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Amity Shlaes: Repeal the Minimum Wage

We’ve long known the economic case. The humanitarian case is even stronger. The economic case against the minimum wage exists, and has been made by me and others often enough. But there’s another, even stronger case against the rule. That is the humanitarian case. And until that case, too, receives consideration, the debate will always be a lopsided one.

Consider the current employment culture. Sit down with an employment officer at the company where you hope to work, and something feels strange. After a while, you realize what it is: The party on the other side of the desk is not a company executive, it is Jacqueline Berrien, the head of the EEOC. The process moves in similarly creepy fashion when you are the one offering the job: Sure, your future hire is there in the flesh, but you might as well be talking to Thomas Perez. That is, the rules the United States secretary of labor enforces determine the course of your conversation more than anything you, or the new hire, might feel like saying.

It was not always thus. In the 19th century and well into the 20th, many employers and employees believed that their relationship, the two-party one, was key. Outsiders — regulators, unions, lawmakers — were intruders. That privacy of employer and employee often yielded negative results. The employer might exploit the employee. But the two-party dynamic often succeeded. Because the employee-employer pair set their terms together, they trusted each other. From time to time, they also helped each other.

Example: It’s hard to find employers more vilified in the annals of American history than Andrew Carnegie and Henry Frick. These gentlemen hired the Pinkerton men who shot at the workers during the steel strike over, yes, wages at Homestead, Pa., in 1892. What is mostly forgotten is that the workers also shot at the detectives. What is entirely forgotten is that Carnegie and Frick did much for workers, precisely because they felt responsible to their counterparty. The exploiting Robber Baron Carnegie endowed more than 1,500 public libraries up and down the Atlantic seaboard and out west, and many more around the world. Carnegie’s aim was to dare workers like those who tackled the Pinkertons to improve their skills, so that they might rise as Carnegie himself had. “He that dare not reason is a slave,” reads the motto at the Carnegie Library in Pittsburgh. Many immigrants after Carnegie did reason, and did rise.

In 1905, the Supreme Court supported this old view when it held that New York State might not regulate the hours worked at a bakery because doing so interfered with the sanctity of the contract between worker and employer. The case, Lochner, has long been ridiculed by progressives and conservatives alike as an example of absurd federal interventionism: After all, the issue was a state law, not a law passed in Washington, D.C. Several decades later, in the 1923 case Adkins v. Children’s Hospital, the Supreme Court explicitly rejected the minimum wage, with Justice Sutherland explaining of the minimum wage: “It exacts from the employer an arbitrary payment for a purpose and upon a basis having no causal connection with his business, or the contract or the work the employee engages to do.” It was only another decade-plus later, in West Coast Hotel, that the enervated justices finally succumbed and opened the door to a third party, the labor regulator. Well into the second term of a progressive administration, justices do tend to get intimidated, and the Supreme Court certainly demonstrated that in West Coast Hotel.

Speaking more generally, conservatives have never been as strong as they could have been when it came to defending the contract between worker and employer. In a perverse way, the finding in Roe v. Wade ensured that that weakness would continue. Those who would make the argument that abortion should be decided by state law also found, for the sake of consistency, that a Supreme Court impulse regarding workers’ hours must be discounted: Employment policy was up to the states.

This trend, however, misses the point: The relationship between employer and worker does matter. The employer who cannot set his business’s wages, or who must, whether or not he can afford it, increase wages, is an employer who is less likely to invest in his relationship with his employees. He is also less likely to hire and more likely to use a temp agency, to “nickel and dime” in the way that progressive cartoons mock. States and towns rarely supply institutions as wonderful as the Andrew Carnegie libraries. When rules intrude, the loss to personal ambition, workplace satisfaction, and civic culture is great. So great that perhaps someone will eventually figure out a way to quantify that.  

— Amity Shlaes chairs the board of the Calvin Coolidge Presidential Foundation. 

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Posted: May 21, 2014 Wednesday