The Fair Labor Standards Act of 1938 I

Remaking a Bargain: The Political Logic of the Minimum Wage in the United States

“…Economic historians have highlighted the sectional and regional interests that characterized early‐twentieth‐century U.S. political economy. Many of the historical narratives of the New Deal minimum wage debate highlight North–South regional differences: Producers in the North, a higher‐wage region, wanted a floor under wage competition, while those in the South were eager to exploit their competitive low labor cost advantage (Douglas & Hackman, ; Nordlund, ; Paulsen, ; Schulman, ; Wright, ). A well‐known explanation for the split in the Democratic Party relies on a protectionist thesis: the desire of constituents in high‐wage regions to protect their labor rents and/or capital rents from low‐wage competition in other regions (Alston & Ferrie, ; Zieger, ).…”

“…Anticipating political opposition from a conservative coalition on the floor, prolabor Senate Democrats empowered the board to set a minimum wage only at or near 40 cents (rather than FDR's 80 cents per hour), required the president to consider all geographical and industrial regions when nominating appointees, and required the Senate to offer advice and consent on all appointments (U.S. Congress, Senate, Committee on Education and Labor, ). The Senate expanded the agricultural exemption to include all occupations involved in the delivery to market and the preparation, packaging, and storage of agricultural goods (Douglas & Hackman, ; Paulsen, ). The regional differentials and exemptions of agriculture in the area of production satisfied the preferences of southern Democrats, who hesitated to support a federal minimum wage.…”

“…While regional differentials were not included, the phased‐in minimum wage provided additional flexibility. There was no requirement that it increase above 25 cents: The agreement specified only that industry committees could vary the minimum wage rate for specific industries (Douglas & Hackman, , ).…”

“…Because redistributive and regulatory decisions such as a minimum wage are difficult and politically costly to make, Congress often acts in ways that either distribute benefits broadly or shield particular groups from the costs. Thus, Congress empowered individual policymakers to legislate exemptions for industries in their states and districts (Douglas & Hackman, , ). In this case, Congress limited the scope to specific interstate industries (manufacturing, mining, quarrying, and forestry) while providing exemptions for employees in executive, administrative, professional, or local retailing capacities; for all retail and service firms doing less than 50 percent of their business in interstate commerce; and for farm workers within the area of production of agricultural and horticultural commodities as defined by the administrator (U.S. Congress, House, Committee on Education and Labor, ).…”

Institutional Economics and the Minimum Wage: Broadening the Theoretical and Policy Debate

“…First in credibility among them was Paul Douglas, faculty member at Chicago and foremost analytical labor economist of that era in the United States. He wrote two lengthy articles on wage regulation and the FLSA (Douglas 1938;Douglas and Hackman 1938) and gave an in-depth appraisal of the goals of minimum wage legislation.3 Douglas listed five objectives of the FLSA that exactly parallel the four stated in the act, with the modest difference that he decomposed the third objective in the FLSA into two separate parts: to augment purchasing power, and to improve productivity and growth.…”