The Myth Busting Economist by Larry Malone

Does Minimum Wage Serve Any Purpose?

The minimum wage is an economic subject that we don’t hear much about these days. A federally mandated minimum wage has been with us since 1938, when Congress and President Roosevelt enacted a 25 cent-per-hour minimum to ensure a living wage for all workers. Our myth busting task in this column is a tough row to hoe, since there is no agreement among economists as to whether the minimum wage is effective in boosting the well-being of workers and families.

The introduction of a minimum wage at the end of the Great Depression was largely a success, but the verdict in more recent times is more mixed. Let’s look at some of the key developments concerning today’s minimum wage.

The first is that a federal minimum wage was never able to account for the dramatic differences in the cost of living among the 50 states. It’s always been cheaper to live in central New York than in Los Angeles, Chicago, Boston, Dallas or Atlanta. A one-size-fits-all approach, with a standard minimum wage for everyone, could never account for vast differences in the cost of living across the country.