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THE
LIGHTHOUSE
"Enlightening Ideas for Public Policy..."
VOL. 3, ISSUE 18
May 7, 2001
Welcome to The Lighthouse, the e-mail newsletter of The Independent
Institute, the non-politicized, public policy research organization
<http://www.independent.org>.
We provide you with updates of the Institute's current research
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IN THIS WEEK'S ISSUE:
1. Minimum Wages for Women Only?
2. Bush's Antitrust Nominees: Skeptics or True Believers?
3. Drug Price Controls Will Hurt Consumers
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MINIMUM WAGES FOR WOMEN ONLY?
If a state law explicitly prohibited poorer, less-educated women from
participating in the workforce, this law would be rightly and publicly
condemned. Yet this was precisely the effect of the Massachusetts minimum
wage law of 1912, which applied to women only -- the first minimum wage
law in the nation. The result was bad for women in Massachusetts -- and
bad for less-skilled female and male workers throughout the nation, given
that other minimum wage laws followed.
Economist Clifford F. Thies examines the effects of that Massachusetts law
in light of contemporary minimum wage theory in his new Independent
Institute working paper, "Minimum Wages for Women Only."
According to Thies:
* Women's employment fell in 1913 not because of economic recession, but
because of the minimum wage law.
* As the minimum wage law made the labor of less-skilled women too
expensive, employers increased their demand for high-wage labor and
capital, resulting in an increase in male employment. This substitution
effect was one way for employers to adapt to the women-only minimum wage.
* Many employers also responded to the increase in labor costs by
eliminating "slack time," for example, by shifting from an
hourly rate to a piece rate.
Although the increase in female job loss was measurable -- six percent in
the laundry industry to 14 percent in the brush industry -- it would have
been even larger had Massachusetts not granted a large number of licenses
to "slow workers" exempting them from the minimum wage law.
The State of Massachusetts probably issued exemptions liberally because
its only enforcement power was to publicize the names of companies
violating the wage decrees. Later jurisdictions that passed minimum wage
laws, such as the District of Columbia, Oregon, and Washington, were not
so liberal in issuing exemptions, and thus made it even harder for the
worst-off employees to retain their jobs.
"Today," Thies concludes, "those who cannot earn the
minimum are denied the dignity of doing what they can for themselves, and
the true compassion of others who are more fortunate. Where formerly those
in need and those better off were joined in voluntary community, there now
is class struggle, envy of the rich and resentment of the poor."
See "Minimum Wages for Women Only" by Clifford F. Thies
(Independent
Institute Working Paper #30), at http://www.independent.org/tii/lighth
ouse/LHLink3-18-1.html.
Also see:
"The Madness of the Minimum Wage," by Robert Higgs, Independent
Institute Senior Research Fellow in Political Economy
http://www.independent.org/tii/lightho
use/LHLink3-18-2.html.
Eugenia Toma's review of TAXING WOMEN, by Edward J. McCaffery (THE
INDEPENDENT REVIEW, Summer 1998)
http://www.independent.org/tii/lightho
use/LHLink3-18-3.html.
OUT OF WORK: Unemployment and Government in Twentieth-Century America, by
Richard K. Vedder and Lowell F. Gallaway (The Independent Institute, 2nd
edition, 1997)
http://www.independent
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