Congress first enacted the Fair Labor Standards Act (FLSA) on June 25th, 1938.
President Franklin D. Roosevelt fought long and hard for it, and pushed lawmakers to vote for it even as Republicans and the United States Supreme Court fought vehemently against it. The FLSA banned overbearing childhood labor, set a federal minimum wage at 25 cents an hour, and set a maximum standard work week at 44 hours.
Minimum Wage Conflicts: A Brief History
The arguments over the minimum wage continue to ring through the halls of our congressional buildings and over our various media airways.
“Minimum wage will kill industry” shout voices from the right.
“Don’t let those rich, stingy, money-hungry, tycoons rob you of what is rightfully yours” shout voices from the left; or as FDR said the night before signing the bill: “Do not let any calamity-howling executive with an income of $1,000 a day, …tell you…that a wage of $11 a week is going to have a disastrous effect on all American industry.”
Minimum Wage or Minimum Standard of Living?
Before deciding on how much of a raise Congress should make to the current minimum wage, if any, one must decide on which side of history one falls. When FDR passed the “minimum wage” act in 1938 it was, as The Cornell Law School said, to create a “minimum standard of living.”
Without this, would we be similar to countries such as China or India where people (including children) work long days for minimal pay, taking their meager means home to their one-room shanty and praying for enough food and clean water to sustain the family for another day?
Most rational people would agree that we, in this great country, should have a “minimum standard of living.” The argument however comes in finding the best means by which to reach this lofty goal.
As previously mentioned, Congress set the minimum wage at 25 cents an hour when first enacting the FLSA. According to the Pew Research Center, adjusted to 2012 dollars, that equates to $3.46 an hour.
It is worth noting that the President and Congress were not attempting to grant everyone the same quality of life nor even giving every worker the same reward for their labors. They simply stated that there are certain living conditions that ought to be attainable for a person willing to put forth the effort.
What about Small Business?
The U.S. Small Business Administration partially defines a small business as: “…one that is independently owned and operated, is organized for profit, and is not dominant in its field.”
The number of employees the SBA categorizes as a small business varies depending on the industry, but it is generally accepted as being fewer than 500 workers. The SBA website also notes that “23 million small businesses in America account for 54% of all U.S. sales, small businesses provide 55% of all jobs, and 66% of all new jobs since the 1970’s.”
Considering this, we need to give serious thought to any possible impact raising the minimum wage might have on small businesses, which provide so much benefit to our economy.
Minimum Wage Increase: Effect on Small Business
Let’s face it, if Congress tells Wal-Mart that it has to raise the minimum amount its employees receive by a couple of dollars per hour, very few people will shed tears wondering about the financial difficulties of the Walton family.
However, if City Councilwoman Kshama Sawant, member of the Socialist Alternative political party, tells the lady running a meager cupcake shop in Seattle, Washington, that she must increase the salary of her few employees from the Washington State 2014 minimum of 9.32/hour to a new bar of $15 an hour, it could very well be the breaking point for her business.
As the inner-city Seattle workers wave their signs on the corners surrounded by union backers and cheered on by the fearless Kshama, someone should look out for the small businesses – businesses who will have to pay out 60% more cash from the register.
Survival of Small Business
The SBA Office of Advocacy states that the, “Bureau of Labor Statistics data on establishment age show that 49 percent of establishments survive 5 years or more; 34 percent survive 10 years or more; and 26 percent survive 15 years or more.”
Anyone who would play with a small business owner’s checkbook better read those last numbers twice, because as Congress forces those owners to give up larger percentages of their bottom line to salaries, more of those jobs will go from minimum wage to nonexistent.
Minimum Standard of Living
Looking back at the reason that Congress enacted the FLSA benefits the ongoing discussion. The reason was to establish a minimum standard of living.
What happens to that standard of living when, instead of getting a raise, workers lose their job entirely?