents and was pilloried by the Chamber of Commerce for such a hike, while George Meany at the AFL-CIO called it “grossly inadequate.” When Nixon became president, he also presided over minimum-wage hikes that raised the ire of the Left and the Right, especially his proposal for a special youth wage, which never flew.

The 1980s saw a reversion to pre-Alf Landon ideology. When Reagan stood firm against minimum-wage hikes, it marked a change in the GOP stance. The minimum wage didn’t rise under his presidency, and he called it the cause of "more misery and unemployment than anything since the Great Depression." Reagan’s more moderate side has gotten consideration in recent years—raising the debt ceiling, supporting gun control, forging arms-control deals—as contrasted with the tea party. But on this issue, Reagan was dug in, and in a way the fight has never gone back to the way it was between 1938 and 1980 when hikes were just assumed and the only debate was over how much. Now, it’s as though the whole fundamental question of government intervention in wage floors gets relitigated at every mention of an adjustment.

Sure, it’s not Alf Landon’s day. No one is left arguing that states and the federal government have no right to establish a minimum wage—although someone should ask Rand Paul. But the minimum wage's fundamental wisdom is still a point of contention even if hiking it remains overwhelmingly popular here and around the globe.