Labor Economics: Theory, Institutions, and Public Policy

By Ray Marshall; Vernon M. Briggs Jr. | Go to book overview
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The Regulation of Labor Markets

Many hazards and uncertainties confront workers over which they have little direct control. As the industrialization of the United States has progressed, public policies have increasingly sought to reduce these uncertainties and to minimize their adverse consequences. Among the most prominent concerns have been the issues of minimum wages, maximum hours, unemployment, safety, compensation for work-related injuries, and retirement income. In 1986, a new dimension of labor-market regulation was added when immigration reform legislation imposed requirements that only citizens and certain specified groups of noncitizens could be hired by U.S. employers. Although each of these topics is too complex to discuss in detail, an awareness of the general objectives and operational characteristics is essential to all citizens. Not only are they significant topics of public discussion but they also impinge upon the welfare of most individuals during some time in their lives.


Historical Development

The drive to establish a minimum floor for wages in the United States began just prior to the turn of the 20th century. The idea had been developed in Europe by the famous papal encyclical of Pope Leo XIII in 1891, entitled Rerum Novarum ("new matters"), and in the concept of the "living wage" as advocated in the writings of Sidney and Beatrice Webb in England in the 1890s. According to its advocates, a minimum wage was essential in an industrialized nation because, without it, some employers would gain a competitive advantage by paying less than subsistence wages to the weakest workers in society. Other employers, perhaps less unscrupulous but who must compete with such employers, would be forced to do likewise in order to survive. The opponents of this view held that it would be disastrous to interfere with wages that are otherwise determined by the market forces of supply and demand. It was also alleged that any employee had a constitutional right to sell his or her services for whatever wage he or she could obtain. To a significant degree, these remain


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Labor Economics: Theory, Institutions, and Public Policy


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