The Minimum Wage in Historical Perspective

During the Progressive period of American history the debate over the minimum wage was often between those who clung to traditional economic theory as a reason for not having a minimum wage and those who saw the efficiency-wage benefits of adopting one. Although the latter argument proved quite effective in swaying many state legislatures, it may have also been a strategic argument for circumventing the Supreme Court’s particular understanding of "liberty of contract." Under this doctrine, states could not pass any legislation mandating a minimum wage unless a compelling case could be made that such a wage would definitely serve the larger public interest. This paper argues that although efficiency-wage arguments might have been appealing to liberal reformers of that time, the arguments were ultimately used as a disingenuous means by which "liberty of contract" arguments could be circumvented.