October 31, 2012

Scrooge, Bob Cratchit and the minimum wage?

Read/Post Comments (2)

     I've been thinking about jobs. Jobs lost and new ones sought. And the minimum wage. One of the candidates I support in the 2012 elections has challenged her opponent because he opposes a minimum wage. "He doesn't even know what the minimum wage is!" she said. It made me wonder: "Do I know what the minimum wage is? I support the minimum wage, but do I need to reconsider the reason for my doing so?"

     Several years ago a witness in a jury trial was testifying. She was an elderly employee of my client, and was asked by the opposing attorney: "How long have you worked for this business, and what is your hourly wage?" Her answer: "Twelve years, and I earn $5.15 an hour. Minimum wage."

     I was horrified. This was 1997! That meant that if she did not miss any work time, in an eight hour day she would earn $40.00 a day, $200 a week, and $860.00 a month, before taxes. She had not had a raise for twelve years, and was a competent, hard worker, with a life, and responsibilities beyond her job. The jury looked at my client clearly with questions in their minds. "Have we got a female "Scrooge" employer, and a female Bob Cratchit employee, here?"

     The federal minimum wage today, and since 2009, is $7.25 per hour. In 1938, when the first minimum wage was set, it was .25 per hour.

     In 1843, when Charles Dickens published A Christmas Carol and created Scrooge and Bob Cratchit, solving the problems of the poor through legislating how little employees could be paid, was nearly eighty years away. In 1936, in the midst of the Great Depression, President Roosevelt promised to constitutionally protect American workers if he was re-elected. Wages were at an all time low. President Roosevelt was re-elected by a landslide, and he kept his promise to the voters with the 1938 Fair Labor Standards Act (FLSA; web page here). In addition to establishing a mandatory nation-wide minimum wage of .25, the FLSA introduced many other workers' protection laws still in effect today, including banning child labor and establishing workplace safety statutes.

     A "minimum wage" requires that an employer not pay employee wages less than the amount set. Also, employees cannot legally "sell their labor" for less than that amount. Penalties can be imposed for violating the law. In our United States, a federal minimum wage impacts all fifty states. Most of the fifty states also have minimum wage laws and a minimum wage law in any state, impacts only that state. Where federal and state law have different minimum wage rates, the higher standard applies. To see minimum wage laws among the states, see the United States Department of Labor web site, click here.

     Supporters of the minimum wage say that it reduces poverty, and provides minimal increases to the standard of living of workers, giving them access to acquiring work experience and becoming self sufficient. Business owners say that it interferes with business decisions, and they do not believe that social engineering (reducing poverty) should be their responsibility.

     I'm convinced. A carefully crafted minimum wage law, which is what we have, is good for the country.

Posted by Peggy S. Hedrick at 1:28pm

Click here to comment:

I think you're missing part of the analysis here. I think we can all agree that a minimum wage is a good thing. Similar to state anti-price gouging laws, the minimum wage protects those employees who, due to circumstances outside their control, occupy significantly disadvantaged bargaining positions. The current job market, with its high unemployment and under-employment rate (and the corresponding bargaining strength that situation affords employers) is particularly illustrative of my premise.

The piece of analysis you miss is whether the federal goverment has the authority to engage in such price fixing. I would submit that it doesn't. Or, more precisely, it didn't have the authority when the FLSA was originally passed.

Under current Supreme Court precedent (ignoring Raich as inapposite), the Commerce Clause is read as including the power to regulate any activity which, in the aggregate affects interstate commerce. Prior to Wickard v. Filburn, which was decided in the '40s, the Commerce Clause was limited to controlling activities that were interstate in nature. While some jobs would be included, the majority would have been intra-state and therefore out of bounds. Obviously, given current Commerce Clause jurisprudence, this argument is largely moot.

Believing, as I do, that the federal system is great in part because it allows for state-level experimentation, the minimum wage shoukd have been left to the states. If it was, who is to say that some better method would not yet have been devised? If the current system is, in fact the best, then each state could have passed it individually. The FLSA (along with many other federal legislative schemes, see the federal estate tax) acts to stifle the states' innovation in this field.

So, while a minimum wage limitation is a prudent legislative measure for the states, it is an action, which at the time of its enactment, represented an unconstitutional violation of the Commerce Clause. My preference would be for it to remain a decision for the states. - Terry
Posted by Terrance Jones on 11/1/2012 at 1:16pm

I agree, Terry, that justifying the 1938 FLSA by the Commerce Clause at the time of its enactment may have been a stretch. But not nearly as far off base as penalizing a farmer for growing more wheat for his own family's use in 1942 (Wickard v. Filburn). I also believe that your preference and the courts' preference should remain a decision for 1) the parties, or, when appropriate, 2) the states. And, when the contradictions among the state "solutions" just don't work, and/or create more problems than they solve, or are a threat to the country, I hope there are federal Judges brave enough to step in.

What a terrific analysis, Terry! And well written and stated. It's great to have family willing and able to wrap their minds around these things. Thank you for sharing.
Posted by Peggy Hedrick on 11/3/2012 at 6:50am

I agree wholeheartedly! Even at minimum wage a lot of people have trouble meeting the bare minimum living standard. Excellent posting! --K
Posted by Kay Hedrick on 11/1/2012 at 10:23am