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This chapter examines Muller's aftermath in legal history through the landmark case of Adkins v. Children's Hospital (1923). In Oregon, an employer (Children's Hospital) sought an injunction against the DC Minimum Wage Board to restrain it from imposing the minimum wage of $16.50 per week for women workers in hotels, hospitals, restaurants, clubs, and apartment houses. The District of Columbia Supreme Court upheld the law in June 1920, as did the DC Court of Appeals in June 1921. However, at the second hearing in November 1922, the DC Court of Appeals upset the law. In 1923, when Adkins v. Children's Hospital reached the Supreme Court, defenders of the minimum wage faced a less receptive roster of justices than they had in 1917; recent appointments made in wartime and soon after had produced a more conservative court. As such, the Supreme Court failed to sustain the District of Columbia minimum wage law by a 5–3 decision.

This chapter begins with a brief history of the minimum wage over the past century. It traces the origins of the minimum wage back to its roots in the late nineteenth century, and describes how it evolved in the United States from a weak set of state-specific laws targeted at women in the early 1900s to the combination of federal, state, and local minimum wage laws with broad coverage that we have today. The chapter then considers the ongoing debates among economists about the merits of a minimum wage law.

Chapter 1 identifies a common type of argument deployed by modern liberals in support of various government regulations—a type of argument that makes no appeal to abstract principles about the proper role of government but instead appeals to lower-level moral principles about how people ought to be treated. This book calls these “conversion arguments,” since they are directed at converting classical liberals to the modern liberal faith (and vice versa). These arguments are also directed at those without firm commitments about the proper scope of government on a range of issues. These arguments reflect a kind of moral pragmatism that is characteristic of modern liberalism. Chapters 7 through 10 canvass conversion arguments for each element of the modern liberal regulatory agenda. They find that most of these arguments can be challenged by classical liberal counterarguments of the same type, which typically involve explaining how the range of social problems identified by modern liberals could be handled by a private ordering. The conclusion of this chapter and the next three is that, for nearly all items on the modern liberal regulatory agenda, there is persistent reasonable disagreement about these government interventions into a private ordering because there are opposing conversion arguments that each side can offer.

This chapter moves from the general goals of labour law to the concrete goals of specific labour laws. An inquiry into the goals of specific regulations is a necessary component of the purposive analysis. Three laws are examined (as examples): minimum wage laws, collective bargaining laws, and unjust dismissal (‘just cause’) laws. For each of these, the chapter conducts an in-depth review of possible justifications as well as critiques, and concludes with an articulation of the goals. It is argued that the goals of the minimum wage are redistribution and protecting dignity; the goals of collective bargaining laws are promoting workplace democracy, redistribution, and efficiency; and just cause laws are needed to provide security, which is justified because of the unique characteristics of employment relationships and the nature of the employer–employee exchange (subordination for security).

Both changing population demographics and the movement from classical to neoclassical theories of value produced dramatic shifts in labor policy. Under classical wage-fund doctrine a “natural” rate of wages was determined by the surplus an employer had saved from previous production. Paying more would produce ruin and starvation. In contrast, the emerging marginal value theory saw wages as determined by the worker’s anticipated contribution to the employer’s business. Further, a fiercely competitive labor market and much less competitive producer market indicated that wages were less than the worker’s contribution, and that capitalists were pocketing the difference. This perspective produced purely economic justifications, in addition to traditional moral ones, for both unionization and minimum wage laws—views that were strongly resisted by traditionalists. This collision of views came to a climax in the great battles between the New Deal administration and the Supreme Court.

Antitrust law cannot directly address wage suppression that occurs as a result of search costs and job differentiation, which cause frictions in labor markets. The question arises whether other employment and labor regulations can be used to reduce the monopsony power of employers that arises from these sources, or to mitigate its ill effects. These regulations include minimum wage law, tax and wage subsidies, mandatory benefits, job protection, licensing, training, job standardization, labor law, governance reforms, and macroeconomic reform. While some of these regulations, if well-designed, can help mitigate the harms of labor monopsony, many of them are ill-suited to this task.

In recent years, a controversy has erupted over the distinction between employees and independent contractors. Commentators have argued that in the modern “gig economy,” many people traditionally classified as independent contractors are as vulnerable as employees and should be granted the legal protections that employees alone normally enjoy. However, the distinction between the two categories remains inescapable, and the theoretical basis for it has not been identified. A better approach derives the distinction from market structure. Employees are workers who, because they must make relationship-specific investments in a single firm, are subject to labor monopsony. Independent contractors do not make such relationship-specific investments, and hence normally operate in a competitive labor market. Employment and labor law may be explained as a method for protecting workers from labor monopsony; because independent contracts are not subject to labor monopsony, they do not require such protection.

This chapter analyzes Rosetta (1999), the first Belgian film to win the Cannes film festival's top award, the Palme d'Or. The film also received a special mention in the contest for the Directors' Ecumenical Prize, while the actress playing Rosetta, Emilie Dequenne, received the award for Best Female Performance. The success of Rosetta hastened the passing of a Belgian law that became known as the “Rosetta Law,” which prohibits employers from paying less than the minimum wage to teenage employees and decrees a 3 per cent minimum of young employees in any work force comprising more than fifty workers. Asking what kind of world we had created for ourselves at the end of the twentieth century, Rosetta sharply criticizes a society that can sacrifice its willing workers on the altar of economic efficiency.