History of Minimum Wage

Minimum wage is a hot topic in the United States and around the world. Today, most of the world’s countries have some type of minimum wage.

Why was minimum wage introduced in the first place? Which country had the world’s first minimum wage? Where is minimum wage going in the future? Today, we’re going to explain the history of minimum wage in the United States and around the world.

The World’s First Minimum Wage

New Zealand passed the world’s first national minimum wage laws way back in 1894.This minimum wage law covered all businesses and all industries across the entire country.

Australia (specifically, Victoria), was the second jurisdiction in the world to pass minimum wage laws. At first, Victoria’s minimum wage laws only covered certain industries: they only covered six industries that were notorious for paying low wages. By 1904, these minimum wage laws had grown to cover 150 industries. New South Wales and Western Australia had also passed their own minimum wage laws two years earlier in 1902.

Following the “minimum wage experiment” in Australia and New Zealand, other countries began considering enacting minimum wage in their own borders.

As a result, the UK passed its own set of minimum wage laws in 1909.

Minimum Wage in the United States

The U.S. federal minimum wage was first introduced by President Franklin D. Roosevelt in 1938 at 25 cents per hour (about $5 per hour in 2024 dollars). This was part of the Fair Labor Standards Act (FLSA), which also addressed youth employment standards, overtime pay, and more. Prior to this, Massachusetts had passed state-level minimum wage laws in 1912, but they only applied to women and children.

Since 1938, the federal minimum wage has been raised 22 times by 12 different presidents. Unlike some other countries, the U.S. minimum wage does not automatically rise with inflation; it requires congressional action to increase.

That minimum wage was introduced as part of the Fair Labor Standards Act (FLSA). The FLSA also covers things like youth employment standards, overtime pay, recordkeeping, and standards for government employees at the local, state, and federal levels.

Minimum Wage Increases Over the Years

October 1938 (FDR): $0.25/hr ($4.15/hr in 2014 dollars)

October 1939 (FDR): $0.30/hr ($5.05/hr)

October 1945 (Truman): $0.40/hr ($5.20/hr)

January 1950 (Truman): $0.75/hr ($7.29/hr)

March 1956 (Eisenhower): $1/hr ($8.61/hr)

September 1961 (Kennedy): $1.16/hr ($8.97/hr)

September 1963 (Kennedy): $1.25/hr ($9.56/hr)

February 1967 (Johnson): $1.40/hr ($9.80/hr)

February 1968 (Johnson): $1.60/hr ($10.75/hr)

May 1974 (Nixon): $2/hr ($9.49/hr)

January 1975 (Ford): $2.10/hr ($9.13/hr)

January 1976 (Ford): $2.30/hr ($9.47/hr)

January 1978 (Carter): $2.65 ($9.51/hr)

January 1979 (Carter): $2.90/hr ($9.34/hr)

January 1980 (Carter): $3.10/hr ($8.80/hr)

January 1981 (Carter): $3.35/hr ($8.62/hr)

April 1990 (Bush): $3.80/hr ($6.82/hr)

April 1991 (Bush): $4.25/hr ($7.30/hr)

October 1996 (Clinton): $4.75/hr ($7.08/hr)

September 1997 (Clinton): $5.15/hr ($7.51/hr)

July 2007 (GW Bush): $5.85/hr ($6.61/hr)

July 2008 (GW Bush): $6.55/hr ($7.12/hr)

July 2009 (Obama): $7.25/hr ($7.80/hr)

Above statistics come courtesy of Time.com.

As you can see, the minimum wage has increased in a linear fashion in terms of dollars, but in terms of real dollars, minimum wage has declined sharply from its highest point in February 1968.

Of course, the above rates only cover the federal minimum wage. Most states – and even some cities – have minimum wages significantly higher than the federal level.

San Francisco’s minimum wage, for example, rose to $12.25 on May 1, 2015. On July 1, 2018, minimum wage will rise once more to $15 per hour.

Washington has the nation’s highest minimum wage, clocking in at $9.47, while Oregon has a minimum wage of $9.25 in second place. California plans to raise its minimum wage to $10 per hour in 2016.

Minimum wage increases have been fairly steady since 1938. There have been two major breaks in minimum wage increases. The first large break took place between January 1981 and April 1990. Then, the second major break took place between September 1997 and July 2007, which was the longest period during which the minimum wage was not adjusted.

As of 2024, the federal minimum wage remains $7.25 per hour, unchanged since 2009. This has led to a significant decrease in its real value due to inflation.

Minimum Wage Averages At 60% of the Poverty Level

Another important thing to recognize about minimum wage is its relation to the poverty level. Using a work year of 50, 40-hour work weeks, we can get the annual earnings expected from a minimum wage worker.

In 1968, minimum wage as a percentage of the poverty level was at 99%. In other words, someone working a minimum wage job full-time for one year would be just 1% under the poverty line.

Since 1989, minimum wage as a percentage of the poverty level has averaged around 60%.

State and Local Minimum Wages

Many states and cities have set their minimum wages higher than the federal level. As of 2024:

• Washington has the highest state minimum wage at $16.50 per hour.
• California has a minimum wage of $15.50 per hour.
• Cities like Seattle and San Francisco have minimum wages exceeding $18 per hour.

Characteristics of Minimum Wage Workers

• To understand how minimum wage laws work in the United States (and also around the world), it helps to understand who, exactly, mime wage workers actually are. In 2013, the Bureau of Labor Statistics compiled data about the millions of minimum wage employees across the country:
• In 2013, approximately 1.5 million US workers aged 16 and over earned exactly the federal minimum wage of $7.25 per hour.
• Another 1.8 million US workers received wages below the federal minimum wage.
• Together, the above two groups make up 4% of all hourly paid workers in America
• In 1979, 13% of US wage workers received minimum wage. In 2012, that number had dropped to 5%. The 2013 figure of 4% is an all-time low.
• Half of all minimum wage workers are age 25 or younger. Approximately 20% of all hourly paid workers are age 25 or younger.
• 20% of employed teenagers earned minimum wage or less, compared to about 3% of workers over age 25.
• 62% of minimum wage workers are women and 38% were men. 5% of women in America earned minimum wage or less, compared to 3% of men.
• 64% of minimum wage workers are part-time workers while 36% are full-time workers.
• 47% of minimum wage workers were in the South while 24% were in the Mid-west, 18% were in the Northeast, and 12% were in the West.
• 64% of minimum wage workers are in service occupations, with 47% in food preparation and related serving professions.
• The two states with the highest percentage of hourly paid workers earning federal minimum wage or lower are Tennessee and Idaho (both at around 7%).
• The states with the lowest percentages of hourly paid workers earning minimum wage or lower are Oregon, California, and Washington, all of which are under 2%.
• In 2023, approximately 1.5 million U.S. workers earned exactly the federal minimum wage, and another 1.8 million earned less, making up about 4% of all hourly paid workers. The demographic profile shows:
  • Half of all minimum wage workers are under 25.
  • 62% are women.
  • Most are part-time workers, with significant representation in the service and food preparation industries.

Annual Earnings for Full-time Minimum Wage Workers

Full-time earnings for minimum wage earners are estimated based on a 40-hour work week and 50 working weeks per year.

The current federal minimum wage is $7.25 per hour, which leads to a full-time minimum wage of $15,080 per year.

In 2012, the poverty threshold for a single person was $11,945 and $22,283 for a family of four with two children.

An individual who works minimum wage for a full year will make enough to live above the poverty line. However, if that individual is the sole provider for a family of four, then that individual is only earning 65% of the federal poverty guideline according to research collected by the UC Davis Center for Poverty Research.

Minimum Wage Laws Around the World

New Zealand, Australia, and the United Kingdom were the first countries in the world to pass minimum wage laws.

Since then, most countries around the world have passed minimum wage laws of some form or another. Here’s a brief overview of minimum wage history in other nations around the world:

Australia

Australia was the second country in the world to pass minimum wage laws. After Victoria, New South Wales, and Western Australia passed laws in 1902 and 1904, Australia implemented a “basic wage” act with the Harvester Judgment of 1907.

The Harvester Judgment mandated a fair living wage for workers across the country, setting a precedent with “national ramifications” and “international significance”.

As of 2024, Australia maintains one of the highest minimum wages globally, at AUD 21.38 per hour.

Brazil

Brazil’s national minimum wage is adjusted every year by federal law. In 2012, minimum wage was R$ 622 ($173.57 USD) per month, which works out to R$ 20.7 ($5.78 USD) per day and R$ 2.59 ($0.72 USD) per hour.

Brazil’s national minimum wage is adjusted annually by federal law. As of 2024, the minimum wage is R$1,320 per month, which works out to approximately R$44 per day and R$5.50 per hour.

Canada

Canada’s minimum wage laws vary between provinces and territories, with no federal minimum wage law.

As of 2024, the minimum wage ranges from CAD 14.00 to CAD 16.50 per hour across the provinces. Alberta and Saskatchewan have a minimum wage of CAD 15.00 per hour, while Ontario’s minimum wage is CAD 16.55 per hour.

The territories have some of the highest minimum wages in the country, including CAD 16.77 per hour in the Yukon, CAD 16.05 per hour in the Northwest Territories, and CAD 16.00 per hour in Nunavut.

According to recent statistics from Stats Canada, the average full-time retail wage across Canada is CAD 21.00 per hour, and the average part-time retail wage is CAD 14.50 per hour.

Certain Canadian provinces also have differential minimum wages for specific professions; for instance, liquor servers often earn a lower minimum wage, while other professionals, such as homeworkers, may earn a higher minimum wage.

China

China’s history of minimum wage legislation is relatively recent. The country passed its first minimum wage law in 2004 as part of the Regulations on Enterprises Minimum Wage. China has both a monthly minimum wage for full-time workers and an hourly minimum wage for part-time workers.

Minimum wages vary widely throughout China due to differing standards of living across regions. For instance, as of 2024, the highest minimum wage is in Shanghai at RMB 2,690 per month and RMB 23 per hour, while lower wages are seen in less economically developed regions. The wide variation ensures that wages are adjusted to local economic conditions.

European Union

As of 2024, 22 of the 27 member states in the EU have national minimum wages.

Certain countries (Sweden, Finland, Denmark, Austria, Italy, and Cyprus) have no national minimum wage laws but rely on unions, trade groups, and employer groups to set minimum earnings through collective bargaining.

Other countries, like Germany, implemented minimum wage laws relatively recently, with Germany enacting its first national minimum wage law in 2015.

France

France introduced its first minimum wage law in 1950 as part of the Interprofessional Guaranteed Minimum Wage Act. This act initially established two minimum wages: one for the Paris region and another for the rest of the country.

As of 2024, France’s national minimum wage (SMIC) is €1,747.20 per month.

France updates its minimum wage every January. The increase cannot be lower than the rate of inflation for the previous year. In recent years, the minimum wage increase has generally aligned with inflation rates, ensuring that the purchasing power of workers is maintained.

Germany

Many people are surprised to learn that Germany did not have a minimum wage law until January 1, 2015. Germany implemented its national minimum wage law as part of the MiLoG – Mindestlohngesetz.

This law requires Germany to update its minimum wage every other year based on the recommendations of a Minimum Wage Commission. As of 2024, Germany’s minimum wage is set at €12.00 per hour.

Ireland

Ireland’s minimum wage was introduced in 2000. The country has unique minimum wage laws, with certain reductions applying to different workers, particularly young workers.

As of 2024, the minimum wage in Ireland is €11.30 per hour. However, certain groups receive minimum wage reductions:

• 30% reduction for all employees under 18.
• 20% reduction for employees over 18 in their first year of employment in any job since they turned 18.
• 10% reduction for employees over 18 in their second year of employment in any job since they turned 18.

The minimum wage can be further reduced by up to €7.73 per day if lodgings or food are provided as part of the job.

Trainees also receive a lower minimum wage during training, ranging from a 25% reduction for the first third of the course to a 10% reduction on the last third of the course.

Japan

Japan’s minimum wage varies according to the industry and region. Industries and regions both have their unique minimum wages. In situations where one minimum wage is higher than the other, the higher minimum wage of the two will apply.

As of 2024, Japan’s minimum wage ranges from ¥930 to ¥1,100 (approximately $6.50 to $7.70 USD) per hour, depending on the region. The highest minimum wage is in Tokyo, reflecting the higher cost of living in the capital.

New Zealand

New Zealand was the world’s first country to pass a minimum wage law and continues to have strong minimum wage regulations. New Zealand enacted its minimum wage law nationwide with the Industrial Conciliation and Arbitration Act of 1894.

As of 2024, New Zealand has a countrywide minimum wage of NZD 22.70 per hour. There is no minimum wage for employees under 16 years of age, and the starting-out wage for employees aged 16 and 17, as well as those in training, is NZD 18.16 per hour.

United Kingdom

The United Kingdom often claims to have had the world’s first local minimum wage laws. Starting in 1524, certain towns in the UK began regulating local wage levels.

More recently, the country established the National Minimum Wage (NMW) in 1999 at a rate of £3.60 per hour for workers aged 22 and older.

As of 2024, the minimum wage in the UK is as follows:

• £10.42 per hour for workers aged 23 and over.
• £10.18 per hour for workers aged 21 to 22.
• £7.49 per hour for workers aged 18 to 20.
• £5.28 per hour for workers under age 18.
• Apprentices have their own minimum wage of £5.28 per hour, which applies to those aged 16 to 18 and apprentices aged 19 or over who are in their first year.

OECD Rankings of Minimum Wage in Countries Around the World

The Organization for Economic Co-Operation and Development (OECD) recently released a chart showing minimum wage laws around the world in terms of US dollars per hour after taxes at purchasing power parities:

As of 2024, Luxembourg leads the way with the world’s highest minimum wage, followed closely by Australia and France. To view a complete list of minimum wage laws in countries around the world, you can refer to the OECD’s official reports or visit Wikipedia for a comprehensive summary.

Countries with No Minimum Wage Laws