The Fair Labor Standards Act was created in 1938 to fix four linked problems the Great Depression had exposed: wages too low to live on, workweeks so long they kept other people unemployed, widespread child labor that pushed adults out of jobs, and a state-by-state race to the bottom in which any jurisdiction trying to protect workers watched employers flee to one that didn’t. President Franklin D. Roosevelt signed the bill on June 25, 1938, and for the first time the federal government set a nationwide floor under wages and a ceiling on hours.1U.S. Department of Labor. Fair Labor Standards Act of 1938: Maximum Struggle for a Minimum Wage
The Conditions That Forced Congress to Act
By the mid-1930s, unemployment had peaked above 20 percent, industrial wages had cratered, and workers who still had jobs often took whatever an employer offered because the alternative was nothing. Sweatshop conditions common before World War I came roaring back once employers realized they could push hours up and wages down with no legal consequences.
Roosevelt’s first attempt at a fix, the National Industrial Recovery Act of 1933, let industries write their own wage and hour codes. The Supreme Court struck the NIRA down in 1935 as an unconstitutional delegation of legislative power, wiping out every labor code the government had negotiated and leaving millions of workers with no federal protections at all. The FLSA was Congress’s second try, written this time as a direct statutory mandate rather than a voluntary code system. Legislators fought over its scope for more than a year before Roosevelt signed it.
Setting a Wage Floor Against Poverty
The most visible reason for the law was to stop employers from paying starvation wages. Congress declared that labor conditions “detrimental to the maintenance of the minimum standard of living necessary for health, efficiency, and general well-being of workers” burdened interstate commerce and had to be corrected.2Office of the Law Revision Counsel. 29 US Code 202 – Congressional Finding and Declaration of Policy The language from Section 202 gave Congress its constitutional footing under the commerce power, but the practical idea was blunt: a full week of work should feed a person.
The economic logic reached beyond charity. Workers earning poverty wages couldn’t buy the goods American factories produced. Roosevelt and his allies in Congress saw a minimum wage as a way to restart consumer demand. More money in workers’ pockets meant more spending at local businesses, more hiring, and more spending again. The original 25-cent-per-hour floor looks trivial now, but it represented real money in 1938 and gave the federal government a mechanism it could ratchet upward over time.
Making Long Hours Expensive to Spread Work
The overtime provision attacked unemployment from a different angle. Section 207 requires employers to pay at least one and one-half times an employee’s regular rate for every hour worked beyond 40 in a workweek.3Office of the Law Revision Counsel. 29 USC 207 – Maximum Hours The original threshold was 44 hours, stepping down to 40 over three years.4Federal Reserve Bank of St. Louis. Full Text of Fair Labor Standards Act of 1938
The reasoning was simple. If an extra hour costs 50 percent more, an employer would rather hire a second worker at straight time than keep paying one worker at time-and-a-half. Congress wasn’t banning long hours. It was making them expensive enough to change the math. In a country where millions stood in bread lines while workers who still had factory jobs put in 50- or 60-hour weeks, redistributing hours across more people looked like common sense.
This work-sharing rationale has faded from public memory, but it shaped the law’s architecture. The overtime premium isn’t calculated on base hourly pay alone. The “regular rate” includes almost all compensation an employee receives for the workweek, including non-discretionary bonuses and commissions.5U.S. Department of Labor. Fact Sheet 56A: Overview of the Regular Rate of Pay Under the Fair Labor Standards Act
Pulling Children Out of the Labor Market
Child labor was the moral centerpiece of the FLSA. Reformers had been fighting it for decades, but two earlier federal child labor laws had been struck down by the Supreme Court, and a proposed constitutional amendment on the subject never got enough states to ratify. The FLSA took a different route: rather than directly banning child labor, it prohibited the shipment in interstate commerce of goods produced by businesses that employed children in violation of the Act’s standards.6Office of the Law Revision Counsel. 29 US Code 212 – Child Labor Provisions
The law defined “oppressive child labor” in two tiers. Children under 16 generally could not be employed at all, with narrow exceptions for a parent’s own business (outside manufacturing and mining) and for 14- and 15-year-olds in jobs that didn’t interfere with schooling or health. Workers 16 and 17 could hold most jobs but were barred from occupations the Secretary of Labor declared hazardous.7Office of the Law Revision Counsel. 29 USC 203 – Definitions
The point wasn’t only to remove children from the workforce for their own sake. Reformers understood that every job held by a 12-year-old was a job an adult breadwinner couldn’t get. Eliminating child labor protected children and redirected scarce employment toward heads of households at the same time.
Ending the Interstate Race to the Bottom
Congress’s stated findings in Section 202 reveal a purpose that often gets overlooked: the FLSA was a trade regulation as much as a labor law. Before 1938, states that tried to set minimum wages or limit hours watched businesses relocate to states with no such protections. Those low-standard states could then undercut competitors on price precisely because they paid workers less and ran them harder. Congress found this dynamic constituted “an unfair method of competition in commerce” and that substandard labor conditions in one state spread to others through the channels of interstate trade.2Office of the Law Revision Counsel. 29 US Code 202 – Congressional Finding and Declaration of Policy
A uniform federal floor solved the problem. Once every employer engaged in interstate commerce had to pay the same minimum wage and the same overtime premium, no state could gain a competitive edge by grinding its workers down further. The law took labor exploitation off the table as a business strategy, forcing companies to compete on efficiency and quality instead. That same interstate-commerce rationale gave Congress the constitutional hook it needed to regulate what had traditionally been a matter of state law.
What the 1938 Law Actually Covered
The ambitions were sweeping; the original coverage was not. In its first form, the FLSA set the minimum wage at 25 cents per hour, capped the standard workweek at 44 hours, banned oppressive child labor, and reached industries covering roughly one-fifth of the American labor force.1U.S. Department of Labor. Fair Labor Standards Act of 1938: Maximum Struggle for a Minimum Wage Most retail, service, and agricultural workers were left out entirely. Public-sector workers and domestic workers wouldn’t be covered for decades.
Even that limited reach represented something new in American law: the federal government telling a private employer how much to pay a worker and how long that worker could be kept on the clock. Every purpose Congress named in 1938 (livable wages, shorter hours, no child labor, a level competitive playing field) was pursued through the same lever: conditioning access to interstate commerce on decent labor standards. The scope has grown enormously since, but the reasons the law exists have not changed.