1938 Minimum Wage: FLSA Rates, Overtime, and Child Labor

The first minimum wage in 1938 was $0.25 per hour, set by the Fair Labor Standards Act that President Franklin D. Roosevelt signed on June 25, 1938 and that took effect on October 24 of that year.{¹} The rate reached roughly one-fifth of the American labor force and came with a built-in schedule of increases, a cap on weekly hours, and a ban on oppressive child labor in covered industries.

Why Congress Set a Federal Wage Floor

The Great Depression had pushed wages in some industries to levels that could not sustain a family. Unemployment was high, employers held the leverage, and labor unrest was widespread. Roosevelt made a federal minimum wage part of his New Deal, arguing that a race to the bottom on pay was destabilizing the whole economy. If every employer had to pay at least a set rate, no business could undercut competitors by starving its workers.

Congress grounded the law in its power to regulate interstate commerce, reasoning that substandard labor conditions burdened trade between states and created unfair competition.{²} The statute is codified at 29 U.S.C. Chapter 8.{³}

From a Quarter an Hour to Forty Cents

The starting rate of $0.25 per hour took effect October 24, 1938. Rather than jump the floor in a single leap, lawmakers built in a schedule so employers could plan. The rate rose to $0.30 per hour on October 24, 1939.{⁴}

The final step in the original schedule brought the rate to $0.40 per hour by October 24, 1945, seven years after the law first took effect.{⁴} The timeline was a compromise: immediate relief for workers earning pennies per hour, with a runway for businesses still recovering from the Depression.

The 44-Hour Week and Overtime Premium

The FLSA did more than set a wage. It also capped the standard workweek and required a premium for anything beyond it. When the law took effect in 1938, the cap was 44 hours per week, and hours over that threshold had to be paid at one and one-half times the regular hourly rate.{¹}

The hours cap had its own schedule. It dropped to 42 in October 1939 and to 40 in October 1940. That 40-hour standard workweek became permanent and remains the federal overtime threshold today.{⁵} The overtime premium discouraged working existing staff to exhaustion and gave employers a financial reason to hire additional workers instead. Spreading available work across more people was an explicit policy goal for a country still dealing with mass unemployment.

Who the 1938 Law Covered

Coverage turned on a single question: was the employee engaged in interstate commerce or producing goods for shipment across state lines? Because Congress used its power over interstate trade to justify the law, the reach was limited to workers whose jobs had some connection to commerce between states.{⁶}

In practice, that meant manufacturing, mining, transportation, and similar industries that carried national trade. The interstate test also produced awkward dividing lines within a single workplace: two employees at the same factory could have different coverage depending on whether the goods they handled personally crossed state borders.

Workers Left Out

The exclusions shaped the law as much as the inclusions did. Agricultural workers and domestic service employees, including housekeepers and cooks, were carved out entirely. Southern members of Congress, whose votes were needed to pass the bill, insisted on excluding the industries that employed the vast majority of Black workers in the South. Farmworkers did not gain minimum wage coverage until 1966, and household employees waited until 1974.{¹}

Retail and service employees were also largely outside the law’s reach in 1938. For workers in those sectors, pay continued to depend on local market conditions and whatever bargaining power they could muster individually.

Child Labor Rules

The FLSA set a general minimum working age of 16 for employment in covered industries. Children aged 14 and 15 could work in occupations outside manufacturing and mining, but only during hours that would not interfere with schooling and under conditions that would not harm their health.{} For hazardous work, the floor was 18.{⁷}

Enforcement worked through the shipping channel: it was illegal to ship goods in interstate commerce if they had been produced in a facility that used oppressive child labor within the preceding 30 days.{⁸} Earlier federal child labor laws had been struck down in court; by tying the ban to interstate commerce and folding it into the broader wage-and-hour framework, the 1938 act gave the restriction a stronger constitutional footing.

Enforcement and Penalties

The wage and hour rules had real teeth. Employers who willfully violated the law faced criminal prosecution, with penalties of up to $10,000 in fines, up to six months in prison, or both, with jail time available on a second conviction.{⁹}

On the civil side, the law gave workers a private right of action. Underpaid employees could sue to recover their unpaid wages plus an equal amount in liquidated damages, effectively doubling the recovery, and courts were required to award reasonable attorney’s fees to a prevailing employee, which made it financially possible for low-wage workers to bring claims.{⁹} The Department of Labor was authorized to investigate workplaces, inspect records, and seek court injunctions to stop ongoing violations.

The Supreme Court Upholds the Law

Opponents challenged the FLSA in court, arguing that Congress had overstepped its authority by regulating wages and hours in private businesses. The test case reached the Supreme Court in 1941 as United States v. Darby Lumber Co. The Court upheld the law unanimously, ruling that Congress’s power over interstate commerce extended to regulating working conditions in industries producing goods for interstate trade, even when the regulated activity itself happened entirely within one state. The decision overruled Hammer v. Dagenhart, an earlier case that had struck down a federal child labor law, and rejected Tenth Amendment objections by holding that the amendment “is not a limitation upon the authority of the National Government” to use appropriate means to exercise its granted powers.{¹⁰} Every subsequent increase to the federal minimum wage and every expansion of coverage has built on the constitutional foundation Darby confirmed.

1
U.S. Department of Labor. Fair Labor Standards Act of 1938 – Maximum Struggle for a Minimum Wage
2
U.S. Department of Labor. 29 USC 201 – Fair Labor Standards Act of 1938
3
Office of the Law Revision Counsel. 29 USC Ch 8 – Fair Labor Standards
4
U.S. Department of Labor. History of Federal Minimum Wage Rates Under the Fair Labor Standards Act, 1938 – 2009
5
Office of the Law Revision Counsel. 29 USC 207 – Maximum Hours
6
Federal Reserve Archival System for Economic Research (FRASER). Fair Labor Standards Act of 1938
7
Office of the Law Revision Counsel. 29 USC 203 – Definitions
8
Office of the Law Revision Counsel. 29 USC 212 – Child Labor Provisions
9
Office of the Law Revision Counsel. 29 USC 216 – Penalties
10
Justia US Supreme Court. United States v Darby, 312 US 100 (1941)