Thursday, February 21, 2013

A Little History on the Min Wage

President Obama’s minimum wage hike proposal delivered in the State of the Union address has prompted much chatter in the blogosphere on the subject.  If you’re a Café Hayek patron, your min wage cup runneth over, and over, and over..
I did a little research on the matter, and learned that min wage laws were not always allowed.  In 1905, the US Supreme Court ruled, in Lochner v. New York, that the NY legislature went too far in restricting the vocation of bakers.  The law attempted to put a ceiling on the number of hours and days a person could work as a baker.  (According to some, this law was to protect American bakers from immigrant competition, who would work harder and longer than their American counterparts.)  The law was upheld through lower court rulings but was eventually overturned (5-4) in a landmark decision.  Justice Rufus Wheeler, speaking for the court said that, “[the] Fourteenth Amendment protected an individual's "general right to make a contract in relation to his business.”  Seems like common sense to me.  This ruling began what was known as the Lochner Era, a prolonged period where the high court struck down many regulations aimed at restricting personal liberty.

Then, in 1923, the Court struck down a federal 1918 law that set minimum wages for women and children in the District of Columbia.  The Court said that if the legislature could set a min wage, nothing would prevent it from setting a max wage, and apparently that notion did not sit well with the Justices.  (I touched on this topic here.)  They ruled 5-4 that this minimum wage law was unconstitutional, based on similar grounds found in the Lochner case.  However, this reprieve from the min wage wouldn’t last long.

After fourteen years, a new case was brought before the Court that would reinstate the min wage.  In West Coast Hotel Co. v. Parrish, the Court ruled that legislatures could indeed restrict the activities of individuals where the health and welfare of the community was involved.  (And when isn’t the health and welfare of the community not involved??)  This case effectively ended the Locher Era, as the New Deal Era drastically shifted the direction of the Court.

Bring back the Lochner Era I say!

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