The US Minimum Wage in Comparative Perspective

Despite strong voter support for higher minimum wages, the US federal minimum wage has been stuck at $7.25/hour since 2009. This is the longest period of minimum wage stagnation not only in US history but also in the OECD and has resulted in an erosion in its real value over time. Existing scholarship on the politics of the minimum wage in the US has attributed federal inaction to declining union density, the power of wealthy interests, and increasing polarization and partisanship. Although these factors are important, we emphasize the overlooked role of institutions. The US system of minimum-wage setting, in which the legislative branch initiates bills to raise the minimum wage, passes them, and then secures presidential approval, is highly unusual. In most countries, the executive branch has the authority to raise minimum wages without legislative approval. This institutional difference produces both fewer veto points and a distinctive political logic. When executives have the authority to raise the minimum wage, they cannot easily duck responsibility for wage stagnation; they can also manipulate the minimum wage for maximal effect during election season. The result, we argue, is more frequent and generous increases to the minimum wage. Through a comparative analysis with the Hungary and the United Kingdom, we illustrate how institutions shape the politics of the minimum wage, resulting in almost yearly raises there and substantial improvements in the real value of the minimum wage.