In a quiet ceremony on June 4, 1912, Governor Eugene Foss signed the nation’s first statute for a minimum wage, “An Act Establishing the Minimum Wage Commission for the Determination of Minimum Wages for Women and Minors.” While it may seem appropriate for Massachusetts, the “cradle of liberty,” to lead the nation in mandating that employers pay decent wages, Foss was an unlikely candidate for his historic role. A conservative Democrat, he is better known for sending troops to break the Lawrence textile strike.
Foss opposed the minimum wage law and succeeded in removing provisions providing criminal penalties for paying wages below the minimum; instead, the Commission was charged with recommending a minimum wage for each industry and publicizing its recommendations in hopes of shaming employers into compliance. The Commission began with the Brush industry where an appointed joint board (including employers, employees, and members of the public) recommended a minimum wage of $0.16 an hour, higher than that paid over 60% of the industry’s female workers. Despite the lack of penalty, the recommendation had a powerful impact; women’s wages rose sharply in 1914.
Using arguments that have been oft-repeated since, critics warned that minimum wages would create unemployment for women workers and would drive industry out of the state, an argument that has been made since despite a nearly total lack of evidence. The Minimum Wage Commission carefully reviewed the brush industry experience and concluded in 1915 that the minimum wage had raised wages for women without reducing employment. Similar findings have been reported by a large empirical literature since: whether over time, between industries, between states, or even between adjacent counties, changes in the minimum wage have raised wages without reducing employment. Rather than lay off workers or transfer production, employers have accommodated higher wages by raising productivity, which also comes through reduced turnover, or with small increases in prices, or by absorbing the cost in lower profits or lower management salaries.
The campaign for a legal minimum wage in Massachusetts was part of a much larger popular reaction against the excesses of America’s “Gilded Age,” the period after the Civil War where much of the gain from rapid economic growth went to the rich and the superrich, to the Rockefellers, the Vanderbilts, J.P. Morgan and Andrew Carnegie. The Gilded Age Progressive reaction of the early 20th century was against the enormous disparity between such fortunes and the poverty of the working population below them. Inspired by success in Massachusetts, the Progressive reaction spread across America. Our minimum wage law was soon followed by laws in other states and then, during the New Deal of the 1930s, by the enactment in1938 of the Fair Labor Standards Act establishing a national minimum wage.
The New Deal inaugurated a 30 year period when America combined rapid economic growth with a narrowing of income differentials, a period where rising productivity benefited all Americans. Much of the New Deal has been effectively repealed since the 1970s, and the minimum wage has been allowed to lose much of its real value in the face of inflation and the general rise in living standards. After adjusting for price changes, the Massachusetts minimum wage (now $8.00/hour) is down 20% since the 1970s. Even this understates the extent to which the minimum wage has fallen. Adjusting for the increase in per capita income, the $0.16/hour standard set in 1914 should be $21.00/hour today, a decline of 60% below the level set by the Minimum Wage Commission to be the minimum it judged necessary to “supply the necessary cost of living and to maintain the worker in health.”
As in 1912, many in Massachusetts today are concerned about the gross disparities between rich and poor and the rising tide of inequality. Some support the Occupy movement; many favor the enactment of the Buffett Rule or other tax increases on the rich and superrich. On this anniversary, all committed to a more egalitarian America can take inspiration from our Progressive-era counterparts who, beginning in Massachusetts, launched a successful campaign to bring a greater measure of fairness and justice to America’s workplaces.
Professor of Economics
University of Massachusetts at Amherst