Causes and consequences of American minimum wage legislation, 1911-1947
Seltzer, Andrew Joseph
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Permalink
https://hdl.handle.net/2142/21229
Description
Title
Causes and consequences of American minimum wage legislation, 1911-1947
Author(s)
Seltzer, Andrew Joseph
Issue Date
1995
Doctoral Committee Chair(s)
Alston, Lee J.
Department of Study
Economics
Discipline
Economics
Degree Granting Institution
University of Illinois at Urbana-Champaign
Degree Name
Ph.D.
Degree Level
Dissertation
Keyword(s)
Economics, History
Economics, Labor
Language
eng
Abstract
This dissertation examines the early history of American minimum wage legislation. Chapter 2, the first substantive chapter, examines the twenty eight state laws passed prior to 1938. It is shown that most of these laws were ineffective. Typically the minimum rate was set below the market wage, penalties for violations were insignificant, or no attempt was made to enforce the law. The chapter then explains why so many laws were passed when they did so little. The legislative process is modeled as a game between legislators, interest groups and voters. Passing an ineffective law was an equilibrium outcome because big business, a powerful interest group, opposed effective legislation while voters favored the principal of legislation but did not monitor its effectiveness.
Chapter 3 examines the passage of the Fair Labor Standards Act (FLSA). The legislators voting on the Act are assumed to be rationally interested in increasing their probability of re-election and incorporating their ideological preferences into legislation. The interest groups most concerned with the FLSA were industry, agriculture, employers of low-wage workers, unions, blacks, young workers, and the South. It is shown that congressional committees substantially altered the content of the bill in response to interest groups, there is no evidence of North-South divisions after controlling for other constituent characteristics, and the most important factors influencing voting were the proportion of the labor force earning sub-minimum wages and legislator ideology.
Chapter 4 examines the effects of the FLSA on three low-wage southern industries. Industry-specific peculiarities in technology and demand meant that individual industries adjusted to the minimum wage in different manners. In the lumber industry there was wide-scale evasion of the law. Many firms legally evaded coverage by producing solely for intrastate commerce, others illegally paid workers less than the minimum wage. Seamless hosiery firms reacted by replacing labor with capital. Hand operated machines were replaced with automatic ones, particularly in the lowest-wage plants. Finally, the tobacco industry was barely effected by the minimum wage because final product demand was very inelastic and low-wage labor comprised a low proportion of total costs.
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