ABSTRACT
Arguably, the demise of wage policy in the United States began shortly after World War II with the passage of the Taft-Hartley Act, which was viewed as no less than an assault on unions. To the extent that New Deal policies served to establish new and strengthen existing labor market institutions, wage policy in the post-New Deal era can be characterized as anti-labor market institutions. The objective was to weaken those very same institutions in order to suppress wages. As was true of the fight over the FLSA during the New Deal era, the fight over wage policy during the post-New Deal era was driven by regional differences. Regions where wage rates were always historically lower saw the strengthening of unions and the establishment of minimum wages as an attempt to impose a higher wage structure on them. With a lower wage structure, they enjoyed some comparative locational advantage as firms looking for places to locate would seek to do so in lower cost labor markets. The assault on these institutions wasn’t an assault on wage policy per se; rather wage policy essentially declined as a function of the coalescence of several forces. The first was that between the 1950s and 1980s union membership fell sharply. During the 1980s, the Reagan administration seized upon these foundations and only accelerated the decline of unionism by mounting an all out assault on unions. With Reagan’s firing of the PATCO air traffic controllers in 1981, the precedent was set to fire striking workers. Although the Wagner Act required collective bargaining, it never prohibited the hiring of replacement workers while permanent workers were on strike. But until the 1980s, it was simply taboo to do so. While the striking worker technically could not be fired, the hiring of replacement workers and the cessation of negotiations was effectively tantamount to a firing. The second force, which was very much influenced by the first, was that presidential administrations opposed to labor unions were also opposed to the minimum wage. As unions were declining in membership, particularly during the 1980s, the minimum wage was also stagnating with its value falling considerably below the poverty line. Moreover, without unions to serve as a constituency in support of wage policy, it was even less likely that the minimum wage would be raised. Meanwhile, these two forces coincided with the neoclassical synthesis on the minimum wage that stressed the inefficiency of the minimum wage, as well as other institutions that artificially raised wages.
