Order Code RL33754
Minimum Wage in the 110th Congress
December 19, 2006
William G. Whittaker
Specialist in Labor Economics
Domestic Social Policy Division

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Minimum Wage in the 110th Congress
Summary
In 1938, following decades of discussion and research in academic and policy
circles, Congress adopted the Fair Labor Standards Act (FLSA). It quickly became
the primary federal statute in the fields of minimum wage, overtime pay, child labor,
industrial work at home, sweatshops, and related areas.
The act is a living statute, variously modified through the years as Congress has
set forth new requirements for American workers and their employers. Where the
minimum wage is specifically concerned, the act has undergone major modification
on eight different occasions: in 1949, 1955, 1961, 1966, 1974, 1977, 1989, and
1996. Under current law, the minimum wage is $5.15 per hour.
The FLSA mandates that not less than the minimum wage be paid to most
workers — and it requires that the employer pay it. There are other elements of the
law that qualify its mandate. The employer, for example, may pay only a portion of
the income of a tipped employee ($2.13 per hour) — so long as the total income
reaches the federal minimum rate. Under some conditions, a youth worker may
receive less than the minimum wage. Some employees of small businesses, for
example, may be entirely exempt from the federal minimum wage. Persons with
disabilities can be paid a wage commensurate with their productivity — but with no
floor or minimum standard.
It has now been a decade (i.e., 1996) since the minimum wage was last adjusted
for inflation. The issue absorbed a considerable amount of attention during the 109th
Congress — but no new legislation was adopted. Some 27 states (including the
District of Columbia) have adopted a minimum wage in excess of the federal rate.
If the 110th Congress takes up the minimum wage question, there may be a
number of issues to be addressed — for example, the tip credit provision, the matter
of a youth sub-minimum, indexation of the wage rate, and the small business
exemption.
This report examines the background and context of the minimum wage, and
the demographics of the minimum wage (low-wage) workforce. It will be updated
as conditions warrant.

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Contents
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Logistics of Application and Targeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Adequacy of the Minimum Wage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
To Whom Should Not Less Than the Minimum Wage Be Paid? . . . . . . . . . 5
Who Should Pay the Minimum Wage? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
The Minimum Wage v. the EITC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Small Businesses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
General Demographics of the Minimum Wage Workforce . . . . . . . . . . . . . . . . . . 7
Who Are the Minimum Wage Workers? . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
The Size of the Minimum Wage Workforce . . . . . . . . . . . . . . . . . . . . . . . . . 9
Some Collateral Issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Minimum Wage: the Issue of Indexing . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
The Youth Sub-Minimum Wage
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
The ‘Tip Credit’ Provision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Legislative Linkage: Moving a ‘Clean Bill’ . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
List of Tables
Table 1. Federal Minimum Wage Rates, 1938-2006 . . . . . . . . . . . . . . . . . . . . . . 2
Table 2. Status of State Minimum Wage Rate (as of November 2006)a . . . . . . . 3
Table 3. Poverty Guidelines,
All States and the District of Columbia (2006) . . . . . . . . . . . . . . . . . . . . . . . 5
Table 4. Number and Percent of Workers
Paid Hourly at the Minimum Wage or Less . . . . . . . . . . . . . . . . . . . . . . . . . 10

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Minimum Wage in the 110th Congress
The Fair Labor Standards Act (FLSA) of 1938, as amended, is the primary
federal statute in the area of minimum wages and certain related labor standards
issues (e.g., overtime pay and child labor). At present, the general minimum wage
(although there are exceptions) is $5.15 per hour.
Introduction
The FLSA is an umbrella statute that deals with a series of labor standards.
These fall, roughly, into three categories: first, minimum wage (Section 6 of the act);
second, overtime pay (Section 7); and third, child labor (Section 12). Section 3 of
the act defines the concepts used throughout the statute and, thereby, limits or
qualifies its wage/hour and child labor provisions.1
Traditionally, Congress has mandated broad general minimum wage coverage,
and then has specified select categories of workers who are not to be covered by the
act. Section 13 provides a body of exemptions (or special treatment) for segments
of industry and/or groups of workers. In these areas, the Secretary of Labor has been
granted wide interpretive powers — though these have not been without limit.

The minimum wage aspects of the FLSA have undergone changes on numerous
occasions: in 1949, 1955, 1961, 1966, 1974, 1977, 1989, and 1996. (See Table 1.)
The act began in a limited way, encompassing labor standards essentially for
industrial workers. In 1938, the minimum wage was 25 cents an hour; the work week
was 44 hours. With amendment, coverage provisions of the act were expanded
while, over the years, the rate was raised to $5.15 per hour, with a 40-hour week. For
more than 40 hours worked in a week, overtime pay (time-and-a-half) would have to
be paid.
Since the 1970s, coverage patterns seem to have leveled off, with few new
workers, by classification, having been brought under the act. Moreover, in real
terms, the value of the minimum wage rate has been on a downward slope. The
minimum wage reached its peak in 1968 at $l.60 an hour and, then, generally
declined in terms of constant dollars. To equal its 1968 peak in purchasing power,
it would currently need to be $9.19 an hour. Going into the 110th Congress, the most
1 This report focuses narrowly upon the federal minimum wage. Other related issues are
considered separately in other CRS products.

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CRS-2
frequently suggested wage level, among proponents of the minimum wage, appears
to be $7.25 per hour — set to go into effect two years and 60 days after enactment.2
Table 1. Federal Minimum Wage Rates, 1938-2006
Public law
Effective date
Rate
P.L. 75-718 (Enacted June 25, 1938)
October 1938
$0.25
October 1939
0.30
October 1945
0.40
P.L. 81-393 (Enacted October 26, 1949)
January 1950
0.75
P.L. 84-381 (Enacted August 12, 1955)
March 1956
1.00
P.L. 87-30 (Enacted May 5, 1961)
September 1961
1.15
September 1963
1.25
P.L. 89-601 (Enacted September 23, 1966)
February 1967
1.40
February 1968
1.60
P.L. 93-259 (Enacted April 8, 1974)
May 1974
2.00
January 1975
2.10
January 1976
2.30
P.L. 95-151 (Enacted November 1, 1977)
January 1978
2.65
January 1979
2.90
January 1980
3.10
January 1981
3.35
P.L. 101-157 (Enacted November 17, 1989)
April 1990
3.80
April 1991
4.25
P.L. 104-188 (Enacted August 20, 1996)
October 1996
4.75
September 1997
5.15
Fair labor standards issues are handled jointly by the states and the federal
government. The states took up the question early in the 20th century, enacting a
variety of measures dealing with minimum wages and related subjects — and states
have continued to do so. Various states currently have minimum wage rates (and
other standards) that are higher than those established by the federal FLSA, with
Washington state at the top with a state minimum wage standard of $7.63. (See
Table 2.) Speaking generally, where there is overlapping jurisdiction, the higher
standard (the one most favorable to workers) takes precedent — and where
applicable, the federal statute supercedes lower standards of the states. Some aspects
of fair labor standards (notably, rest breaks and lunch breaks) have traditionally been
treated as state matters.
2 See CRS RS20040, Inflation and the Real Minimum Wage: Fact Sheet, by Brian W.
Cashell.

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CRS-3
Under federal law, special treatment may be afforded to certain youth workers,
to tipped employees, and to persons with a disability. Where there are state statutes
that also deal with these matters (and deal with them in a manner more favorable to
workers), the state standard would normally prevail. The federal FLSA provides a
floor, as some perceive it, for fairness in the workplace. The states, where conditions
permit, are allowed to go beyond the federal statute and enact higher standards.
Individuals are not allowed to bargain away provisions of the federal law.
Table 2. Status of State Minimum Wage Rate
(as of November 2006)a
Jurisdictions with minimum wage rates higher than the federal FLSA
Alaska ($7.15)
Hawaii ($6.75)
New Jersey ($6.15)
Arkansas ($6.25)b
Illinois ($6.50)
New York ($6.75)
Arizona ($6.75)b
Maine ($6.75)b
Ohio ($6.85)b
California ($6.75)
Maryland ($6.15)
Oregon ($7.50)
Colorado ($6.85)b
Massachusetts ($6.75)
Pennsylvania ($6.25)b
Connecticut ($7.40)
Minnesota ($6.15)
Rhode Island ($7.10)
Delaware ($6.65)b
Missouri ($6.50)b
Vermont ($7.25)
District of Columbia ($7.00)
Montana ($6.15)b
Washington ($7.63)
Florida ($6.40)
Nevada ($6.15)b
Wisconsin ($5.70)
Jurisdictions with minimum wage rates at the same level as the federal FLSA ($5.15)
Georgia
Nebraska
South Dakota
Guam
New Hampshire
Texas
Idaho
New Mexico
Utah
Indiana
North Carolina
Virginia
Iowa
North Dakota
West Virginiad
Kentucky
Oklahoma
Wyoming
Michigan
Puerto Rico
Jurisdictions with minimum wage rates less than the federal FLSA
American Samoac
Kansas ($2.65)
Virgin Islands ($4.65)
(administered)
Jurisdictions with no state minimum wage requirement
Alabama Mississippi
Tennessee
Louisiana
South Carolina
Source: U.S. Department of Labor, Wage and Hour Division, Employment Standards Administration,
[http://www.dol.gov/esa/minwage/america.htm], visited Apr. 3, 2006.
a. Coverage patterns vary from one jurisdiction to another. Some jurisdictions have a structured
minimum wage system (i.e., different rates for various industries, sizes of firms, etc.). The table
refers to the highest standard applicable under the law of the jurisdiction. In some jurisdictions,
the rate (but not necessarily the pattern of coverage) is linked to the federal FLSA.
b. States that have adjusted their minimum wage rate to go into effect on Jan. 1, 2007. In some
instances, increases are scheduled to go into effect at a later time — in which case, they are not
listed.
c. For American Samoa, the minimum wage rate is set administratively, and varies from one industry
to another at rates lower than the federal minimum wage.
d. West Virginia has raised its minimum wage to $8.85 per hour, but coverage under the state statute
is very limited.

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CRS-4
Of the state standards, many run roughly parallel to the FLSA, but they need not
do so — and often do not. Even with this more or less dual coverage, not all workers
are covered by wage/hour standards — though most are. Coverage patterns
(including patterns of exemption) need to be taken into account when considering the
potential impact of changes in federal wage/hour law. Because of variations in
coverage (with extensive administrative rules governing implementation and
enforcement of wage/hour law), it may be perilous to suggest who is (or is not)
covered by the requirements of statute without careful assessment.
Logistics of Application and Targeting
Adequacy of the Minimum Wage
In the academic literature and political debate, people often tend to speak of the
minimum wage as a livable wage or a decent wage. But, it is not clear that such
concepts are always interpreted in a consistent manner.
In statute, the minimum wage is reasonably clearly defined: $5.15 per hour for
most (but not all) covered workers. However, the FLSA does not translate that dollar
amount into social or human terms. For example, some have questioned as to
whether $5.15 an hour is actually a “living wage.” The livability of the minimum
wage, in some measure, depends upon the context in which it is earned: whether in
urban or rural areas or the section of the country. It may also be dependent upon the
earner’s role within the family and the number of persons in a family unit.
Under current law, a minimum wage worker employed full-time and full-year
(40 hours per week for 52 weeks at $5.15) would earn $10,712. A full-time worker,
under age 20 and paid at the statutorily permissible sub-minimum rate ($4.25 per
hour), could earn $8,840 — for the same hours of work and for performing the same
duties.3
Since much minimum wage work is also part-time and/or part-year, estimating
actual annual income for minimum wage workers can be problematic. Some
workers, earning the minimum wage, find, either through their own designs (school,
sports, family responsibilities) or through the absence of alternative work, that their
year-long income may fall substantially below an annualized figure. While some
minimum wage work may provide a fringe benefit component, such fringes are often
not available until a worker has been employed for a specific period of time: a period
that many minimum wage workers may not reach. Under present law, the concept
of a minimum wage is limited to a cash wage.
As set forth in Table 3, one sees the level of income regarded as a poverty
threshold, at various family sizes, for eligibility for certain federal assistance
programs. The extent to which the poverty guidelines are realistic can be, and have
3 After 90 consecutive days with an individual employer, however, a qualifying youth
employee would ordinarily see his or her wage increased to $5.15 an hour — unless he or
she breaks the consecutive days rule.

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CRS-5
been, debated. The guidelines have no direct connection with the federal minimum
wage, but they are frequently cited in discussions of minimum wage and are used by
some analysts as a measure of the adequacy of the wage floor.4 If the estimated
annual income ($10,712) for a minimum wage worker is compared to the poverty
guidelines in Table 3, the income is just above the poverty line for a family of one
and below the poverty line for families of any other size.
Table 3. Poverty Guidelines,
All States and the District of Columbia (2006)
Poverty guideline
Size of family unit
States and District of Columbia
Alaska
Hawaii
1
$9,800
$12,250
$11,270
2
13,200
16,500
15,180
3
16,600
20,750
19,090
4
20,000
25,000
23,000
5
23,400
29,250
26,910
6
26,800
33,500
30,820
7
30,200
37,750
34,730
8
33,600
42,000
38,640
Source: U.S. Department of Health and Human Services, “Annual Update of the HHS Poverty
Guidelines,” 71 Federal Register 3848-3849, Jan. 24, 2006.
Note: For family units with more than eight members, add $3,400 for each additional member. For
Alaska, add $4,250, and for Hawaii, add $3,910. Poverty guidelines are not defined for Puerto Rico,
the Virgin Islands, American Samoa, Guam, the Commonwealth of the Northern Mariana Islands, or
other U.S.-related insular jurisdictions.
To Whom Should Not Less Than the Minimum Wage Be Paid?
FLSA minimum wage requirements have always been subject to exceptions:
e.g., the tipped worker, the youth worker, the person with disabilities. In some cases,
an exception has been made on the basis of the type of work performed: for example,
in the early days of the act, agricultural labor — and, even now, certain small
business establishments. (See discussion below.)
A collateral question involves the issue of need — which, it would seem, also
involves a variety of socio-economic questions. If the worker is engaged primarily
for pin money, then his or her need may be less extreme than a fellow worker who
supports a parent or is saving for tuition at the local university. But, here, one may
4 The table is provided as a reference. Minimum wages are not a federal assistance program
but, rather, are payment for performance that comes directly from the employer.

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CRS-6
want to ask: Should compensation be based upon the needs of the worker, their
productivity, or simply based upon the demand for services.5
Who Should Pay the Minimum Wage?
How the minimum wage worker is defined, and the intent of Congress in
establishing/maintaining a federal minimum wage, are critical to consideration of by
whom the minimum wage ought to be paid.
If one thinks of the minimum wage as an anti-poverty measure, then it is more
likely to be considered as needs-based and focused on moving the worker out of
poverty. Conversely, if the minimum wage is productivity based, but fails to provide
income sufficient to maintain an individual (or his dependents), then some
supplemental means may be necessary through which to increase the worker’s
income. But, by whom should this supplemental income be paid?
The Minimum Wage v. the EITC. In 1975, Congress established the Earned
Income Tax Credit (EITC). As amended, it provides a tax credit to certain low-wage
workers. To qualify, a family must reside in the United States — unless absent for
military duty. While oriented toward persons with children, some childless adults
may also qualify. The program can also be complex. Historically, it has been subject
to over-claims of benefits — and, on occasion, to under-claims as well.6
Proponents of the EITC argue that it affords firms that operate on a slim margin
an opportunity to remain in business and to provide employment, even if at low
wages. However, the EITC is conditional upon the low earnings of the worker, not
the marginal profitability of the employer. It makes no distinction between
businesses (employers) that are struggling economically and those that are doing
well. Some view the EITC as a supplement to the minimum wage, predicated upon
the needs of a worker rather than upon his productivity; others, as a substitute for
future minimum wage increases. Employer/business acceptance of the EITC and
hostility toward the minimum wage may reflect an economic reality: with the EITC,
the taxpayer subsidizes the employer’s wage costs; with the minimum wage, those
costs fall directly upon the employer or businessperson and indirectly upon the
consumer.
5 There are other options available to the employer. A youth, under 20 years of age, can be
paid a youth sub-minimum rate ($4.25 an hour) through certain periods. Or, if the youth is
involved in tipped employment, his earnings from the employer can be reduced to $2.13 an
hour. If he or she is employed in a small business (defined under the act), he may not be
subject to the act at all.
6 See CRS Report RL31768, The Earned Income Tax Credit (EITC): An Overview, and CRS
Report RS21477, The Earned Income Tax Credit (EITC): Policy and Legislative Issues,
both by Christine Scott.

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CRS-7
Small Businesses. The FLSA’s small business exemption allows certain
qualifying employers to be exempt from the FLSA minimum wage requirements. In
general (though the exemption is complex), this could include firms “whose annual
gross volume of business done” is less than $500,000, though individual employees
of such firms, engaged in interstate commerce, may be covered individually.
Over time, there has been pressure from the small business community to
expand this exemption. Proponents have argued that small firms may be adversely
affected — or even driven out of business — by having to pay their workers the
minimum wage. However, since there is no test of profitability, the exemption is
enjoyed by prosperous and struggling businesses alike.
General Demographics
of the Minimum Wage Workforce
Precise data on the minimum wage workforce is difficult to develop. Not
everyone is covered by the minimum wage. Some low-wage workers may be paid
at or below the federal minimum wage; because of exemptions built into the statute,
they may not be affected by changes Congress may make — their pay continuing at
whatever level. Conversely, some employers may choose to pay the statutory
minimum because it is a convenient and generally recognized basic rate — even
where workers are not subject to the act.
In addition, persons employed at or below the federal minimum wage may
change jobs (and economic status) with some frequency, moving into and out of
work in response to non-work-related factors: school, pregnancy or, perhaps, a
change in marital status. Some workers may be multiple jobholders.7
Not all workers covered under the FLSA are covered in precisely the same way.
Thus, we may be speaking of the low-wage worker rather than the minimum wage
worker covered under the FLSA.
Who Are the Minimum Wage Workers?
In 2005, about 1.882 million workers, 16 years of age and up, paid hourly rates,
earned at or below the federal minimum wage of $5.15 per hour. About 479,000
7 Surveys of income may collect information only with respect to a worker’s main job.

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CRS-8
were paid at the minimum rate; about 1.403 million were paid below the minimum.8
In absolute numbers, according to data provided by the Bureau of Labor
Statistics (BLS), persons working at or below the minimum are about as likely to be
adults as youth (see the discussion below), more likely to be female than male, and
more likely to be white than of another race. Further, persons working at or below
the minimum wage are more likely to be working part-time than full-time.
Critics of the minimum wage often point to a minimum wage worker who is a
young person, working for “pin money” and being supported by a suburban
middle-class family. Conversely, proponents of a higher minimum often view the
low-wage workforce as largely adult and, thus, suggestive of more serious needs.
Statistics can be used to support either interpretation. If, for example, using
2005 data, one defines a youth as someone between 16 and 19 years of age, then
about 26.1% of workers, paid hourly at or below the minimum wage, are youths and
about 73.9% are adults. If one’s definition is more expansive, defining youth as
between 16 and 24 years of age, then about 53.3% of persons earning at or below the
minimum wage are youths and 46.7% are adults. Thus, even with an expansive
definition of youth (16 to 24 years of age), close to half of the minimum wage/sub-
minimum wage workforce is 25 years of age or over.
Among hourly workers, paid at or below the general minimum rate, about
65.6% were women and about 34.4% men. Although the data are imprecise because
of definitional questions with respect to race and ethnicity, it is clear that the majority
of workers earning at or below the federal minimum wage are white.9
In 2005, about 59.8% of workers at and below the minimum wage were
employed on a part-time basis; about 39.9% were full-time. Some 71.1% of part-
time workers were female. (Some statistical variation may result from a small
number of multiple jobholders.) Low-wage employment may tend to be less stable
than more highly compensated employment, with workers experiencing involuntary
joblessness or moving in and out of the labor force because of discouragement,
quitting to seek better wages and working conditions, or for other personal reasons.
8 About 75.6 million workers, of a civilian noninstitutional workforce of around 150
million, were paid hourly rates in 2005. In transmitting numbers of minimum wage workers,
the Bureau of Labor Statistics states, “It should be noted that it is not possible to determine
whether workers surveyed in the CPS [Current Population Survey, upon which BLS relies]
are actually covered by the Fair Labor Standards Act or by individual State minimum wage
laws. Thus, some workers being reported as earning an hourly wage of $5.15 may not, in
fact, be covered by Federal or State minimum wage laws; at the same time, the presence of
a sizable number of workers with wages below the prevailing Federal minimum wage does
not necessarily indicate violations of the Fair Labor Standards Act or applicable State laws,
because of the numerous exemptions to these wage statutes.” (Emphasis added.)
9 BLS divides the low-wage workforce into “white,” “black,” and “Asian” within the context
of race and provides a separate classification of “Hispanic or Latino.” Concerning this
classification, see Mary Bowler, et al., “Revisions to the Current Population Survey
Effective January 2003,” Employment and Earnings, Feb. 2003, pp. 4-7, and 14.

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CRS-9
Full-time employment is not synonymous with full-year employment. Estimating
the annual income of minimum wage workers may be problematic since many full-
time minimum wage workers may not be employed on a full-year basis. There may
be periods when they are not working (or not working at the minimum wage).
One may recall that the minimum wage is a cash wage. Fringe benefits earned
by a minimum wage worker are likely to be less than those of more highly paid
persons, widening the gap between the economic well-being of the minimum wage
worker and others.10
The Size of the Minimum Wage Workforce
In 2005, as noted above, there were roughly 1.882 million workers, paid at
hourly rates, who earned at or below the federal minimum wage of $5.15 per hour.
They constitute about 2.5% of hourly paid workers from an aggregate of about 75.6
million hourly paid workers. This figure constitutes the smallest percentage of
persons earning at or below the minimum wage in the United States in recent times.11
(See Table 4.) The numerical decline doesn’t necessarily indicate improved
economic status for the workers but may suggest a progressive movement up from
the statutory (fixed) minimum wage in response to inflationary pressures.
The decline in the real value of the minimum wage (in policy terms) would
appear to have several implications. If the statutory minimum wage remains at its
current level while the general wage level rises because of inflation and/or
productivity improvements, the number of minimum wage workers could reasonably
be expected to experience a further decline. Fewer and fewer people could be
expected to be employed at the low wage level — even though their economic
condition may not have improved. This would not mean that the low-wage
workforce had shrunk: merely that an increasingly large number of persons would be
employed at wages above the declining real value of the statutorily defined
minimum.
10 Data, here, have been drawn from unpublished sources provided by the U.S. Bureau of
Labor Statistics. The bureau has used information drawn from the Current Population
Survey (CPS), provided by the U.S. Census Bureau.
11 The early history of the FLSA was marked by a relatively sparse coverage which, through
the 1960s and 1970s, was generally broadened giving the act, roughly, its present form.

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CRS-10
Table 4. Number and Percent of Workers
Paid Hourly at the Minimum Wage or Less
Workers paid hourly rates
Total paid the minimum wage or less
Year
Number in thousands
As a percentage of hourly paid workers
1979*
6,913
13.4
1980*
7,773
15.1
1981*
7,824
15.1
1982
6,496
12.8
1983
6,338
12.2
1984
5,963
11.0
1985
5,538
9.9
1986
5,060
8.8
1987
4,697
7.9
1988
3,927
6.5
1989
3,162
5.1
1990*
3,228
5.1
1991*
5,283
8.4
1992
4,921
7.7
1993
4,332
6.7
1994
4,127
6.2
1995
3,655
5.3
1996*
3,724
5.4
1997*
4,754
6.7
1998
4,427
6.2
1999
3,340
4.6
2000
2,710
3.7
2001
2,238
3.1
2002
2,168
3.0
2003
2,100
2.9
2004
2,003
2.7
2005
1,882
2.5
Source: United States Bureau of Labor Statistics.
* Years in which a legislated change in the federal minimum wage took effect.

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Under this scenario, the federal minimum wage would, soon, be effectively
repealed by attrition. In that context, an argument might be made that since so few
would actually be employed at rates at or below the statutory minimum (its relative
value aside), the problem of the working poor could be handled through other more
narrowly targeted means — possibly through transfers of income rather than through
strictly work-related earnings. This may run counter to public policy that income
from work is generally preferable to entitlements financed through taxation.
Finally, as noted on Table 2, some state minimum wage rates have moved in to
fill the gap of a declining federal minimum wage. However, such considerations
have been uneven. What impact such state regulations may have is yet to be
assessed.
Some Collateral Issues
Minimum Wage: the Issue of Indexing

Varying through the years, the minimum wage reached its inflation-adjusted
peak in 1968, and has since generally declined in value. A recent CRS analysis
suggests that the minimum wage would need to be raised to $9.19 an hour (October
2006) to reach its February 1968 level.12
During the initial debates on wage/hour legislation in 1937-1938, it was
suggested that a reasonable rate (for that period) would have been 40 cents an hour.
Under prolonged objections from southern industrialists, the figure was dropped to
25 cents per hour. Thus, Congress avoided a regional option and southern
industrialists avoided stricter standards.
With the minimum wage under the FLSA set in statute, it remains at a fixed
level, without regard for general economic changes, until Congress alters it through
legislation. Failure of the minimum wage to maintain parity with the cost of living
has been a continuing concern. Some have suggested that the minimum wage might
usefully be indexed to reflect changes in the cost of living (or shifts in other
economic variables), thus providing a more regular pattern of increase. On the other
hand, some contend that there really isn’t a need for a federal minimum wage at all.
Indexation was discussed during the early 20th century as an approach to wage
stability. It was last a subject of extensive congressional debate during the 1970s
and in the context of the 1988-89 FLSA amendments. It has been rejected with
Congress seeming to prefer direct control of legislative action.13 Several states have
experimented with indexation: e.g., Oregon, Washington, Vermont, and Florida (with
12 CRS Report RS20040, Inflation and the Real Minimum Wage: Fact Sheet, by Brian W.
Cashell.
13 See H.R. 2812 (107th Congress), introduced by Representative Bernard Sanders (I-VT),
which discusses indexation.

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others currently in the process of such experimentation).14 No federal action has been
taken — though the issue remains alive.
The Youth Sub-Minimum Wage
During the 1960s and 1970s (as retail and service industries, major employers
of youth workers, came under the FLSA), the issue of a youth sub-minimum wage
became active. Proponents of the concept urged that youth workers be paid at a rate
lower than the standard minimum wage, regardless of experience or the quality of
work they performed. In each case and after heated debate, the issue was defeated.
When George H. W. Bush became President in 1989, he agreed to sign a new
minimum wage increase if, inter alia, it included a general sub-minimum wage for
workers beginning new employment. A first bill was vetoed; but, following extended
discussions, Congress adopted a new bill with a sub-minimum wage for youth.15
The youth program, affecting persons under 20 years of age, was divided into
two parts. The first part covered a 90-day period with no conditions beyond a
willingness of the worker to accept the work. The second part was more complex,
mandating training through a second 90-day period. After 180 days, the regular
minimum would be required. The program was experimental: from April 1990 to
April 1993. As it turned out, almost no one used the program and it was not
extended.16
In 1996, during the Clinton Administration, the minimum wage came up as a
floor amendment to the “Small Business Job Protection Act of 1996” — essentially
a tax bill but with the sub-minimum wage as one of its provisions. The measure was
passed with the sub-minimum wage in place (P.L. 104-188).17 As enacted, the bill
allows an employer to pay a youth (under 20 years of age) a sub-minimum wage of
$4.25 per hour through the first 90 consecutive days of employment with an
employer.
Having set forth a youth sub-minimum rate, Congress then raised the general
minimum rate to $5.15 an hour — but without linking the youth worker option to the
new standard. Unless Congress takes specific action to increase the youth rate, it will
14 See CRS Report RL30927, The Federal Minimum Wage: The Issue of Indexation, by
Gerald Mayer.
15 See “Minimum-Wage Impasse Finally Ended,” Congressional Quarterly: Almanac, 101st
Congress, 1st Session, 1989. Congressional Quarterly Inc., 1990, pp. 333-340.
16 P.L. 101-157, Section 6: training wage. See U.S. Department of Labor, Employment
Standards Administration, Wage and Hour Division, Report to the Congress on the Training
Wage Provisions of the Fair Labor Standard Act Amendments of 1989 from the Secretary
of Labor, Robert B. Reich, Apr. 21, 1993, 24 pp.; and Kevin G. Salwen, “Subminimum
Wage of $3.62 an Hour Is on Deathbed but Draws Few Mourners,” The Wall Street Journal,
Mar. 12, 1993, p. A4.
17 On President Clinton’s views, see Public Papers of the Presidents of the United States:
William J. Clinton, Book II, 1996. Washington: United States Government Printing Office,
1998, p. 1317. In some states, this arrangement (still on the books) may not be permissible.

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remain at $4.25 per hour — even if the general minimum wage is raised.
Legislatively, the youth rate is a separate issue from the general wage floor.18
The ‘Tip Credit’ Provision
Minimum wage coverage was expanded, during the 1960s and 1970s, to provide
protection for retail and service workers. Some of these workers were “tipped” and
their employers argued, successfully, that they (the employers) ought not to be
responsible for paying such tipped employees a full minimum wage. Through the
years, the level of the so-called tip credit has varied.
Under the 1996 FLSA amendments, Congress provided a tip credit of 50% of
the then standard minimum wage $4.25 (or $2.13 an hour). So long as an employee
received tip income on a regular basis sufficient to reach the statutory minimum
wage, when combined with an employer contribution of $2.13 per hour, the employer
had no further minimum wage obligation. (The credit deals only with the amount not
to be paid by the employer of a tipped employee.) The tipped employee would
receive a full minimum wage: either through tips or, where tips were insufficient, in
combined tips and cash. Then, Congress increased the federal minimum wage, in
steps, from $4.25 to $5.15 per hour.19
When Congress increased the federal minimum, in steps, to $5.15 per hour, the
threshold income for tipped employees remained at $2.13 per hour. The minimum
cash wage ($5.15 per hour) and the tip credit provision ($2.13 per hour) are not
linked. They do not increase in tandem. Tipped employees do receive the minimum
wage albeit in a combination of tips and cash wages.
Legislative Linkage: Moving a ‘Clean Bill’
The original FLSA proposals (1937-1938) were in the form of freestanding
legislation: focusing narrowly upon wage/hour and child labor protections. As a
procedural matter, the next seven rounds of minimum wage increases (1949, 1955,
1961, 1966, 1974, 1977, and 1989), though each provided various changes in the
FLSA itself, took the form of freestanding legislation. Non-FLSA or non-wage/hour
issues were not addressed as part of the package with minimum wage and related
concerns.
In 1996, minimum wage and related FLSA amendments were brought to the
House floor as an amendment to a broad package of industry-related proposals: the
“Small Business Job Protection Act of 1996.” Indeed, the FLSA was a relatively
small part of the overall package. While some components of the wage/hour portion
18 See “Congress Clears Wage Increase With Tax Break for Business,” Congressional
Quarterly: Almanac, 104thCongress, 2nd Session, 1996. Congressional Quarterly Inc., 1997,
pp. 7-3 to 7-9.
19 For a discussion of the tip credit, see CRS Report RL33348, The Tip Credit Provisions
of the Fair Labor Standards Act, by William G. Whittaker.

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of the bill had been the subject of hearings during the 104th Congress, others had not
been — nor had the body of FLSA-related provisions been considered by committee
as a unit. During the spring and summer of 1996, the joint minimum wage/tax
revision measure moved through Congress, and was signed by President Clinton on
August 20, 1996 (P.L. 104-188).20
When minimum wage legislation came up during the 106th Congress in 1999-
2000, it largely followed the 1996 pattern. It combined tax revisions that were
beneficial to the business community with changes in the FLSA — including an
increase in the minimum wage.21 By this point, the two issues — a minimum wage
increase for low-paid workers and tax breaks for employers (whether or not they
employed workers paid at the minimum wage) — had become linked in policy terms:
i.e., that the former could not go forward, it seemed, without the latter.
Linkage, although a tradition only since the 104th Congress (1996) and used
only during that one occasion, has appeared to become a frequent focus of the
minimum wage debate during succeeding Congresses. “We came to the table,”
observed Representative Rick Lazio (R-NY), “with the realization that a wage
increase was fair but we also came to the table with a desire to protect the small
business people who will end up bearing the direct burden of any wage increase that
we pass here today.”22 Senator Don Nickles (R-OK) concluded, looking ahead to the
107th Congress: “It kind of fits, frankly, to do it as a part of the tax package next
year.”23 Some may argue that, in practice, linkage is a matter of fairness and equity
with respect to those who are called upon to fund an increased minimum wage.
Not all observers concur. Amy Borrus, writing in Business Week, termed the
tax/minimum wage bill “a monument to legislative logrolling,” stating that “its
veneer of virtue made it the perfect vehicle for a tax-break extravaganza.”24
Representative Charles Rangel (D-NY) seemed to sum up the views of critics of
linkage: “We should not be forced to bribe the wealthy in our society in order to
20 See CRS Issue Brief IB95091, The Minimum Wage: An Overview of Issues Before the
104th Congress, by William G. Whittaker (out of print, but available from the author). See
also Alissa J. Rubin, “Congress Clears Wage Increase with Tax Breaks for Business,”
Congressional Quarterly, Aug. 3, 1996, pp. 2175-2177; and Julie Kosterlitz, “A Bounty For
Business,” National Journal, Oct. 26, 1996, pp. 2289-2292.
21 In the Senate, minimum wage increases had been included in H.R. 833, as amended, the
“Bankruptcy Reform Act of 1999;” in the House, it was part of H.R. 3081, the “Small
Business Tax Fairness Act of 2000.” Though each chamber passed a version of the
minimum wage legislation, the proposals died at the close of the 106th Congress. See CRS
Report RL30690, Minimum Wage and Related Issues Before the 106th Congress: A Status
Report, by William G. Whittaker (out of print, but available from the author).
22 Congressional Record, Mar. 9, 2000, p. H860.
23 Bureau of National Affairs, Daily Labor Report, Dec. 6, 2000, p. A12.
24 Amy Borrus, “Why Business Isn’t Bucking This Minimum-Wage Hike,” Business Week,
Nov. 1, 1999, p. 55. Borrus added, “And that’s how lobbyists managed to squeeze
maximum benefits for their clients out of the minimum-wage measure.”

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secure a simple dollar more per hour for the poorest working American families.”25
Thus, some may argue, that proposals to raise the minimum wage have become, in
practice, a vehicle for legislating economic benefits for employers and others in
higher income brackets.26
The concept of linkage, though utilized only once (in 1996), continues as an
active theme in the public policy discourse. It is unclear whether the theme will
remain active as the 110th Congress convenes.
There has been speculation that some “Senate Democrats are willing to add tax
sweeteners to a minimum wage bill” in order to secure the requisite number of votes
for passage.27 However, Senator Edward Kennedy (D-MA) has reportedly indicated
that “he wants the Senate to pass a minimum wage bill ... without additional
provisions....” Senator Kennedy was quoted as saying: “It is going to be clean.”28
In the House, Representative George Miller (D-CA) reportedly held a similar view.29
25 Bureau of National Affairs, Daily Labor Report, Mar. 9, 2000, p. A8.
26 In general, see Bureau of National Affairs, Daily Labor Report, Apr. 25, 2001, pp. A6-A7;
and Juliet Eilperin, “Business Seeks Tax Breaks in Wage Bill: Pay Raise Is Viewed as Best
Chance at Cuts,” The Washington Post, May 14, 2001, pp. A1 and A12. In an article,
“Business Coalition Holds Firm for Bush Tax Cut Package,” Congress Daily, Apr. 19, 2001,
reporters Stephen Norton and Charlie Mitchell state that trade association and business
supporters of the Bush Administration’s tax package have shown “remarkable discipline in
resisting the urge to press for inclusion of their own pet items” in the tax package, “mindful
of assurances from GOP leaders that there will be a ‘second bite at the apple’ for business-
specific provisions next year or even later this year — possibly paired with a bill to raise the
minimum wage.”
27 Bureau of National Affairs, Daily Labor Report, Nov. 15, 2006, p. A12.
28 Bureau of National Affairs, Daily Labor Report, Nov. 17, 2006, p. A6.
29 Bureau of National Affairs, Daily Labor Report, Dec. 13, 2006, p. A1.

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