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Minimum Wage

7 min read

Part of Markets and money.

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Every episode (4)

Who argued it

Art Carden · Michael Tanner · Joe Mathews · Matt Zwolinski

Rent Control · Free Markets · Education · Occupational Licensing · Criminal Justice Reform · Libertarianism · 10th Amendment · Federalism

Background: minimum wage laws

The constitutional objection: criminalizing a contract

Bob Zadek frames the minimum wage as a constitutional question rather than a policy one. In his discussion with Damon Root, he says the debate in America today is conducted at the level of whether people deserve a living wage, whether it raises prices, and whether it puts lower-skilled people out of work, while there is almost no discussion of the core constitutional issue: that minimum wage laws criminalize two consenting adults who want to enter into a contract for the sale of labor. He offers the example of a worker who wants to sell his labor for $6 an hour and an employer who agrees, calling it a transaction between two consenting adults enjoying economic freedom overruling_government_overreach__damon_root_on_the.

Root grounds that objection in the classical understanding of economic freedom, which he says the courts held a century ago and libertarian legal scholars and advocates hold now: government may regulate the economy under the Constitution, but the regulation must be justified as a public health, safety, or welfare measure. Pollution going into a river is such a case; workplace health and safety conditions may allow some government role. But bartering over wages, Root says, becomes a special interest legislation question rather than a public health or safety one, and the liberty of contract and economic liberty doctrines then argue that the government is exceeding its power overruling_government_overreach__damon_root_on_the.

Zadek presses the point as a policy matter: there is no victim when two people voluntarily contract, and the transaction is mutually beneficial, yet it becomes criminal because of the application of minimum wage laws. He calls this a perfect example of the subordination of economic rights, and says economic freedom was taken for granted for a good deal of American history until the progressive movement subordinated it overruling_government_overreach__damon_root_on_the.

Lochner and its reversal

Root recounts the focal case. Lochner v. New York was a Supreme Court decision issued in 1905, arising from a New York law called the Bakeshop Act, passed in 1895, which regulated the baking industry in many ways, including a 10-hour maximum day and 60-hour maximum week. The Court held that the maximum hour provision had nothing to do with health or safety—one could work 12 hours in a bakery and the bread would be just as safe and the workers no more endangered—while the other provisions, such as ceiling height and drain pipes, were fine. The Court struck down the maximum hour law as a violation of the right to liberty of contract: the employer had a right to say how many hours he needed people to work, and the employee had a right to contract for those hours overruling_government_overreach__damon_root_on_the.

Progressives, Root says, pointed to the case as conservative or libertarian judicial activism, claiming the Court read a laissez-faire economic theory into the Constitution and overturned the will of the people of New York. Lochner set the terms of the legal debate for the next 30 years and was cited in Supreme Court cases dealing with economic regulations. Progressives and then the New Dealers hated the decision and wanted it overturned; in 1937 the Supreme Court did so, in what Root calls the New Deal constitutional revolution, saying that the Court used to protect economic liberty and liberty of contract but would not do it anymore. That doctrine, Root says, has been dead ever since overruling_government_overreach__damon_root_on_the.

The racist history

Zadek argues that minimum wage laws were initially enacted by whites in the construction trades in New England and in New York because blacks were coming up from the South in the ’20s and were willing to work for much cheaper than the prevailing wage of union workers in the Northeast; the laws were enacted to prevent blacks from working for less. He attributes this to cowardice and to workers who refuse to accept only what they are worth, wanting government to artificially inflate the value of their job by preventing competition Let Them All In (2013).

Michael Tanner makes the same historical case: minimum wage laws were in many cases intended to block African American participation in labor fields, and the people who sponsored the legislation were often explicit that they worried about African American laborers undercutting white wages, much as people now worry about immigrants undercutting wages. They created occupational licensing laws, union shops African Americans could not join, and minimum wage laws that priced many African Americans out of the labor market. Tanner adds that today’s advocates of the minimum wage are not racist, but the laws still have the impact of blocking entry-level work, particularly for young African American men with little attachment to the labor force or a big skill set Towards a Libertarian Theory of Anti-Racism (2020).

Zadek offers a specific piece of evidence: a hearing he believes took place in 1948 before the US Senate Labor Committee, for which an audio record exists, in which JFK, then a senator, and Jacob Javits discussed a federal minimum wage increase. Zadek says JFK insisted on the increase because his constituents, the Irish in Massachusetts and Boston, complained that blacks were taking their jobs, and said he needed an increase to protect white people’s jobs. Zadek calls the minimum wage a systemically racist statute on the books today Towards a Libertarian Theory of Anti-Racism (2020).

Poverty, entry-level work, and the FAST Act

Tanner lists minimum wage laws among the policies that block poor people from participating in the economy, alongside occupational licensure and zoning, in a book that examines government policies that make people poor rather than debating whether to increase or cut poverty spending by a billion dollars Libertarian Anti-Poverty Policy (2019).

In a separate episode, Zadek argues that where entrepreneurs and customers meet with relatively equal bargaining power—the hair salon, the local gym, the small business—there is no power imbalance and no need for government protection; economic freedom is damaging to the consumer only without small business. With small business, he says, you do not need minimum wage laws or much employment law, because you can quit and go elsewhere and jobs are plentiful The Decline of American Independence (2020).

Zadek introduces a 2022 discussion with Richard Epstein by describing the newly enacted California FAST Act—the Fast Food Accountability and Standards Recovery Act—as seeking to socialize the entire California fast food industry by putting it under strict governmental control, and notes that other states are looking at what California has done. He frames the conversation as covering the implications of both the act and minimum wage laws on economic life in America Which Side Are You On? (2022).

Across episodes: the same argument, restated

The episodes show no development in the argument across episodes: the same claims recur. Zadek makes the racist-origins case in 2013 and again in 2020, with Tanner supplying the scholarly version in the later episode; the constitutional objection appears in 2014 through Root’s account of Lochner and its 1937 reversal; Tanner adds the poverty and entry-level framing in 2019; and the 2022 episode extends the topic to the California FAST Act.

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