Vickie Rozell

Director/Dramaturg, Author, Editor

America’s minimum wage movement started after the national railroad strikes in 1877, inspired by similar movements in Britain in the early 1870s. The first minimum wage law passed in Massachusetts in 1912, followed by 15 more states and the District of Columbia over the following decade.

The constitutionality of these laws was challenged and, in 1923, the Supreme Court declared them unconstitutional. In 1931, however, Congress passed the Davis-Bacon law establishing “prevailing wage” standards for construction companies on government contracts. It required them to pay what a majority of workers in the area received for the same job, but did not put a lower limit on that wage.

In 1937, the Supreme Court reversed its decision, paving the way for a federal minimum wage. Backed by President Franklin Roosevelt’s statement that “no business which depends for existence on paying less than living wages to its workers has any right to exist in this country,” it became a part of the Fair Labor Standards Act of 1938, which also outlawed child labor and set the maximum work week at 44 hours.

The purpose of the minimum wage was to prevent market forces from driving the wage of the least skilled below what Congress deemed to be minimal and to pay workers enough to maintain a “minimum standard of living necessary for health, efficiency, and general well-being...without substantially curtailing employment.”

But, it is not tied to inflation or the cost of living, so the minimum wage increases only when Congress acts. It reached its peak buying power in 1968, but its buying power has dropped 36% since then. Ronald Reagan, who believed it caused “more misery and unemployment than anything since the Great Depression,” did not raise it during his eight-year presidency.

He was not alone in his opposition. Earlier this year the idea of raising the minimum wage never made it to a vote in Congress. Opponents contend it not only reduces employment opportunities, but actually kills jobs, and principally benefits teenagers. Supporters counter that, as long as it isn’t excessive, it costs few, if any, jobs, helps working people escape poverty, largely benefits adult workers, and can help boost workers’ buying power and stimulate overall demand for goods.

More than 10% of America’s workforce attempts to live on minimum wage— approximately 11.8 million workers. Today’s federal minimum wage, set in 1997, is $5.15, but the law also states, “Tips may be considered as part of wages, but the employer must pay not less than $2.13 an hour in direct wages and make sure that the amount of tips received is enough to meet the remainder of the minimum wage.” However, eleven states and the District of Columbia currently have minimum wages higher than the federal level,including California where the minimum is $6.75. Also, in California, employers may not use tips as a credit toward the minimum wage. For reference, someone working 40 hours a week for 52 weeks a year at $5.15 an hour would make a yearly income of $10,712.

The federal poverty level for a family of four is $18,400 or $8.85 an hour for a single wage earner. To determine what families actually need, the Economic Policy Institute in Washington DC developed a “family budget” and in 1999 published numbers for six different family compositions for 400 communities across the nation. Their numbers try to estimate what it actually costs to provide a family with minimal needs including childcare, housing, transportation, and food. In San Jose, for example, they estimate it takes $47,520 to provide for a two parent, two child family.

A second approach to family needs is the “living wage.” The movement started in Baltimore when soup kitchen and shelter workers realized their clientele was increasingly full time workers with families. They began a grass roots campaign to bring working people out of poverty. Living wages vary from community to community, but, in general, they require private businesses that benefit from public money in the form of contracts, subsidies, tax abatements, etc., to pay their workers enough to bring a local family of three or four out of poverty. They currently range from $6.15/hour in New Orleans to $14.75/hour in Fairfax, CA. The idea is to keep taxpayers from paying twice: once for the business subsidy and again for food stamps and emergency and social services for those not making enough money on which to live.

The first living wage went into effect in July 1995 in Baltimore, establishing a wage of at least $6.10 per hour for anyone on a city contract. The same year, our own Santa Clara County required tax-abated businesses to pay at least $10/hour plus health insurance to permanent employees. Since then, 109 cities and counties have passed living wage ordinances and 119 more are considering them including San Mateo, Sacramento and Monterey. In the Bay Area, Santa Clara, Marin, and Santa Cruz Counties, as well as the cities of Watsonville, Richmond, Santa Cruz, Hayward, San Jose, Oakland, Berkeley, and San Francisco, and Stanford University all have living wage laws.

Nine states have passed preemptive laws barring cities from setting their own minimum wages, although some have been challenged in court and struck down. In California, however, Governor Gray Davis signed legislation in 2002 giving cities the right to enforce wage and labor standards on economic development projects.

Clearly, the living wage has its opponents and supporters. Opponents say such laws increase unemployment because companies reduce staff or move to cities with lower employment costs. Advocates counter that they stimulate local economies by raising wages and lowering dependence on public welfare, as well as offering business gains in lowered absenteeism and turnover, and increased morale.

In many places, living wage laws are being updated and expanded to cover greater numbers of people, including home healthcare and daycare workers. Locally, San Franciscans gathered signatures to put a city-wide minimum wage of $8.50 on the ballot this November. That amount does not match its current living wage, which is $10 for companies offering health insurance and $11.25 to those who don’t, but it shows the city’s interest in continuing to address wage issues in one of the most expensive cities in the country.

© Vickie Rozell, All Rights Reserved

Reproduction only with permission