The Secret History of the Minimum Wage - Reason.com

The Secret History of the Minimum Wage - Reason.com

In his elegant and persuasive book Illiberal Reformers, the Princeton economist Thomas C. Leonard presents a third idea: Tell him where the minimum wage came from. After all, George uses the historical argument that the Industrial Revolution was caused by exploiting workers, and he thinks that we got rich subsequently by struggling against the exploitation. As 1066 and All That put it, "Many remarkable discoveries and inventions were made [in the early 19th century]. Most remarkable among these was the discovery (made by all the rich men in England at once) that women and children could work for 25 hours a day…without many of them dying or becoming excessively deformed. This was known as the Industrial Revelation." It's mistaken, but no matter. George clearly believes a history is relevant to the assessment of a present result.

All right. Leonard shows in detail that the minimum wage arose in the early 20th century as a Progressive policy designed to screw low-wage workers. Designed. And unlike many other laws "designed" to achieve a result (for example, protective tariffs designed to enrich America), the minimum wage achieved what it was after.

The first minimum wage was in Victoria, Australia, in 1894, but it quickly spread to other places. The minimum wage, writes Leonard, was "the holy grail of American progressive labor reform, and a Who's Who of progressive economists and their reform allies championed it." The inability to command a wage 50 percent above the going unskilled rate would keep out the riffraff. "Removing the inferior from work benefited society by protecting American wages and Anglo-Saxon racial purity."

"Of all ways of dealing with these unfortunate parasites," wrote the British socialist Sidney Webb in 1912 in the University of Chicago's Journal of Political Economy, "the most ruinous to the community is to allow them to unrestrainedly compete as wage earners." What was to become of them when the minimum wage excluded them from employment? Henry Rogers Seager, a Progressive economist at Columbia, gave in 1913 the usual reply: "If we are to maintain a race that is to be made up of capable, efficient and independent individuals and family groups we must courageously cut off lines of heredity that have been proved to be undesirable by isolation or sterilization."

By 1919, 15 American states had enacted minimum wages, focused especially on women. In the U.K. a minimum wage, supported by Sidney and Beatrice Webb, was instituted in 1907. Back in the U.S., E.L. Godkin of The Nation had articulated the now-libertarian complaint that the minimum wage is a bad interference in what workers are worth, and that if income is undignified taxpayers should make it up. The present-day readers of The Nation, among them George, would not agree. In 1923, the Supreme Court's decision in Adkins v. Children's Hospital briefly challenged the doctrine that it's a good and proper purpose of public policy to prevent the allegedly inferior (women, blacks, immigrants from Eastern and Southern Europe, the third "generation of imbeciles") from having a job. But in 1938 a non-packed Court reversed itself and acceded to the federal minimum for men and women.

"Race suicide" theory, adopted with rare exceptions by most social scientists before National Socialism shamed it, held that the inferior races with low wage "standards" would drive down wages of "Saxons," thus reducing their fertility—unlike the wretched blacks and immigrants, who would always have large families. Leonard notes that the low-wage folk, including women, were simultaneously objects of pity and objects of fear, a "strange and unstable compound of compassion and contempt." He summarizes the argument about a "race to the bottom," that "the decent capitalist…who wanted his workers to have a living wage…could not compete with unscrupulous rivals, who hired low-standard women, children, immigrants, blacks, and the feeble-minded."

The race-to-bottom argument is still heard from amiable and well-meaning people on the left, such as former Labor Secretary Robert Reich and Harvard professor Michael Sandel. But not only on the left. That economic growth started in Northwestern Europe has often been spun into a theory of racial superiority of the Saxons, despite the crushing evidence that highly non-Saxon folk, such as the Chinese and the Indians, if they adopt libertarian policies, can do it too. The Euro-centric theory is still heard in conservative circles, a notion that European superiority started deep in history, back in the Germanic forest.

The minimum wage was the easiest to administer of a host of eugenic proposals put forward a century ago, such as Oriental exclusion (the oldest), literacy tests (for Jim Crow), voter registration, head taxes, the outlawing of contract labor, celibate labor colonies, deportation, restrictive union rules, and sterilization. By the end fully 30 states had forcible sterilization laws, Indiana being the pioneer in 1907. Democratic Gov. Woodrow Wilson signed New Jersey's law in 1911. It was not Nazi Germany that led the way: Progressive Norway and Sweden down to 1970 sterilized more people as a percentage of their populations.