What is the Minimum Wage?
By Sarah Weber
To continue our blog series, we felt it was important to discuss minimum wage, its history, and its implications with affordable housing. Federal minimum wage is currently set at $7.25 per hour and has not been raised since 2009. Minimum wage also varies on a state level, yet, North Carolina’s is also set at $7.25 per hour. As mentioned in last week’s blog, minimum wage incomes are roughly equal to 17% AMI in North Carolina. Due to inflation and other factors, the cost of living continues to increase making it more difficult to live off of a minimum wage.
It is important to understand the history behind the federal minimum wage and the trends of policy change throughout the past century. The first minimum wage laws date back to 1912 when progressives in Massachusetts pushed the state legislature for change (Procon.org 2021). Many states followed suit leading to a national debate about the constitutionality of a minimum wage law. With the start of The Great Depression, the wage crisis exploded as individuals already not making a living wage lost their jobs. This focusing event led to President Franklin D. Roosevelt to establish the Fair Labor Standards Act in 1938. After years of political pushback against other attempts at a federal wage law, the new federal minimum wage was established as $0.25/hour (Procon.org 2021). This law also helped establish other necessary labor standards, but was not widely enforced immediately.
The federal minimum wage has gradually increased throughout the past century in order to adjust with inflation. In 2007, the Fair Minimum Wage Act passed in Congress resulting in a gradual minimum increase from $5.15/hour to $7.25/hour over the course of two years (elaws n.d.). This was a significant legislative step in improving wages for workers in the United States, however, it has not increased since 2009. This is inherently problematic as inflation has increased at a fast rate leaving $7.25/hour to be nowhere close to a livable wage.
To further understand this wage disparity, let’s compare current AMI to that of 2009. Area Median Income in 2009 for North Carolina was set at $43,700/year (Digest of Education Statistics 2010). This would leave an individual working a minimum wage job to earn 35.5% AMI. As mentioned in my previous post, North Carolina AMI is now set at $87,000/year, leaving minimum wage workers to earn only 17% AMI. This difference in income is due to several factors, one of which being inflation. With the federal minimum wage not being adjusted for inflation since 2009, this AMI wage disparity will continue to increase. There is continual national debate about raising the federal minimum wage, however, it is challenging to implement due to the change in inflation since its last change was 14 years ago.
Now you may be wondering how this impacts the search for affordable housing. Similar to AMI, housing costs have increased significantly making it difficult to afford a living space with a stagnant minimum wage. Since 2010, the cost of a home in North Carolina has increased by 31.5% with rental costs increasing by 14.6% (Tanner 2022). These costs continue to rise with inflation and other economic factors leaving the supply of truly affordable housing to dwindle. It is for this exact reason that places like the P.E.A.C.H Apartments are vital to our communities. Individuals making a minimum wage deserve a place to live in their community, and without the raising of the federal minimum wage, the search for affordable housing will only become more challenging.
Work Cited:
Digest of Education Statistics, 2010. National Center for Education Statistics (NCES) Home Page, a part of the U.S. Department of Education. (2010). https://nces.ed.gov/programs/digest/d10/tables/dt10_025.asp
History of the minimum wage - procon.org. Minimum Wage. (2023, January 10). https://minimum-wage.procon.org/history-of-the-minimum-wage/
Tanner, M. (2022). Keeping North Carolina’s Housing Affordable. Cato.org. https://www.cato.org/policy-analysis/keeping-north-carolinas-housing-affordable
What is the minimum wage?. Elaws - Fair Labor Standards Act Advisor. (n.d.). https://webapps.dol.gov/elaws/faq/esa/flsa/001.htm#:~:text=The%20Fair%20Minimum%20Wage%20Act,wage%20is%20%245.85%20per%20hour.