March 15, 2012

Minimum wage and liberty of contract

By Damien M. Schiff Senior Attorney

Earlier this week I was pleased to see an article in the Wall Street Journal from George Mason University Professors Donald Boudreaux and Walter Williams on the cons of minimum wage legislation.  The article succinctly explains how such laws have the perverse effect of pricing out of the market the very people the laws are intended to serve, namely, the un- or underskilled, the young, and the poor generally.  Although the article focused just on the policy arguments against the minimum wage, it brought to mind some hoary legal doctrines from the early twentieth century, principally the doctrine of liberty of contract, espoused by the Supreme Court in Lochner v. New York, and championed by my colleague Timothy Sandefur.

Today the great legal debate is whether Congress has the power, under the Commerce Clause, to force people into economic transactions.  What I find remarkable is that no one contends that Congress cannot pass such a law, even if it otherwise falls within its power to regulate interstate commerce, because the law would infringe on individuals’ liberty of contract.  The reason why of course is that the Supreme Court has backed away considerably from the doctrine of liberty of contract.  But the article of Professors Boudreaux and Williams reminded me of a time when the Supreme Court held such minimum wage laws to be unconstitutional as violations of the liberty of contract.  See, for example, the decision in Adkins v. Children’s Hospital, written by Justice George Sutherland, one of the famed Four Horsemen and a strong advocate of Lochner principles.

And, to complete my personal recherche du temps perdu, thinking of the minimum wage, Lochner, Justice Sutherland, and liberty of contract brought back very happy memories of working with my law school mentor, the late Bernard Siegan.  Professor Siegan not only fervently preached the liberty of contract in book after book, but he did so at a time when to advocate such positions in academia made one a pariah.  Perhaps then it’s not too pollyannish to think that by the time the next big case addressing federal power comes before the Supreme Court, there will be a legitimate and prominent role for considerations of economic liberty.

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