Defining A Minimum Wage

Initially upheld by a supreme court decision in 1938 the national minimum wage has grown to ensure an increasing number of U.S. workers are paid no less than the given nationally established value. This value has increased over time but by the end of July this year the U.S. minimum wage will have remained at its current value of $7.25 an hour for over a decade. As the current wage stagnates there are also workers within the U.S. that are still able to be legally paid less than the current $7.25 an hour. These workers have a somewhat truer definition for their minimum wage: whatever they can get their employer to consistently pay them.

In most U.S. states the legal minimum wage is determined by the statewide minimum wage. These 29 states individually determined that the national minimum wage is unsuitable for their workers, and legally determined that the statewide minimum wage would be higher than the national minimum. For these states it would be illegal for a worker to be paid the national minimum wage as it would be less than the state’s legal minimum wage. For many of these states there are more than a simple singular minimum wage. The legal minimum wage is determined by total weekly hours and/or employer statistics. Like the federal minimum wage many states have determined that any hours worked beyond a predetermined weekly value will result in a higher required minimum wage. At the same time, it is common for states to have minimum wages determined by gross employer receipts or total number of employees in the given business. Beyond these values it is also common for employees that frequently receive tips to be able to be paid an exceedingly low hourly wage. As a result, it can be difficult for workers to know exactly what wage they are entitled to earn. This difficulty in defining the minimum wage can lead to laborers working for less than the minimum wage they were meant to legally receive.

While it is true that every U.S. citizen has the right to be paid the federally mandated minimum hourly wage, some Americans forgo this right and are paid an illegal wage. This wage is unknown and untaxed by the U.S. government and so it can dip below the legal minimum wage. For these low wage employees, the U.S. minimum wage is not the least they will make. Instead, their employer will save money by paying them somewhat less than minimum wage and in turn the employee can save money by not reporting their income to be taxed or garnished. Currently within the U.S. it is believed that nearly 2 million U.S. citizens are paid less than the national minimum. While such low wages are illegal it does demonstrate that the U.S. government can not define the lowest possible wage when it comes to illegal employment. At the same time there remains an even greater number of laborers within the U.S. earning less than minimum wage.

As of the end of 2019 the current number of illegal immigrants within the U.S. is estimated to be as high as 12 million. Due to their coming to the United States illegally these people are frequently unable to use the justice system to support a minimum wage for their labor. Julie Beck in her article “Illegal immigrants can sue for wages for work actually performed,” for publisher InsideCounsel notes that “The defendants tried to combat the FLSA with the Immigration Reform Control Act (IRCA), arguing that because it’s illegal under the IRCA for an employer to hire an undocumented worker and because the employees are working illegally, their wages can’t be protected by the FLSA.” With this prevailing legal opposition, it is common for these worker to be forced to work for a wage at less than the current U.S. minimum. For these workers the minimum wage they receive is dictated by what their employer is willing to pay and demand for the job at that pay rate. In regions with few illegal workers the demand for their labor is high relative to the supply so they can make close to minimum wage. In areas with significant numbers of illegal worker, employers may be able to leverage these employees into working for cripplingly low pay. The minimum wage for these lowest paid U.S. workers, the minimum wage is simply the lowest wage anyone is willing to work for.

Prior to the 1938 decision to enforce a national minimum wage, employers could legally pay their workers as much as they deemed fit. Wages could be seen as an agreement between the business owner and the given employee. If the employee believed their pay rate undercut their value to the company, they could threaten to cease working for their current wage. At the same time employers could deny wage raises if they believed they could hire a new employee for the same or lower wage. In the Journal of Economic Behavior and Organization article “Employment and distribution effects of the minimum wage,” authors Fabián Slonimczyk and Peter Skott claim that “In this setting, one solution is for firms to use the threat of dismissal as a way to elicit effort.” Therefore, the minimum wage received by these workers was largely determined by the individual. A worker with exceptional skill and experience could demand a high wage or threaten to leave for better employment elsewhere. Unfortunately, most workers are unskilled and had been exploited, especially in the latter half of the 19th century and beginning of the 20th century. As a result, Americans agreed on a minimum wage to protect some of the more vulnerable workers in the country. The minimum wage went from being the lowest amount you and your employer could agree on, to a legally defined minimum value.

Over time there have be numerous definitions for what determines a minimum wage. Even solely within the U.S. the exact definition has changed constantly over time. Many would consider the minimum wage to be the lowest amount allowed by the government. Despite this, millions of workers in the U.S. earn less than the government mandated amount. As a result, it is clear that the minimum wage is something other than what the government decides. For many low wage earners the minimum wage is and always has been what they and their employer can agree supply and demand has already dictated for their job.

References

Illegal immigrants can sue for wages for work actually performed. (2013). Inside Counsel24(267), 52–53. 

Slonimczyk, F., & Skott, P. (2010). Employment and Distribution Effects of the Minimum WageJournal of Economic Behavior & Organization84(1), 245–264. doi: 10.2139/ssrn.1596005 

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