Dawn Addis, the Democratic member of the California legislative assembly for the 30th district, sent me an email in recognition of Labor Day. In it, she wrote:
This Labor Day holiday, let’s remember it is because of hard-fought wins that we have a five-day work week, a minimum wage and even weekends.
I think she’s only one third right. It is true that labor unions pushed for those three policies. The only one, though, for which unions can take credit is the minimum wage. More on that anon.
What was the main factor behind the five-day work week and weekends free from work? Rising standards of living. Leisure is a normal good and so as real income rises, we demand more of it. The effect of rising income, to the extent it’s due to rising wages and salaries (which it largely is), is actually ambiguous. On the one hand, as noted, there’s an income effect: we want more leisure. On the other hand, the price of leisure, which is the foregone after-tax wage, rises and so we want less leisure. It’s pretty clear, though, that the income effect has dominated. So with or without labor union pressure, we almost certainly would still have the five-day work week. The difference is that without the law, there would be more flexibility so that the (I assume) relatively small percent of workers who wanted to work for six days without time and a half for overtime would be able to work for employers who wanted them to. So the effect of unions, to the extent they were responsible for the legislated 40-hour work week, was to foreclose options. They were responsible for the legislated 40-hour work week but not for the de facto 40-hour work week.
On the minimum wage, she’s right. But she shouldn’t be bragging. The minimum wage at the federal level came about in 1938 in part because labor unions in the industrial north, especially the New England states, noticed that employers were moving to the southeast to take advantage of lower wage rates, often paid to black people. They wanted to reduce the south’s competitive advantage so that employers would be less likely to move.
Back then, and even into the 1950s, politicians could be more blunt about their motives. So in discussion of the minimum wage at a committee hearing in Washington in 1957, one U.S. Senator from a New England state stated the following:
Of course, having on the market a rather large source of cheap labor depresses wages outside of that group, too—the wages of the white worker who has to compete. And when an employer can substitute a colored worker at a lower wage—and there are, as you pointed out, these hundreds of thousands looking for decent work—it affects the whole wage structure of an area, doesn’t it?[1]
[1] From U.S. Senate, Labor and Public Welfare Committee, Proposals to Extend Coverage of Minimum Wage Protection, Hearings before the Subcommittee on Labor, 85th Congress, 1st session, March 20, 1957, p 856.
That senator was John F. Kennedy. It has been well known for decades that one of the effects of the minimum wage has been to price lower-skilled workers out of jobs. Back then, that category had a disproportionately high number of black people and still has a disproportionately high number of black youth.
READER COMMENTS
Ahmed Fares
Sep 4 2023 at 3:50pm
From a recent article by Alex Tabarrok titled: “The Harried Leisure Class”, which is about a book by Staffan Burenstam Linder with the same title:
https://marginalrevolution.com/marginalrevolution/2023/06/the-harried-leisure-class.html
Vivian Darkbloom
Sep 4 2023 at 4:34pm
“The only one, though, for which unions can take credit is the minimum wage.”
I’m not so sure about that, either. The first federal minimum wage was incorporated in the National Fair Labor Standards Act of 1938. Large parts of the organized labor movement opposed the minimum wage on the grounds, among other things, that it would potentially set a ceiling rather than a floor. Thus, the initial bill excluded those employees covered by collective bargaining from the minimum wage mandate.
https://www.epi.org/blog/a-history-of-the-federal-minimum-wage-85-years-later-the-minimum-wage-is-far-from-equitable/
Given the significant opposition of much of the organized labor movement to the initial federal minimum wage law, I don’t think it is appropriate to give unions credit (blame?) for that development.
David Henderson
Sep 4 2023 at 4:56pm
Thanks, Vivian.
I went to the link and found this paragraph that relates to unions and the minimum wage:
So they did favor a minimum wage.
Vivian Darkbloom
Sep 4 2023 at 5:09pm
I meant to link to the underlying article and not the blurb that appeared in that blog post:
https://www.bls.gov/opub/mlr/2000/12/art3full.pdf
Supporting a bill (or rather, not opposing it) as long as it doesn’t apply to you doesn’t give much credence to the later claim that you were responsible for it. As usual, the reality is much more complicated.
David Henderson
Sep 6 2023 at 10:51am
You write:
Actually, it gives lots of credence. A standard tactic of organizations that want to hobble competition is to have laws apply to their competition but not to them. Think of the many occupational licensing laws that grandfather people who are already in those occupations.
Vivian Darkbloom
Sep 6 2023 at 1:26pm
The original claim was that unions can take credit (not just partial credit) for the introduction of the minimum wage. Your argument now seems to be, without more, that because they allegedly had bad motives, this gives credence to that argument?
David Henderson
Sep 7 2023 at 5:16pm
Vivian writes:
I don’t think any organization ever gets full credit for a policy change for which many politicians voted. The politicians get credit too.
You write:
No, and this is a rare miss for you, who are usually spot on. I’m saying that they wanted a minimum wage that didn’t apply to them, assuming that the link you gave was accurate. But they wanted a minimum wage to price out competitors.
Vivian Darkbloom
Sep 9 2023 at 2:12pm
Sorry for the delay in responding to your latest, David. I reluctantly relented to a brief family outing which kept me from the keyboard. I managed, though, to prevail in an adjustment to the program to shorten it a bit. So, you understand, that little outing, as enjoyable as it was, is not something I can take credit for.
And, I was reluctant to respond to your comment which so graciously indicated that I am “usually spot on”. Nevertheless…
I suspect you and I have a somewhat different idea of what it means to merit “taking credit” for something. While the term admittedly has no precise meaning, I believe that the idea falls more closely to either initiating something or being primarily responsible for it. In ordinary parlance, I think it means much more than merely supporting something that eventually comes about through the efforts primarily of others. This is so especially when “taking credit” is not limited by any sort of adjective or adverb that diminishes the full force of that unmodified phrase.
And so, with respect to the issue of the minimum wage, can the organized labor movement (unions) “take credit” for the introduction of the minimum wage? I don’t think so.
As you know, the federal minimum wage law eventually incorporated in the FLSA of 1938 was preceded by the 1933 National Industrial Recovery Act of 1933 and, subsequent to that, Roosevelt’s “President’s Reemployment Agreement” where employers signed contracts committing themselves to paying a minimum wage. As any law student can tell you, those provisions where held unconstitutional under Schechter Poultry and later Tipaldo, both landmark Supreme Court decisions.
Here, after winning re-election in a landslide enter Roosevelt threatening to stack the Supreme Court in large part due to unhappiness with those decisions. Following these threats, the Supreme Court changed course in West Coast Hotel Company v. Parrish (1937).
Roosevelt was also moved (his own account) by a note he got from a young girl (not a union member) during the election (after the SCt decisions referred to above) which read, in part,:
I wish you could do something to help us girls….We have been working in a sewing factory,… and up to a few months ago we were getting our minimum pay of $11 a week… Today the 200 of us girls have been cut down to $4 and $5 and $6 a week.
Enter here, Labor Secretary Francis Perkins who had been waiting for an opportunity to re-introduce working conditions and minimum wage legislation which found its way into the FLSA of 1938. The primary contribution of the organized labor movement to the latter was to delay its passage and limit it in scope. I have not uncovered any major lobbying effort of unions to get that bill and specifically the minimum wage provisions contained in it, introduced. Unions would therefore be a fair bit down on the list of those to whom I would “give credit” for the federal minimum wage.
Again, as far as the second part of your comment is concerned, I contend that it is a far cry from initiating a bill proposing a minimum wage and subsequent to it’s introduction actively working to limit it’s scope. History is usually much more complicated than such pat characterizations.
(Somehow, this reminds me of the history of Medicare D. Should we “give credit” to George Bush Jr for introducing that program or did he do so to head off a much more expansive and expensive program advocated by Democrats?).
Despite our apparent disagreement, I hope that this discussion adds a bit more nuance to the issue than was evident from your original post.
Viv
MarkW
Sep 5 2023 at 6:49am
Plus ça change:
https://www.theguardian.com/us-news/2016/apr/12/los-angeles-15-dollar-minimum-wage-unions
Richard W Fulmer
Sep 4 2023 at 6:04pm
There are those who believe in what I call the “theory of enlightenment.” According to the theory, people engaged in terrible and immoral practices for millennia – child labor, women treated as second-class citizens, long work weeks, destruction of the environment. Then one day an enlightened being pointed out the immorality. Unions were organized and people marched in the streets, waved banners, and chanted slogans. Laws were passed and utopia reigned.
But waving banners did little to improve anything. Change was the result of the huge gains in productivity brought about by free individuals, private property, freedom of contract, and a system of profit-and-loss all operating within a rule-of-law framework.
When plows were little more than sticks, productivity was so low that people, including children, worked long hours. Hard work was the only alternative to starvation. The Industrial Revolution magnified people’s productivity so much that child labor and 80-hour work weeks became the exception rather than the rule. It was only then that we had the luxury of anti-child-labor laws and limits on working hours.
Women were, and still are, second-class citizens in societies in which brute strength is the main requirement for survival. It was only after technology reached the point at which brains counted for more than brawn that women were placed on an equal, perhaps more than equal, footing.
Poverty correlates with pollution. A clean environment is a luxury good. Poor people are more concerned with survival than with clean air. Western, capitalist nations are far cleaner than either developing or centrally controlled nations.
steve
Sep 5 2023 at 10:28am
Entertaining hyperbole. While there was no enlightened being, there was certainly a lot child labor that was pretty harsh and cruel. while the people for whom they worked lived in luxury. Lots of women really were 2nd class citizens. While there may or may not have been flag waving it wasn’t uncommon for laborers to be beaten shot and killed when they. asked for a larger share of what they produced. Sometimes when the owners brought in the Pinkerton’s they even shot the families of the workers. Locking workers inside of fire traps may have increased productivity but when the inevitable fire happened people died.
So while you are correct to note that workers were not a bunch of angels on a mission from God if we want to remember history as it actually occurred there was no shortage of company owners who treated workers harshly. and very poorly just because they could.
Steve
Richard W Fulmer
Sep 5 2023 at 11:03am
Why is it hyperbole to observe that increased productivity is a prerequisite for eliminating child labor and reducing work hours? Before the Industrial Revolution, child labor wasn’t a “problem,” it was simply what children had to do to survive.
When child labor laws were passed in countries like India in which productivity had not yet risen sufficiently, children continued to work because the only other option was starvation. Unfortunately, with no recourse to the law, they were exploited far worse than before.
And where did I suggest that factory owners were angels and that workers weren’t? I made no claims about anyone’s morality or lack thereof.
steve
Sep 5 2023 at 2:59pm
So the following is your serious interpretation of history? Interesting. Who was that enlightened being?
“Then one day an enlightened being pointed out the immorality. Unions were organized and people marched in the streets, waved banners, and chanted slogans. Laws were passed and utopia reigned.”
While I would agree that increases in productivity lead to improvements there is still no ignoring the extremes of abusive behavior that existed just because of the disparity in wealth and influence. Much of that was alleviated by changes in norms, the bad behaviors being exposed to the public and sometimes even laws. I dont really much problem with child labor, just abusive child labor.
Steve
Richard W Fulmer
Sep 5 2023 at 4:52pm
No, go back and reread my post. That is not my interpretation of history, that’s the standard leftist interpretation of history that I call the “theory of enlightenment.” It’s the interpretation exemplified by Dawn Addis’ quote at the beginning of Dr. Henderson’s article. “Progress is made by activists” is the fairy tale that the left tells about itself.
steve
Sep 5 2023 at 6:56pm
I read way more is healthy for anyone. I have never heard or read that claimed to be the official leftist view. Who says stuff like that?
Steve
Richard W Fulmer
Sep 5 2023 at 7:12pm
Dawn Addis, for one.
Thomas Hutcheson
Sep 5 2023 at 9:59am
“Industrial policy” has many problems, the man one being using the wrong instrument for the policy objective. (If you want more energy generated without emitting CO2 one wud subsidize the energy so produced, not the investment in some specific technology that produces zero CO2 energy. The problem of requiring higher cost labor to be employed in the process of producing the zero CO2 energy is pretty small potatoes.
Ditto the risk of disruption of supply of some “critical” product. Tax imports in proportion to the riskiness
Jon Murphy
Sep 5 2023 at 2:18pm
No, I’m quite sure that is not the main problem…
Anders
Sep 6 2023 at 9:38am
Unions get credit for the minimum wage? They represent workers typically well above it, no? One of the reasons apartheid proved so tenacious was that white (and also coloureds) insisted not on higher minimum wages, but on very high wages for white workers. So high that almost all sectors without high levels of capital investment stood no chance to compete at that level.
My question is at a time when there is little mass employment in low or medium skilled jobs similar enough for workers to join up, what role is there for unions that has anything to do with their supposed function? Teachers and doctors and civil servants certainly can stand on their own. Restaurant workers and berry pickers have precarious, short term contracts. Only coal miners and low paid health workers come to mind.
Dale Pescitelli
Sep 6 2023 at 4:08pm
I totally disagree with the “price of leisure” comment Imagine if 75% of a 500 person company said we’ll work a 6 day week. where is that payroll coming from ?? INCREASED PRICES !!!
Mike Wagner
Sep 6 2023 at 4:16pm
Health Care benefits and pensions is one area where the unions have been a factor. Many of the increased benefits white collar workers enjoy today are the result of union labor negotiations. If the company wouldn’t go along with increased wages they would allow increase pension and health care coverage. It’s less clear if these increases were beneficial in the long run?
Richard W Fulmer
Sep 6 2023 at 4:42pm
I think that employee benefits owe more to government action than to unions. First, they’re a relic of the wage and price controls imposed during WWII. Companies, unable to attract workers with higher wages, turned to offering benefits such as health insurance. Second, companies receive a tax break on the benefits they pay their employees. So, it costs a company less than a dollar to give a worker a dollar’s worth of health care. That’s why companies are more likely to offer increased benefits than higher wages during union negotiations.
Ak Mike
Sep 8 2023 at 1:05pm
Richard – although I agree with much of what you have commented here, a minor correction: it is not the company that gets the tax break for health insurance, it’s the employee. The company would get the same deduction for paying higher wages as for using the same money to buy medical insurance. The difference is that the employee is not taxed for the value of the employer-provided insurance, as he/she would for the same amount added to the paycheck.
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