All this talk of a $15 national minimum wage prompted me to revisit the standard textbook on economics of the US Progressive Era. Principles of Economics, by Frank W. Taussig (1917) is a pretty interesting book overall and it does hold up in general as an elucidation of then-existing knowledge and pedagogy.
There is one section, however, where the author really goes off the rails. He is discussing labor policy and a “compulsory minimum wage rate.” There was no such national law at the time (that didn’t arrive until 1933) but Professor Taussig made the case for one.
For him, this was not about lifting up the poor or increasing wages for everyone. He saw it as a tool for including and excluding workers based on whether and to what extent the people in question should even be part of the labor pool.
As he plainly says, the purpose of the law is to “regulate the plane of competition” so that “one could not undersell the others by cutting below the established rate.” Workers whose productivity fell below the minimum would simply be excluded from the workforce: “It would be impossible to compel employers to pay the minimum to those whose services were not worth it.”
To him, this is a feature, not a bug.
Why would anyone want such exclusion? Here is where Taussig gets brutal. Some people are simply unemployable, he says, for example “those who are helpless from cases irremediable” due to “old age, infirmity, disabling accident” and also those suffering from “congenital feebleness of body and charters, alcoholism, dissolute living…irretrievable criminals and tramps.”
This class, he opines, “must be stamped out” and should not “be allowed to breed.” Ideally, he says, we should “proceed to chloroform them once for all” but that might have a bad look. Instead, “at least they can be segregated, shut up in refuges and asylums, and prevented from propagating their kind.”
What does this have to do with minimum wages? They are one tool to use to achieve that goal. However, in order to enforce this, “the power of laws must be very strong indeed, and very rigidly exercised, to order to prevent the making of bargains which are welcome to both bargainers.”
Pretty chilling? Indeed. Welcome to the world of Progressive-Era economics as informed by eugenic concerns in which the law is deployed for purposes of stamping out undesirables. Taussig’s view was not considered scandalous because it was fully mainstream opinion at the time. As grim and immoral as his aspirations, at least he gets the economics right: the minimum wage does indeed lock people without privilege out of the labor force.
He was hardly alone in this view, which is why no one of that generation found it particularly shocking.
Princeton University’s Royal Meeker, Woodrow Wilson’s commissioner of labor, held the same position. “It is much better to enact a minimum-wage law even if it deprives these unfortunates of work,” Meeker argued in 1910. “Better that the state should support the inefficient wholly and prevent the multiplication of the breed than subsidize incompetence and unthrift, enabling them to bring forth more of their kind.”
Henry Rogers Seager of Columbia University, and president of the American Association of Labor Legislation, laid it all out in “The Theory of the Minimum Wage” as published in the American Labor Legislation Review in 1913: “The operation of the minimum wage requirement would merely extend the definition of defectives to embrace all individuals, who even after having received special training, remain incapable of adequate self-support.”
“If we are to maintain a race that is to be made up of capable, efficient and independent individuals and family groups,” Seager continued, “we must courageously cut off lines of heredity that have been proved to be undesirable by isolation or sterilization.”
Fabian socialist Sidney Webb summed up the consensus of the time in his 1912 article “The Economic Theory of the Minimum Wage:” “Legal Minimum Wage positively increases the productivity of the nation’s industry, by ensuring that the surplus of unemployed workmen shall be exclusively the least efficient workmen; or, to put it in another way, by ensuring that all the situations shall be filled by the most efficient operatives who are available.”
And so on it goes. The whole generation was frank about their intentions: the point of the minimum wage law was to reserve jobs in society only for those who are deemed worthy of civic inclusion. The wage rate was to be used as a test. If your earning power falls below a specified floor, this must be because you are unfit. At that point, the mandatory minimum had eugenic intent. Its purpose was to “stamp out” those who couldn’t make the cut.
For more on this, have a look at Thomas Leonard’s eye-opening account Illiberal Reformers.
You could of course say that none of this matters. That generation was filled with moral monsters who believed that culling the population of non-normative people was a function of the state. These days, however, the purpose of the minimum wage is to uplift everyone. The problem with this excuse is that the previous generation at least had the economics correct. Price control on wages creates serious market dislocations.
Let’s say that instead of a $15 an hour minimum, Congress pushed a $15 maximum wage/salary. The rich would simply stop working, while everyone else would likely lose professional aspiration. This is not complicated to understand. So too with a wage floor: it cuts the poor out of the market just as the eugenicists said it would.