The aftermath of the Great Depression spurred lawmakers to investigate labor
practices. Industry support of strike breaking, labor spies, and violent attacks on workers prompted the passage of the Fair Labor Standards Act of 1938 (Axinn &
Stern, 2008). In addition to standardizing work hours and controlling child labor, the legislation set a minimum wage below which employers could not legally pay workers. The hourly rate in 1938 was set at 25 cents an hour; it had risen to
$4.25 an hour in 1991 (Social Security Administration, 1994). In 1996, President Clinton and Congress agreed to new legislation, the Small Business Protection Act
(P.L. 104-188), which raised the minimum wage to $4.75 per hour as of October 1, 1996, and to $5.15 per hour as of September 1, 1997. In 2006, the minimum wage was once again raised through legislative action to amend the Fair Labor Standards Act. The rate was scheduled to increase incrementally from 2007 to 2009, rising to $5.85 in 2007, $6.55 in 2008 and $7.25 in 2009.
Critics argue that the minimum wage is inadequate and has not kept pace with the cost of living. As shown in Box 9.7, the value of the minimum wage shrunk over the years. The 2006 rate of $5.15 per hour was the lowest in constant dollars since the 1950s. With the increases for 2008 and 2009, the minimum wage pro-vides a higher wage level, which should positively impact low wage earners.