Order Code RL30993
CRS Report for Congress
Received through the CRS Web
The Fair Labor Standards Act:
Minimum Wage in the 108th Congress
Updated February 7, 2005
William G. Whittaker
Specialist in Labor Economics
Domestic Social Policy Division
Congressional Research Service ˜ The Library of Congress
The Fair Labor Standards Act:
Minimum Wage in the 108th Congress
The Fair Labor Standards Act (FLSA) is the primary federal statute in the fields
of minimum wages, overtime pay, and child labor. In the 108th Congress, legislation
in a variety of forms has been introduced that would modify the act in each of these
areas and that would extend the act’s minimum wage protections to workers in the
Commonwealth of the Northern Mariana Islands (CNMI).
This report deals only with the minimum wage aspects of the act. Other
components of the FLSA are considered in separate CRS products.
In 1938, following several decades of discussion and research in academic and
policy circles, Congress adopted the FLSA. The act is a living statute which
Congress has variously modified through the years in response to altered public
policy and workplace realities. It has undergone major amendment on eight separate
occasions, in addition to periodic less extensive adjustments.
Currently, the general minimum wage is $5.15 an hour. There are, however, a
number of specialized minima: for example, a sub-minimum wage for youth, special
calculation of the rate as it affects tipped employees, a reduced wage structure for
persons with disabilities, etc. Early in the 108th Congress, concern with the wage
aspects of the act seem to have focused, largely, upon an increase in the general rate
— usually to be instituted through a series of phased step increases. Several bills
would extend federal minimum wage protection to the CNMI — currently covered
only by insular wage standards lower than the federal rate. See, for example: H.R.
936, H.R. 965, H.R. 4256, S. 20, S. 224, S. 448, and S. 2370. A minimum wage
amendment was also proposed with respect to H.R. 4, the Welfare Reform
Section 13(a) of the FLSA defines a series of exemptions from the act’s
otherwise applicable minimum wage and overtime pay requirements. Several
proposals of the 108th Congress would amend Section 13(a) to alter the wage/hour
treatment of specialized groups of workers: e.g., licensed funeral directors and
embalmers, certain engineering consultants, computer services workers, retail sales
workers who deal in fireworks and who are employed on a seasonal basis — with
other changes in coverage. In these areas, see H.R. 1996, H.R. 2065, H.R. 2145,
H.R. 2263, H.R. 4396, S. 237, S. 292, and S. 495. Minimum wage standards for
inmate workers in Federal Prison Industries is treated in H.R. 1829.
Ultimately, none of the legislation dealing with the Federal minimum wage was
taken up during the 108th Congress. There are no time constraints built into the act.
Congress is not required to take up wage/hour legislation at all — though social and
economic pressure (and other policy concerns) may render such action appropriate.
Most Recent Developments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Minimum Wage: Background and Comment . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
General Policy Concerning the Minimum Wage . . . . . . . . . . . . . . . . . . . . . . 4
The Socio-Economic Context of Minimum Wage . . . . . . . . . . . . . . . . 6
What Do We Mean by Minimum Wage? . . . . . . . . . . . . . . . . . . . . . . . . 7
How Minimal is Minimum? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
To Whom Should Not Less Than the Minimum Wage Be Paid? . . . . . 8
Who Should Pay the Minimum Wage? . . . . . . . . . . . . . . . . . . . . . . . . 10
General Demographics of the Minimum Wage Workforce . . . . . . . . . . . . . 11
Who Are the Minimum Wage Workers? . . . . . . . . . . . . . . . . . . . . . . . 12
The Size of the Minimum Wage Workforce . . . . . . . . . . . . . . . . . . . . 13
Commonwealth of the Northern Mariana Islands (CNMI) . . . . . . . . . 15
Minimum Wage Legislation in the 108th Congress . . . . . . . . . . . . . . . . . . . . . . . 16
Establishing a Tradition? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Current Minimum Wage-Related Initiatives . . . . . . . . . . . . . . . . . . . . . . . . 18
To Raise the Minimum Wage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
To Expand Exemptions from Minimum Wage Protection . . . . . . . . . 19
More Specialized Wage Related Proposals . . . . . . . . . . . . . . . . . . . . . . . . . 20
Camp Safety . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Prison Industries Labor Standards . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Some Collateral Issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
The Youth Sub-Minimum Wage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
The ‘Tip Credit’ Provision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
The Computer Services Professional Rate . . . . . . . . . . . . . . . . . . . . . . 22
The ‘Small Business’ Exemption . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
The Case of American Samoa . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Welfare Reform Reauthorization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Legislating a Living Wage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
List of Tables
Table 1. Federal Minimum Wage Rates, 1938-2002 . . . . . . . . . . . . . . . . . . . . . . 3
Table 2. Status of State Minimum Wage Rates . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Table 3. Poverty Guidelines, All States and the District of Columbia (2004) . . . 8
Table 4. Number and Percent of Workers Paid Hourly at the Minimum
Wage or Less . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
The Fair Labor Standards Act:
Minimum Wage in the 108th Congress
Most Recent Developments
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.1 Various bills dealing with the federal
minimum wage have been introduced in the 108th Congress. However, no action
beyond referral to committee was taken on these proposals. In each instance, the
proposals died at the close of the 108th Congress.
There are no expiration dates embedded within the FLSA, so Congress is under
no obligation to act on amendments to the statute — though the declining value of
the minimum wage could provide an impetus for action. Were Congress to take up
minimum wage legislation, it could focus narrowly upon an increase of the base rate:
raising the floor above the current $5.15 level. But, it could act more expansively,
dealing with a variety of minimum wage-related issues and, perhaps, revising certain
other aspects of the act such as its overtime pay or child labor provisions.
Some have urged that wage/hour amendment be coupled with tax and other
benefits for business. While such linkage seems to have become popular during
recent years, there is no structural reason to proceed in that manner. Broadening the
scope of FLSA legislation (dealing with minimum wages, overtime pay, child labor,
and related issues in one comprehensive bill) could reduce the likelihood that any
measure in this area would ultimately be adopted; but, conversely, depending upon
the overall content of such a package, it could expand the appeal of a wage/hour and
child labor initiative.
Child labor restriction for certain Amish youngsters was modified during the 108th
Congress. See CRS Report RL31501, Child Labor in America: History, Policy, and
Legislative Issues, by William G. Whittaker.
The FLSA is an umbrella statute that deals with a series of labor standards
issues. 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. Traditionally, Congress
has mandated broad general coverage and, then, specified select groups or categories
of workers who are not to be protected by the act. Section 13 provides a body of
exemptions (or special treatment) for segments of industry and/or groups of workers.
While the act is often treated as an integrated unit, it can also be approached in
terms of its three general component parts — and of individual sub-units of each.
This report focuses narrowly upon the federal minimum wage. Other related issues
(e.g., child labor and overtime pay) are considered separately in other CRS products.2
Under the FLSA, Congress has established a basic minimum wage (now $5.15
per hour) that must be paid to most covered workers. However, the level of the wage
floor may vary from one group of workers to another with various exceptions and
sub-minima built into the statute. Thus, the issue may be which minimum wage rate
is applicable and to which workers it should be applied.3
Through the past century, the minimum wage (alone or with other wage/hour
issues) has sparked partisan comment and assertion. The issue has not been solely
whether there is an appropriate federal role in wage/hour regulation (that continues
to be debated) but what that role ought to be. At what level should the minimum
wage be set? Should it be indexed? How broad should minimum wage coverage be?
And, if there are exemptions (which there are), upon what foundation should they
rest? For example, should small firms be able to pay their workers at a lower rate
than large firms? Should wage rates be productivity-based or respond to the needs
and personal lifestyles of the workers involved? Might the wage floor depend upon
an employee’s nonwork status: e.g., whether the worker is the sole earner in a
family, a secondary earner, or a student? As under current law, should the rate vary
See, for example CRS Report RL31501, Child Labor In America: History, Policy and
Legislative Issues; CRS Report RL31875, Compensatory Time vs. Cash Wages: Amending
the Fair Labor Standards Act?; and CRS Report RL32088, The Fair Labor Standards Act:
A Historical Sketch of the Overtime Pay Requirements of Section 13(a)(1), all by William
G. Whittaker. See also CRS Report 98-278, The Gender Wage Gap and Pay Equity: Is
Comparable Worth the Next Step?, by Linda Levine; and CRS Report RL31867, Pay Equity
Legislation in the 108th Congress, by Levine and Charles V. Dale.
It is important to recall: First. Many states have state-mandated minimum wage standards.
These may be roughly parallel to the federal FLSA: they need not be — and, often, are not.
Second. Not all workers are covered under the FLSA — or under state wage/hour standards.
These coverage patterns (including patterns of exemption) need to be taken into account
when considering the potential impact of changes in federal wage/hour law. Third. 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. Too many variables impact coverage to allow easy assessment.
with the age of the worker — even where the work performed and productivity level
among workers may be comparable?4
Minimum Wage: Background and Comment
When the FLSA was enacted in 1938, its coverage was largely limited to
industrial workers engaged in interstate commerce. Retail, service and agricultural
workers, generally, were not protected — nor were persons employed by state and
local governments. On eight separate occasions through the years (see Table 1), the
act has undergone general amendment, which has normally included language
dealing with overtime pay and/or child labor as well as with modification of the wage
floor. On numerous occasions, the FLSA has been subject to more narrowly focused
single purpose amendment.
Table 1. Federal Minimum Wage Rates, 1938-2002
P.L. 75-718 (Enacted June 25,1938)
P.L. 81-393 (Enacted October 26,1949)
P.L. 84-381 (Enacted August 12, 1955)
P.L. 87-30 (Enacted May 5, 1961)
P.L. 89-601 (Enacted September 23, 1966)
P.L. 93-259 (Enacted April 8, 1974)
P.L. 95-151 (Enacted November 1, 1977)
P.L. 101-157 (Enacted November 17, 1989)
P.L. 104-188 (Enacted August 20, 1996)
Under current law, there are special rates for youth workers, for full-time students who
work no more than part-time, for disabled persons, and for others. That these rates (except
nominally for the disabled) are related to productivity may not be entirely clear.
Over the years, amendment of the FLSA has resulted in broadening coverage
and adjusting the act to realities of the contemporary workplace. With the original
enactment, Congress was feeling its way: learning how to deal with constitutional
impediments to federal involvement in private sector labor standards regulation.
Coverage patterns during the 1940s and 1950s remained relatively flat with only
minor adjustment. Then in the 1960s and 1970s, there was substantial expansion of
coverage with intermittent increases in the level of the minimum wage. Since 1977,
change has been restricted largely to increases in the basic wage rate and
modification of existing FLSA provisions. Amendment has often been contentious,
conditioned by economic considerations and political compromise.5 Generally,
expansion of coverage has been opposed by employers and supported by workers —
reflecting, in the short term, who benefits and upon whom the costs fall.
The basic federal minimum wage rate is statutory and will remain at its current
level until Congress takes specific action to alter it. Again, Congress has no specific
obligation to revisit the minimum wage and thus may not do so. Over the long term,
congressional inaction could have the effect of repeal through attrition. Fewer and
fewer workers would likely earn the minimum wage (its value having been reduced
through the impact of inflation) and the requirement, eventually, could become a
dead letter. Conversely, Congress could index the minimum rate, assuring a constant
rate without further congressional intervention.
Some states have a minimum wage requirement that is higher than the FLSA
requirement. Where that is the case, the higher standard normally prevails. (See
Table 2.) In addition, the minimum wage for American Samoa is set through a
commission appointed by the U.S. Secretary of Labor and has been, generally, lower
than the otherwise applicable federal rate under the FLSA. In the Commonwealth of
the Northern Mariana Islands (CNMI), the insular government currently exercises
authority with respect to wage standards — an issue of ongoing contention.
General Policy Concerning the Minimum Wage
For the past century, the minimum wage has been a focus of public policy
discussion. Advocates for each side in the debate — academicians (notably,
economists), policy analysts, and persons from the media — have argued with great
vigor. Although the literature is extensive, the result is by no means definitive.
FLSA historian Willis Nordlund, writing in the late 1990s, observes:
... one would presume that enough was known about the program to formulate
a defensible strategy depicting effects of program change. This is not the case.
There is no more agreement about these effects today than there was at the
program’s inception [with passage of the FLSA] fifty years ago.6
See Congressional Record, July 30, 1937, p. 7876. More generally, see CRS Report 89568, The Fair Labor Standards Act: Analysis of Economic Issues in the Debates of 19371938, by William G. Whittaker (out of print; available from the author: 7-7759).
Willis J. Norlund, The Quest for a Living Wage: The History of the Federal Minimum
Wage Program (Westport, Conn.: Greenwood Press, 1997), p. xvii.
The available data and analysis, it would seem, are fragile and often contradictory.
Still, critics and proponents of a minimum wage floor continue to praise and critique
the concept in unusually strong and, often, unqualified terms.
Few questions in the ongoing debate are new — but they continue to be raised
and debated — with little agreement even upon basic concepts. Many of the
assumptions in the debate are implicit — not fully enunciated and perhaps not even
recognized. Minimum wage debate, perhaps more than other economic issues, may
have a psychological component, reflecting community values and fears. There
continues to be an outpouring of minimum wage literature, some of it analytical but
much of it purely political advocacy. Some of the major areas of concern are
Table 2. Status of State Minimum Wage Rates
Jurisdictions with minimum wage rates higher than the federal FLSA
New York ($6.00)
Rhode Island ($6.75)
District of Columbia
Jurisdictions with minimum wage rates at the same level as the federal FLSA
Jurisdictions with minimum wage rates less than the federal FLSA
Virgin Islands ($4.65)
Jurisdictions with no state minimum wage requirement
Source: U.S. Department of Labor, Wage and Hour Division, Employment Standards Administration,
[http://www.dol.gov/esa/minwage/america.htm], Sept. 24, 2003.
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. 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.
The Socio-Economic Context of Minimum Wage. The minimum wage
is often presented as a mechanism through which to assist the working poor: usually
non-union workers with few skills and little bargaining power.7 Some advocates of
a minimum wage view it not only as socially useful but, also, as economically useful:
promoting socio-economic equity, providing a floor under wages, stimulating
demand for goods and services, expanding employment and, with other measures,
bolstering the general economy.8
Some critics of the minimum wage, conversely, have viewed it as an inefficient
approach to income redistribution — and an unjustified intrusion into the operation
of the free market. They contend that minimum wage increases have an inflationary
impact, restructure employment patterns, and impose an unnecessary burden upon
employers and consumers. Such critics often view the wage floor as economically
harmful, especially for the unskilled and new workforce entrants who, they say, may
be priced out of the job market.
Economists and policy analysts continue to disagree about the impact of changes
in the minimum wage and about what the effects of the minimum wage have been.
The issues are both socio-economic and ideological and have changed little since the
debates of 1937-1938.9
Concerning early interest in the minimum wage, see Lawrence B. Glickman, A Living
Wage: American Workers and the Making of Consumer Society (Ithaca, Cornell University
Press, 1997); George E. Paulsen, A Living Wage for the Forgotten Man: The Quest for Fair
Labor Standards, 1933-1941 (Selinsgrove, Pa., Susquehanna University Press, 1996); and
David A. Moss, Socializing Security: Progressive-Era Economists and the Origins of
American Social Policy (Cambridge, Harvard University Press, l996). In her study,
Civilizing Capitalism: The National Consumers’ League, Women’s Activism, and Labor
Standards in the New Deal Era (Chapel Hill: The University of North Carolina Press,
2000), Landon R. Y. Storrs discusses both the origins of minimum wage legislation and the
socio-economic/reform context from which the federal legislation emerged.
In his radio address of May 24, 2003, President George W. Bush stated (though in the
context of tax reductions): “When people have extra take-home pay, there’s greater demand
for goods and services. And employers will need more workers to meet that demand.”
See, for example “New Minimum Wage Research: A Symposium,” Industrial and Labor
Relations Review, Oct. 1992, pp. 3-99; “The Minimum Wage: Some New Evidence,”
Journal of Labor Research, winter 2002, pp. 1-67; David Card and Alan B. Krueger, Myth
and Measurement: The New Economics of the Minimum Wage (Princeton: Princeton
University Press, 1995); and Oren M. Levin-Waldman, The Case of the Minimum Wage:
Competing Policy Models (Albany: State University of New York Press, 2001).
What Do We Mean by Minimum Wage? When people speak of a
minimum wage, they often speak in terms of “a livable wage” or “a decent wage” or
“a fair wage” or suggest that the working poor ought to be able to live “in reasonable
comfort” and enjoy economic “dignity.” Early in the century, it was common to
speak of a “living, family, saving wage.” But, when individuals use such terms, is
there any reasonable assurance of a consistent meaning?
In statute, the minimum wage is clearly defined: $5.15 per hour for most (but
not all) covered workers. The FLSA does not translate that dollar amount into social
or human terms. Is $5.15 an hour actually a “livable wage” — and, livable by what
standards? Does “reasonable comfort,” for example, mean safe and adequate shelter
with modest amenities? How are “safe” and “adequate” and “modest” defined?
Some may view “minimum” as the lowest wage an individual will accept (a
“reservation wage”) or the highest amount an employer is willing to pay. Some urge
repeal of a legislated wage floor altogether — and define the “minimum” as whatever
rates are set by supply and demand in a free market economy: i.e., a “market wage.”
How Minimal is Minimum? Minimum wage debates contain frequent
references to the “poverty level” for a family of two or three or more (see Table 3).
If Congress intends the minimum wage to be set at a level high enough to move a
family out of poverty (as some suggest), then some measurement of family size and
of total household income is necessary in assessing the adequacy of the FLSA
minima. If, instead, the minimum wage is productivity-based (i.e., resting upon the
contribution of the worker), then family size and non-wage income (support, for
example, from other household members or through sources of income not related
to the individual’s employment) would seem irrelevant.10
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. After 90 consecutive days with an individual employer, however, his/her
sub-minimum rate would ordinarily increase to $5.15 an hour.11 These amounts are
prior to any deductions and exclusive of any fringe benefits. Table 3 sets forth the
level of earnings regarded as a poverty threshold, at various family sizes, for
Some may argue that basing a wage rate on the productivity of the worker may be, itself,
misleading since in large measure worker productivity is based upon the skills of
management and upon management-controlled elements such as work organization,
availability of appropriate equipment, morale, ambience, and other similar factors.
This suggests some of the problems in calculating minimum wage earnings. While a
worker under age 20 can be paid $4.25 per hour through the first 90 consecutive days with
any employer, his wage after 90 days would have to be increased to the full $5.15 per hour
— unless he moved on to a second, third, or fourth employer, or dropped out of work for
a period of time and broke the “consecutive” days pattern. Were he a full-time student
working no more than part-time, he could be subject to a different sub-minimum wage
option. Were he partially disabled and employed under Department of Labor (DOL)
certification, he could be paid at any rate found to be commensurate with his productivity
— however low that might be.
eligibility for certain federal assistance programs. The extent to which the poverty
guidelines are realistic can be, and has been, debated. The guidelines have no direct
connection with the federal minimum wage but they are frequently cited in
discussions of the minimum wage and are used by some analysts as a measure of the
adequacy of the wage floor.
Since much minimum wage work is also part-time and/or part-year, estimating
actual annual income for minimum wage workers may be problematic. Similarly,
choosing a wage rate that will comport with the work patterns of minimum wage
earners and still provide “a living wage” may prove daunting. Moreover, those
earning more than the statutory minimum will often receive fringe benefits in
addition to cash wages: e.g., health insurance, a pension, etc. Under present law, the
concept of a minimum wage is limited to a cash wage.
Table 3. Poverty Guidelines, All States
and the District of Columbia (2004)
Size of family unit
States and District of Columbia
Source: U.S. Department of Health and Human Services, Federal Register, Feb. 13, 2004, pp.73367338.
Note: For family units with more than eight members, add $3,180 for each additional member. For
Alaska, add $3,980, and for Hawaii, add $3,660. Poverty guidelines are not defined for Puerto Rico,
the Virgin Islands, American Samoa, Guan, 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,
sometimes excluding from coverage those likely to be the most poorly paid workers.
Upon what basis has Congress included — or excluded — workers from minimum
wage protection under the FLSA?12
See, for example, discussion during the 1938 debate on the original FLSA. Congressional
Record, June 14, 1938, p. 9257.
When a Member of Congress (or, that body collectively through legislation)
speaks of the “minimum wage worker,” to whom is reference made? Is the minimum
wage worker viewed as a single individual? A parent? A single parent? The sole
economic support for a family? A teenager? Is the FLSA minimum intended to be
a wage floor for all workers, urban and rural — for employees only of large firms, or
for those employed by small businesses as well? Should any non-work or
non-productivity factors be taken into account when setting the wage floor — for
example, age (a youth or a senior citizen), student status, family size, etc.? Whom
does a legislator have in mind when setting the federal minimum wage at, for
example, $5.15 per hour? Is that mental image consistent with the demographic
reality of the minimum wage workforce?
Various social and demographic distinctions have been cited to justify minimum
wage rate differentials. For example, the FLSA, under certain conditions, allows a
full-time student “employed in a retail or service establishment, agriculture, or the
institution of higher education that such student attends” to be paid a lower minimum
wage than that required for a non-student (even for equal work) — so long as the
student works only “part-time” (defined by the statute). The wage level, here, is
conditioned less upon productivity than upon how the worker spends his off-duty
hours: i.e., enrolled in academic course work. If he drops out of school but keeps his
job, the law requires that his hourly rate of pay be raised to at least the full applicable
minimum. Similarly, even while remaining an employed full-time student, if his
hours of work increase to more than part-time, he must be paid at the full applicable
minimum rate. Applicability of the student sub-minimum rate (Section 14(b)) is
dependent upon maintenance of full-time student status and not more than part-time
employment. What is the rationale for paying a part-time worker less, on a per-hour
basis (here, a sub-minimum rate) than a full-time worker — for the same work
performed under the same conditions and equally well? What assumptions about
“need” and “productivity” are implicitly built into the student sub-minimum wage
option — and are these assumptions valid?13
Some may argue that younger persons, by definition, are less experienced and,
therefore, less productive than “prime age” adults. This conclusion, however, may
not be valid for minimum wage-type work and, indeed, an argument can be made that
for low-skilled entry-level positions, young persons may be more productive: i.e.,
more vigorous, more nearly satisfied with such routine activity. What criteria should
be taken into account with respect to the elderly (who may be less productive in
minimum wage-type work) or for the disabled?
In short, should wages be needs-based or productivity-based? If a worker has
an affluent spouse (or parents), should he (or she) be payable at a sub-minimum rate
because his (or her) combined family income is relatively high? Should one who
spends his wages for luxury items (tennis shoes, CD’s, etc.) be paid at a lower rate
Some may argue that this wage structure creates an incentive for young persons to leave
school or to shift their primary focus from study to work. The rationale for sub-minimum
wage treatment, however, is that it may offset the problems young persons have in finding
work that will match their academic schedules: i.e., making them cheaper and, thus, more
attractive to employ.
than one who spends his earnings for tuition, baby formula, or elder care? If needsbased, then should the minimum wage be pegged to family size: the more children,
the higher the minimum wage rate? Are such distinctions useful or workable and do
they lend themselves to public policy formulations?
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 a consideration of by whom the minimum wage ought to be paid.
Is the minimum wage intended to be sufficient to sustain a worker (however
defined by Congress): i.e., a single person without dependents or a sole breadwinner
for a family? If so, should an employer be obligated to pay a wage of at least the
amount needed to sustain the worker (and, where applicable, his or her dependents)
— an amount that could, presumably, be affected by the assumptions built into the
definition of a minimum wage worker?14
If a productivity-based minimum wage is not sufficient to sustain a worker (and
his or her dependents, if any), then by whom should the deficiency be made up?
Should it be paid by the employer who directly benefits by paying low wages
(through utilizing the services of a low-wage workforce) — and, indirectly, by the
consumer of the goods and services such low-wage workers provide — through an
increase in the minimum wage rate? Or, should the difference between one’s wage
and one’s need be subsidized by the taxpayer?
In 1975, Congress established the Earned Income Tax Credit (EITC) which, as
amended, provides a tax credit to certain low-wage workers. Some laud the EITC
for helping “to lift ... working families above the poverty threshold and to provide a
greater work incentive to low-income workers.”15 But, the EITC can also be viewed
as a subsidy, not only to workers but also to low-wage employers who may continue
to pay low wages to their workers and to profit from utilization of such low-wage
employees while tax revenues (through the credit mechanism, or through other public
subsidies) assist their workers in meeting basic living costs. Thus, arguably, the
routine cost of doing business is shifted from the individual employer to the taxpayer.
Similarly, the EITC can be viewed as a subsidy to the consumers of the goods and
services produced by low-wage workers.
Conversely, some argue, the EITC 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. Speaking generally, some view the EITC as a supplement to the minimum
Since workers compete with each other in the labor market, paying a needs-based rate
could encourage an employer to hire single persons without dependents and, thus, to keep
labor costs (wages) low: to avoid hiring persons who are married with children. Similarly,
youth workers, paid at a sub-minimum rate, are often though to be, potentially, economic
substitutes for older workers who must be paid a full minimum scale.
Bureau of National Affairs, Daily Labor Report, Aug. 3, 1993, p. A10.
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.16
The act’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. In addition, the act
contains numerous more narrowly focused exemptions.
Through the years, there has been pressure from the small business community
to expand its exemption. Proponents have argued that small firms may be adversely
impacted — or even driven out of business — by having to pay their workers the
minimum wage. However, some may argue that no test of profitability has been
proposed with respect to firms benefitting from the small business exemption: it is
enjoyed by prosperous and struggling businesses alike.17 But, where small businesses
are free from a minimum wage obligation, the question remains: How will workers
employed by small businesses sustain themselves and, where applicable, their
families? Further, what are the implications of a “small business exemption” with
respect to competition between small firms and mid-sized or larger firms?
General Demographics of the Minimum Wage Workforce
Data concerning the minimum wage workforce are difficult to develop with
precision. Some low-wage workers may be paid at or below the federal minimum
wage — but, through exemptions built into the statute, may not be directly affected
by an altered statutory rate. Conversely, some employers may choose to pay the
statutory minimum because it is a convenient and generally recognized basic rate for
low-wage employment — even where their workers may not be subject to the act’s
minimum wage provisions. In addition, persons employed at or below the federal
minimum wage may change jobs (and economic status) with some frequency,
moving in and out of work in response to non-work-related factors: school,
Concerning the EITC, 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.
Much of the debate over increasing the minimum wage has focused upon the low-wage
worker. Does he (or she) really need the increased income? Is he productive enough to
justify (to earn) a higher minimum wage? Does he have other sources of income: for
example, a working spouse or an employed parent? How will the worker spend his
earnings: for essentials or for luxuries? But, comparable issues have not been raised about
business. Does the small businessperson really need the increased profits from employing
low-wage (sub-minimum wage) workers? Could he (or she) reasonably pay a higher wage?
Or, is the employer’s primary goal or motivation profit enhancement — at the expense of
his employees and, under the EITC, at the expense of the taxpayer?
pregnancy or, perhaps, a change in marital status. Some workers may be multiple
jobholders.18 And, not all workers covered under the FLSA are covered in precisely
the same way. Thus, statistical data in this area may be a little imprecise and we
may, often, be speaking of the low-wage worker rather than the minimum wage
worker covered under the FLSA.
Who Are the Minimum Wage Workers? In 2003, about 2.1 million
workers, paid hourly rates, earned at or below the federal minimum wage of $5.15
per hour: about 545,000 were paid at the minimum rate and 1.6 million were paid
below the minimum.19 These are workers who are 16 years of age or older.
In absolute numbers, according to data provided by the Bureau of Labor
Statistics (BLS), persons working at or below the minimum are more likely to be
adults than youths, more likely to be female than male, and 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
2003 data, one defines a youth as someone between 16 and 19 years of age, then
about 25.4% of workers, paid hourly at or below the minimum wage, are youths and
74.6% are adults. If one’s definition is more expansive, defining youth as between
16 and 24 years of age, then about 52.7% of persons earning at or below the
minimum wage are youths and only 47.3% are adults. Thus, even with an expansive
definition of youth (16 to 24 years of age), close to half of the minimum wage/subminimum wage workforce is 25 years of age or over. For minimum wage type work,
however, the two demographic groups may well be in competition, with youth
workers readily substitutable for older workers and with younger workers having an
employment advantage: even where covered by minimum wage requirements, they
can often legally be hired at a sub-minimum wage.20
Among hourly workers, paid at or below the general minimum rate, about
66.4.% were women, about 33.6% men. Although the data are imprecise because of
Surveys of income may collect information only with respect to a worker’s main job.
About 72.9 million workers, out of a civilian noninstitutional workforce of about 146.5
million, were paid hourly rates in 2003.
In addition to their legally allowable lower wage rate, other arguments can be made for
the competitive advantages of youth workers. They may have more energy than older
workers and may be more flexible. They are normally short-term employees who do not
join unions, do not vest in pension programs, do not earn vacation benefits, are less likely
to be ill or suffer job-related strains that one might associate with long-term employment or
age. Conversely, the argument can be made that they are less disciplined, have fewer skills
(through few skills are required for minimum wage type work), are less dependable, and
may be less acclimated to the culture of the world of work.
definitional questions with respect to race and ethnicity, about 83.1% of hourly paid
workers earning at or below the federal minimum wage classify themselves as
In 2003, about 61.8% of workers at and below the minimum wage were
employed on a part-time basis; about 37.9%, full-time. (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
suffering involuntary joblessness or moving in and out of the labor force from
discouragement, quitting to seek better wages and working conditions, or for other
Full-time employment is not synonymous with full-year employment. Estimating
the annual income of minimum wage workers may be problematic since many fulltime 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).
Beyond uncertainties about combinations of part-time or full-time, part-year or
full-year employment, one must 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. On the other hand, minimum wage workers may
have other sources of income.22
The Size of the Minimum Wage Workforce. In 2003, as noted above,
there were roughly 2.1 million workers, paid hourly rates, who earned at and below
the federal minimum wage of $5.15 per hour. They constituted only about 2.9% of
hourly paid workers from an aggregate of about 72.9 million hourly paid workers.
This is the smallest number of persons earning at or below the minimum wage in
over 20 years (see Table 4). An important question is: Why?
This numerical decline is not necessarily indicative of improved economic status
for the low-wage worker. Rather, it may be that, as the value of the statutory
minimum shrinks in terms of constant dollars, fewer workers are employed at or
below the rate reflective of the reduced value of the statutory minimum. Nor does
this imply that the economic status of those who have been moved, through attrition,
to a rate a little in excess of the statutory minimum (that is, those who are above the
statutory minimum but who are still low-wage workers) has improved: rather, their
wage may have kept pace with inflationary pressures while the statutory minimum
did not suggesting little or no actual change of economic status.
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 process, see Mary Bowlelr, et al., “Revisions to the Current Population Survey
Effective January 2003,” Employment and Earnings, Feb. 2003, pp. 4-7, and 14.
Data here are drawn from an analysis, Characteristics of Minimum Wage Workers: 2003,
prepared by the U.S. Bureau of Labor Statistics. BLS has used data from the Current
Population Survey (CPS), provided from the U.S. Bureau of the Census.
In policy terms, this 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, 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. Thus, were Congress to take no action with respect to the minimum
wage, allowing its value to continue to decline, the size of the minimum wage
workforce could reasonably be expected to decline until it virtually disappears. This
would not mean that the low-wage workforce had shrunk, merely that an increasingly
large number of such persons would be employed at wages above the declining real
value of the statutorily defined minimum.23
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
Number in thousands
As a percentage of hourly paid workers
That fewer people are employed at or below what some may regard as the more or less
arbitrary federal minimum wage rate may be misleading. See Poverty in the United States:
2002 (Washington: U.S. Department of Commerce, U.S. Census Bureau, Sept. 2003), P60222, p. 1. The Census Bureau states that the “official poverty rate in 2002 was 12.1 percent”
with “people below the official poverty thresholds” numbering 34.6 million.
Workers paid hourly rates
Total paid the minimum wage or less
Number in thousands
As a percentage of hourly paid workers
Source: United States Bureau of Labor Statistics.
(*) Years in which a legislated change in the federal minimum wage took effect.
Under this scenario (which is generally consistent with the trajectory of
legislated increases in the statutory minimum wage since its peak year of 1968), the
minimum wage would have been effectively repealed by attrition.24 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 notwithstanding), 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, however, may run counter to public policy that income from work
is generally preferable to transfers or entitlements.
Commonwealth of the Northern Mariana Islands (CNMI). In the mid1970s, the CNMI entered into a quasi-autonomous relationship with the United
States. By the Commonwealth agreement, regulation of overtime pay, under the
FLSA, is enforced by DOL; but the minimum wage is governed by CNMI law. The
CNMI controls its own immigration policy. Finally, the CNMI is regarded as within
the U.S. customs area. The result has been the development of industries based upon
low wages and alien contract labor, the product of which carries a “Made in
America” label and competes with other American-made goods.25
Through the past decade, human rights and labor standards in the CNMI have
been the subject of DOL investigations, congressional hearings, and proposed
legislation. In the 105th Congress, the Committee on Energy and Natural Resources
voted to report legislation co-sponsored by Senators Daniel Akaka (D-Hawaii) and
Frank Murkowski (R-Alaska) that would, inter alia, have created a U.S. controlled
Were the minimum wage to have roughly the value that it had at its peak in 1968, the
statutory rate would now (Feb. 2004) be about $8.49 per hour rather than the current actual
rate of $5.15. It may be significant that, of proposals currently pending in the 108th
Congress, the highest minimum rate would be $7.00 per hour (the Boxer/Kennedy
amendment to H.R. 4) and would take effect only 26 months after enactment — thus,
potentially, allowing further decline in its real value. See CRS Report RS20040, Inflation
and the Real Minimum Wage: Fact Sheet, by Brian W. Cashell.
See CRS Report RL30235, Minimum Wage in the Territories and Possessions of the
United States: Application of the Fair Labor Standards Act, by William G. Whittaker.
insular minimum wage structure.26 The legislation died at the close of the 105th
Congress, but the CNMI issue was the subject of further hearings by the Committee
during the 106th Congress. Several general minimum wage proposals of the 106th
Congress included language that would have brought the CNMI wage floor into
conformity with that of the states.
In the 107th Congress, there was continuing interest in the CNMI with a number
of bills introduced that would have extended FLSA minimum wage protection for
workers employed in the insular jurisdiction. Normally, these proposals would have
phased-in the full national rate through a series of incremental steps. In related
action, on June 5, 2001, the Senate Committee on Energy and Natural Resources
reported legislation to amend immigration law as it applies to the CNMI under the
Covenant of Association between the Islands and the United States. (See S.Rept.
107-28.) The bill died at the close of the 107th Congress.
The issue of minimum wage protection for workers in the CNMI, in part
because of the alleged concentration of sweatshop industry in the islands, remains a
of the wage/hour agenda of the 108th Congress.
Minimum Wage Legislation in the 108th Congress
Early in the 108th Congress, various proposals were introduced that would have
raised the federal minimum wage and/or made other changes in the FLSA. Some
were single issue proposals; others included collateral provisions or were included
in broader legislative packages.
Establishing a Tradition?
The original FLSA proposals of 1937-1938 were in the form of free-standing
legislation: focusing narrowly upon labor standards but covering the entire field of
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 for other changes in the FLSA itself, took the form of free-standing
legislation. Non-FLSA or non-wage/hour issues were not addressed as part of a
package with minimum wage and related concerns. Any “trade-off” to assist
employers in dealing with the impact of wage/hour enactments (for example the “tip
credit” and youth/student sub-minimum wage provisions) were considered within the
context of wage/hour legislation per se.
In 1996, minimum wage and related FLSA amendments were brought to the
floor in the House as an amendment to a broad package of non-wage/hour proposals
mostly associated with tax matters of interest to industry. Indeed, the FLSA was a
relatively small part of the overall package. While some components of the
wage/hour portion 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
U.S. Congress, Senate Committee on Energy and Natural Resources, Northern Mariana
Islands Covenant Implementation Act, report to accompany S. 1275, 105th Cong., 2nd sess.,
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).27
When minimum wage legislation came to the floor during the 106th Congress,
it largely followed the 1996 pattern. It combined tax revisions in behalf of the
business community with changes in the FLSA — including an increase in the
minimum wage.28 By the 106th Congress, the two issues — a minimum wage
increase and tax breaks for employers — 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, appeared to be the
essential focus of the legislative debate of the 106th Congress. “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.”29 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.”30 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.
However, not all concurred. 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.”31
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
secure a simple dollar more per hour for the poorest working American families.”32
Thus, some may argue that proposals to raise the minimum wage have become, in
See CRS Issue Brief IB95091, The Minimum Wage: An Overview of Issues Before the
104th Congress, by William G. Whittaker (out of print; available from the author: 7-7759).
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.
In the Senate, minimum wage increases had been included within 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 house 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, available from the author: 7-7759).
Congressional Record, Mar. 9, 2000, p. H860.
Bureau of National Affairs, Daily Labor Report, Dec. 6, 2000, p. A12.
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.”
Bureau of National Affairs, Daily Labor Report, Mar. 9, 2000, p. A8.
practice, a vehicle for legislating economic benefits for employers and others in
higher income brackets.33
Current Minimum Wage-Related Initiatives
Because the minimum wage under the FLSA is set in statute, it remains at a
fixed level, without regard for changes in the general economy, until Congress alters
it through legislation. Various changes in the wage floor — at large and with respect
to certain targeted groups of workers — have been proposed during recent years.
In 1938, the federal minimum wage rate was set at 25 cents per hour (initial
proposals had called for 40 cents an hour) — a compromise to meet concerns voiced
by some low-wage employers. Its real value has fluctuated through the years
reaching a peak in 1968 and, thereafter, declining. To equal its 1968 value, the
minimum wage would need to be (December 2004) about $8.68 an hour — $3.53
above its current statutory level of $5.15 per hour.34
A failure of the minimum wage to maintain parity with the cost of living has
been a continuing concern. Should the floor remain at a fixed point, subject to action
by Congress to augment it — the current pattern? Or, might it 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? But, would indexation have an
inflationary impact? Indexation was discussed early in the last century as an
approach to wage stability and has remained, intermittently, an issue. It was last a
subject of extensive congressional debate during consideration of the 1977 FLSA
amendments, but was proposed in legislative form as recently as the 107th Congress.35
Several states have experimented with minimum wage indexation in recent years.
Oregon and Washington currently operate under such a system.36
In the 108th Congress, legislation seems to be taking diverse paths. First, there
is legislation that would increase in the minimum wage rate and, under some
proposals, extend the federal minimum wage to the Commonwealth of the Northern
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, p. 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 businessspecific provisions next year or even later this year — possibly paired with a bill to raise the
See CRS Report RS20040, Inflation and the Real Minimum Wage: Fact Sheet, by Brian
W. Cashell; and CRS Report 98-960, The Federal Minimum Wage and Average Hourly
Earnings of Manufacturing Production Workers, by William G. Whittaker.
See H.R. 2812 (107th Congress), introduced by Representative Bernard Sanders (I-VT).
See CRS Report RL30927, The Federal Minimum Wage: The Issue of Indexation, by
Mariana Islands. Second, there is a series of proposals that, if adopted, would
provide exemption from the act’s minimum wage (and, in some cases, overtime pay)
requirements with respect to certain specified categories of workers.
None of these measures became law. However, it may be worth considering
them as patterns of subsequent legislation — were Congress to reconsider the impact
of the Fair Labor Standards Act.
To Raise the Minimum Wage. Early in the 108th Congress, Representative
George Miller (D-CA) introduced H.R. 936, a comprehensive proposal of which
consideration of the minimum wage was one component. (See Sections 5201-5203.)
The bill proposes an increase in the federal minimum wage, 60 days after enactment
of the legislation, to $5.90 an hour; and, 12 months later, a second increase to $6.65
per hour. The bill would also extend the minimum wage requirements of the FLSA
to the Commonwealth of the Northern Mariana Islands, beginning at $3.35 per hour
60 days after enactment of the legislation, and rising by $0.50 per hour at six-month
intervals until the mainland standard ($6.65) had been reached. A similar bill was
introduced by Senator Christopher Dodd (D-CN), S. 448.
On February 27, 2003, Representative Miller also introduced a free-standing
minimum wage proposal: H.R. 965. Its minimum wage provisions, both with
respect to a general increase and to extension of coverage to the CNMI, paralleled
H.R. 936. A companion proposal, identical in its minimum wage provisions, was
introduced by Senator Tom Daschle (D-SD), S. 20. See also S. 224 (Daschle).
During Senate debate on March 30, 2004, on H.R. 4, the Welfare Reform
Reauthorization, Senators Barbara Boxer (D-CA) and Edward Kennedy (D-MA)
proposed an amendment that, were it to become law, would raise the minimum wage,
in steps, to $7.00 per hours 26 months after enactments. The Boxer/Kennedy
amendment would also establish a federal minimum wage for the CNMI that would
gradually be phased-up to the federal level.
On April 30, 2004, Representative Miller introduced H.R. 4256, legislation that
would increase the federal minimum wage, in steps, to $7.00 26 months after
enactment of the bill — and that would extend federal minimum wage protection to
the CNMI. A companion bill, S. 2370, was introduced by Senator Kennedy on May
Critics, likely, would have argued that an increase in the federal minimum wage
of the magnitude proposed by H.R. 4256 and S. 2370, the most expansive of those
pending during the 108th Congress (i.e., to $7.00 an hour), would be inflationary and
economically ill-advised. However, proponents may counter that such an increase
would still have been substantially lower than the minimum wage rate in 1968
expressed in constant dollars (i.e., $8.68 per hour — or about $1.68 per hour below
its historical high in 1968).
To Expand Exemptions from Minimum Wage Protection. Following
a pattern set through several Congresses, legislation (S. 292) was early introduced in
the 108th Congress by Senator Lindsey Graham (R-SC) that would exempt from
minimum wage and overtime pay any person employed as a licensed funeral director
or licensed embalmer. Companion legislation (H.R. 2065) was introduced by
Representative Patrick Tiberi (R-OH). Under the proposals, were they enacted,
persons employed as licensed funeral directors and/or licensed embalmers would no
longer be covered by FLSA minimum wage and overtime pay protections.37
S. 237, also introduced by Senator Graham, would eliminate FLSA minimum
wage and overtime pay protections with respect to “any employee providing
professional consulting services recognized by a four-year degree or greater,
professional licensure, professional certification, or at least eight years of similar
work experience” and meeting a series of duties tests specified in detail in the
proposed legislation. (See also H.R. 4396, a companion bill introduced by
Representative Jim DeMint (R-SC).) S. 495 (Graham) would modify Section
13(a)(17) of the FLSA with respect to exemption of employers of certain computer
services workers from the act’s overtime pay requirements. Detailed duties tests, to
be met in order to classify workers as exempt from overtime pay protection, are set
forth in the proposed legislation and an earnings threshold is also specified. A
somewhat different bill (H.R. 1996), focusing upon the duties tests in Section
13(a)(17), was introduced by Representative Joe Wilson (R-SC).38
Representative Pete Sessions (R-TX) has introduced legislation (H.R. 2263) that
would eliminate FLSA minimum wage and overtime pay protections with respect to
“any employee employed, on a seasonal basis, at a facility or location the primary
source of revenue of which is derived from the sale of fireworks directly to
More Specialized Wage Related Proposals
Legislative initiatives related to minimum wage and other FLSA provisions
include, among other, the following.
Camp Safety. Section 13 of the FLSA is complicated: a body of exemptions
sometimes narrowly focused to impact a specific industry or sub-segment of an
industry. Under current law, “any employee employed by an establishment which is
an amusement or recreational establishment, organized camp, or religious or nonprofit conference center,” subject to certain other specified criteria, can be exempt
from an FLSA minimum wage and overtime pay protection (Section 13(a)(3)).
Representative Robert Andrews (D-NJ) has introduced legislation (H.R. 2145)
that would subject the existing exemption to “compliance with certain safety
standards.” The bill would also impose a series of reporting requirements. H.R.
2145 was referred to the Committee on Education and the Workforce, Subcommittee
on Workforce Protections. The bill was not enacted.
See CRS Report RL30697, Funeral Services: The Industry, Its Workforce, and Labor
Standards, by William G. Whittaker.
See CRS Report RL30537, Computer Services Personnel: Overtime Pay under the Fair
Labor Standards Act, by William G. Whittaker.
Prison Industries Labor Standards. On April 12, 2003, Representative
Peter Hoekstra (R-MI) introduced H.R. 1829, a bill dealing with Federal Prison
Industries (FPI) — inter alia, with contracting policies and labor standards practices
including wage rates. Referred to the Committee on the Judiciary, the bill was
reported on September 25 and passed by the House on November 6, 2003: 350 ayes
to 65 nays.
As passed by the House, the bill would establish basic minimum wage rates for
inmates working in the FPI program that are related to the minimum wage under the
FLSA and equal to the minimum wage not later than September 30, 2009. Wages
due an inmate would be subject to deduction for taxes, payment of fines pursuant to
court order, restitution for victims, support of the inmate’s family, and creation of a
fund “to facilitate such inmate’s assimilation back into society, payable at the
conclusion of incarceration;...”
On November 7, 2003, the bill was received in the Senate and referred to the
Senate Committee on the Judiciary.39 The bill was not enacted.
Some Collateral Issues
As noted above, the content of minimum wage legislation can be as sweeping
or as narrowly focused as one may choose. However, given the structure of the
FLSA and the history of minimum wage-related proposals, there are a number of
issues that could arise were minimum wage to be called up for floor consideration.
In each of these cases mentioned below (except that of American Samoa which
operates under a special committee system), there is a threshold or triggering
mechanism that modifies the impact of any change in the federal minimum wage
and/or the manner in which it is applied. In each case, if change is to occur, direct
action by the Congress is required. Such changes do not follow automatically from
a legislated increase in the minimum wage — not are they related to any particular
The Youth Sub-Minimum Wage. After decades of heated debate, Congress
adopted a general youth sub-minimum wage as part of the 1996 FLSA amendments.
It 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
The general federal minimum wage, in 1996, was $4.25 an hour. In establishing
the youth sub-minimum, Congress set the lower rate at $4.25 an hour in statute and
See U.S. Congress, House Committee on the Judiciary, Federal Prison Industries
Competition in Contracting Act of 2003, report to accompany H.R. 1829, 108th Cong., 1st
sess., Sept. 25, 2003 (Washington: GPO, 2003). For general background, see also CRS
Report 96-892, Federal Prison Industries: UNICOR, by JoAnne O’Bryant; CRS Report
RL32380, Federal Prison Industries, by Lisa M. Seghetti; and CRS Report 93-895, The Fair
Labor Standards Act: Minimum Wage Protection for Prison Inmate Workers and for NonPrison Labor, by William G. Whittaker (out of print; available from the author: 7-7759).
then raised the general minimum wage, in steps, to $5.15 per hour. As a result,
unless Congress takes specific action to increase the youth rate, it will 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. The two do not increase in
The ‘Tip Credit’ Provision. During the 1960s and 1970s, the FLSA was
progressively expanded to provide protection for retail and service employees. Some
of these workers were “tipped employees” and their employers argued, successfully,
that since they were given tips by the public, they (the employers) ought not to be
responsible to paying such tipped employees a minimum wage. Through the years,
the level of the so-called tip credit (the value of tip income received by tipped
employees that an employer could count toward his or her minimum wage obligation)
Under the 1996 FLSA amendments, recalling that the general minimum wage
was then $4.25 per hour, Congress provided a tip credit at 50% of the regular
minimum wage (i.e., $2.13 an hour). So long as an employee received tip income on
a regular basis sufficient, when combined with an employer contribution of $2.13 per
hour, to reach the statutory minimum rate, the employer had no further minimum
wage obligation. The most that he would have to pay his employees, under the
FLSA, would be $2.13 per hour.
In the 1996 FLSA amendments, Congress established a statutory minimum rate
for employers of tipped employees at $2.13 per hour, not 50% of the general
minimum wage — though $2.13 per hour would equal 50% of the pre-1996
minimum rate. Since the floor under the tip credit is set in statute at $2.13 per hour,
it will remain at that level unless Congress takes separate action to alter the base rate.
The minimum cash wage under the tip credit provision and the general minimum
wage are not linked. They do not increase in tandem.
The Computer Services Professional Rate. Beginning in the 1960s, a
campaign was commenced to have certain computer services workers defined
administratively by the Department of Labor as “professional” and, therefore, exempt
under Section 13(a)(1) of the FLSA from minimum wage and overtime pay
protection. When the Department demurred, Congress in 1990 enacted legislation
(P.L. 101-583) directing the Secretary to develop regulations that would permit such
an exemption if, among other criteria, “such employees are paid on an hourly basis”
at a rate that is “at least 6½ times greater than the applicable minimum wage.” The
Department proceeded as directed, developing a regulation under Section 13(a)(3)
and attempting to justify the exemption on the “professional” character of the
Under the 1996 FLSA amendments, Congress directly amended the act (Section
(a)(17)) to exempt the targeted computer services workers where, among other
qualifying criteria, they are paid “on an hourly basis ... at a rate of not less than
$27.63 an hour.” (P.L. 104-188) Then, Congress raised the minimum wage. While
$27.63 was 6½ times the then applicable minimum wage of $4.25 per hour prior to
the 1996 FLSA amendments, a critical shift had been made. The wage requirement
for exemption was now set at a specific dollar amount. The computer services
threshold wage and the general minimum wage were no longer linked. They do not
increase in tandem. Specific action by Congress is required to alter the threshold.40
The ‘Small Business’ Exemption. From enactment of the FLSA in 1938,
Congress had attempted, variously, to exempt certain small businesses from coverage
under the act. Ultimately, Congress instituted a dollar volume test for exemption,
though the level of that test has been changed through the years.
In 1989 (P.L. 101-157), Congress increased the threshold from the then-current
$362,500 to exempt “an enterprise whose annual gross volume of sales made or
business done is not less than $500,000 (exclusive of excise taxes at the retail level
that are separately stated).” The threshold, thus, is set at a specific dollar amount,
requiring direct action by Congress to alter it. The provision is not directly affected
by any change in the general minimum wage.41
The Case of American Samoa. American Samoa was acquired by the
United States as a result of the Spanish-American War and through a series of
subsequent treaties. When enacted in 1938, the FLSA applied to Samoa as it did the
states of the Union. However, it does not appear to have been enforced until the
During the early 1950s, tuna canning became Samoa’s major private sector
employer. When it appeared that the industry would be required to pay its workers
the national minimum wage (though its economy was somewhat different from that
of the mainland), the industry appealed to Congress to write an exception into the act.
Following hearings, the FLSA was amended. An industry committee structure was
created under which an appropriate minimum wage for the island group would be
The industry committee structure was intended, it appears, to have been an
interim measure while the insular economy progressed toward mainland standards.
Nearly half a century later, the system remains in place. The minimum wage for
See CRS Report RL30537, Computer Services Personnel: Overtime Pay under the Fair
Labor Standards Act, by William G. Whittaker. Regulatory changes, proposed by the
Department of Labor with respect to Section 13(a)(1), could impact workers in the computer
services industry. See CRS Report RL32088, The Fair Labor Standards Act: A Historical
Sketch of the Overtime Pay Requirements of Section 13(a)(1), by William G. Whittaker.
It was commonly assumed that the 1989 FLSA amendment would allow a flat $500,000
small business exemption. When DOL prepared the regulations governing the small
business provision, however, it was found that the exemption would only cover workers who
were not engaged in interstate commerce. Workers engaged in interstate commerce would
be individually covered under the act even though the firm, per se, might be exempt. See
CRS Issue Brief IB90082, The Federal Minimum Wage: Changes Made by the 101st
Congress and Their Implications, by William G. Whittaker (out of print; available from the
P.L. 84-1023. See also U.S. Congress, Senate Committee on Labor and Public Welfare,
Amending the Fair Labor Standards Act of 1938, hearings, 84th Cong., 2nd sess., May 8, 1956
(Washington: GPO, 1956.)
American Samoa continues to be set administratively. It is independent from any
change in the general minimum wage rate under the FLSA.43
Welfare Reform Reauthorization
On March 29, 2004, the Senate began consideration of H.R. 4, the Welfare
Reform Reauthorization (also known as the “Personal Responsibility and Individual
Development for Everyone Act” or “PRIDE Act”). A focus of the proposed
legislation was efficient movement of persons from welfare into gainful employment.
“This welfare bill is about workers,” stated Senator Kennedy. “It is about
moving people from welfare into work.”44 To do that, he argued, it is necessary “to
ensure that work pays.” And, he added: “One of the best ways to make sure work
pays is to make sure that those who are on the bottom rung of the economic ladder
— those who make the minimum wage — are going to have a livable wage.”45
Senator Kennedy argued that the current federal minimum wage at $5.15 per
hour ($10,712 per year where a worker is engaged through 52 weeks of 40 hours a
week) was inadequate. The purchasing power of the existing minimum wage, he
suggested, had eroded. In order to maintain its 1968 value, Senator Kennedy noted,
the current minimum wage would need to be $8.50 per hour — though he was
willing to consider a somewhat lower figure. He indicated that he would be
introducing an amendment to H.R. 4 calling for a minimum wage increase and sought
unanimous consent for its consideration. Senator Grassley objected. “What I object
to,” the Senator from Iowa stated, “is the constant harassment on the part of people
on the other side of the aisle to keeping legislation from moving along very quickly
that everybody knows needs to pass” and he protested that a minimum wage
amendment would be “nongermane” to the issue of welfare reform.46
On March 30, Senator Boxer, for herself and for Senator Kennedy, introduced
S.Amdt. 2945. First, the amendment, as introduced, would increase the general
minimum wage, in steps, to $7.00 an hour: to $5.85 an hour 60 days after enactment;
to $6.45, twelve months after the 60th day after enactment; and to $7.00 twenty-four
months after the 60th day following enactment. Second, the minimum wage under the
FLSA would be made applicable to the Commonwealth of the Northern Mariana
Islands. Sixty days after enactment of the Boxer-Kennedy amendment, the rate in the
CNMI would be set at $3.55 per hour and would increase by 50 cent increments each
six months until it reached the general FLSA rate.47
See CRS Report RL30235, Minimum Wages in the Territories and Possessions of the
United States: Application of the Fair Labor Standards Act, by William G. Whittaker.
Congressional Record, Mar. 29, 2004, p. S3266.
Ibid., p. S3265.
Ibid. pp. S3266-S3269.
Congressional Record, Mar. 30, 2004, p. S3336. The Boxer-Kennedy amendment would
not affect other segments of the FLSA in which there is a statutory sub-minium: for
example, the youth sub-minimum and the administered rate for American Samoa.
There was sharp disagreement pro and con — both with respect to the merit of
an increase in the minimum wage and to the germaneness of a minimum wage
increase to the overall question of welfare reform. On March 30, Senator Bill Frist
(R-TN) called for invocation of cloture.48 On the morning of April 1, the Senator
explained that, following 60 minutes of debate on the cloture motion, there would be
a rollcall vote on “invoking cloture on the committee substitute to H.R. 4.” Senator
Frist continued: “If cloture is not invoked, it will be clear that this legislation will be
gridlocked by these unrelated matters and therefore will be difficult to finish.”49
Senator Tom Daschle (D-SD) protested: “People on the other side of the aisle,
for whatever reason, have refused to allow us an opportunity to have an up-or-down
vote on protecting workers’ overtime, on minimum wage, and on unemployment
compensation.”50 As discussion continued, Senator Daschle affirmed: “If we really
want to help people move from welfare to work, we ought to increase the minimum
wage.”51 Senator Max Baucus (D-MT), speaking against cloture, stated: “We are
here today [at this parliamentary juncture] because the majority chooses not to allow
a vote on a minimum wage. It is that simple.”52 The assessment of Senator Rick
Santorum (R-PA), an opponent of the Boxer-Kennedy amendment and proponent of
cloture, was similarly direct. “Without cloture,” Senator Santorum stated, “we do not
get a bill and we do not help millions of Americans get out of poverty. What we are
playing,” he added, “is politics.”53
The vote on cloture failed: 51 yeas to 47 nays. Setting welfare reform aside, the
Senate moved on to other issues.54
Legislating a Living Wage
During the past decade, numerous local governments have passed living wage
statutes.55 Although these enactments tend to vary from one jurisdiction to the next,
they seem most often to (a) set a minimum wage standard higher than the otherwise
Congressional Record, Mar. 30, 2004, p. S3359.
Congressional Record, Apr. 1, 2004, p. S3520.
Ibid., p. S3529. Overtime pay protection and unemployment compensation had been
raised, over a period of months, in conjunction with other legislation — each time, without
a definitive up-or-down vote. Here, the process was enlarged to include an increase in the
Congressional Record, Apr. 1, 2004, p. S3535.
Ibid., p. S3537.
Ibid., p. S3536.
Ibid., p. S3538. Concerning welfare reform legislation, see CRS Issue Brief IB10140,
Welfare Reauthorization: Overview of the Issues, by Gene Falk, Melinda Gish, and Carmen
While the various “living wage” initiatives are not minimum wage proposals in the
traditional sense, they share many of the same purposes.
applicable state or federal wage floor and (b) require that not less than this local
living wage be paid to persons employed by contractors engaged by the local
government or by “employers who receive special treatment from” a city or county.56
The basic premise of the living wage campaign is “that anyone in this country who
works for a living should not have to raise a family in poverty.”57
By the 104th Congress, Representatives Luis Gutierrez (D-IL) and Bruce Vento
(D-MN) introduced legislation (separate and different bills) that would, working from
a base of federal contracting, require payment of not less than a living wage (with
“living wage” defined as not less than the federal poverty line for a family of four).
Similar bills were introduced in the 105th and 106th Congresses — and, again in the
In the 108th Congress, the “living wage” issue reemerged and several new
proposals in this area were introduced No new legislation was adopted in this area.
However, the “living wage” is separate and distinct (both in concept and in statutory
base) from the “minimum wage” under the FLSA.
George Tolley, Peter Bernstein, and Michael Lesage, Economic Analysis of a Living Wage
Ordinance (Washington: Employment Policies Institute, July 1999), p. 2.
Robert Pollin, and Stephanie Luce, The Living Wage: Building a Fair Economy (New
York: The New Press, 1998), p. 1.