ABSTRACT
In this chapter we discuss the political economy of labour regulation in the United States. As a practical matter, the subject has been neglected by labour economists who have almost exclusively focused on the effects of legislation. The determinants of regulation have tended only to be investigated in the context of potential omitted variables and simultaneous equations bias. The role of rent seeking in the political market place has rarely been carefully analysed in the area of labour regulation. Rather, the tendency has been to assert and at best to infer such influence. In the cases of unemployment insurance and workers’ compensation, for example, the cross-subsidization involved – respectively, from low-to high-unemployment industries and from low-to high-accident industries – has been argued to create incentives for those so subsidized to engage the polity, underscored by the phenomenon of rational ignorance. Similarly, it has been conventional to attribute national legislation on minimum wages to the congressional majority of northern states which coalesced to suppress competition from the smaller number of southern states paying lower wages and which in turn voted against the Fair Labor Standards Act. This strategy of raising rivals’ costs has of course almost invariably been laid at the door of organized labour for virtually all labour regulation. That is, organized labour has always and everywhere been credited with supporting labour legislation as a means of raising the costs of non-union labour and hence shifting demand in its favour (that is reducing competition for its jobs).
