Seattle recently passed its minimum wage ordinance and in doing so found that "[o]ver 100,000 Seattle workers earn wages insufficient to support themselves and their families."1 One of the purposes of the ordinance was to "respond to the challenge of rising income inequality and ensure broadly shared prosperity in our community."2
The debate over the ordinance raised the issue of who is responsible for paying the difference between a living wage and a minimum wage when the two are not synonymous. Some will be surprised to hear this argument pre-dates our current economic climate, and was previously discussed by the U.S. Supreme Court in cases we studied in law school, but have probably forgotten.
The issue was addressed in Adkins v. Children's Hospital, 261 U.S. 525 (1923), in which the Court emphasized both freedom of contract and the importance of protecting contracting parties from government intrusion. The case dealt with a minimum wage law passed by Congress to cover women and children working in the District of Columbia. The Court invalidated the law and the majority opinion asserted:
To the extent that the sum fixed [by the law] exceeds the fair value of the services rendered, it amounts to a compulsory exaction from the employer for the support of a partially indigent person, for whose condition there rests upon him no peculiar responsibility, and therefore, in effect, arbitrarily shifts to his shoulders a burden which, if it belongs to anybody, belongs to society as a whole.
Note Justice George Sutherland's use of the phrase "partially indigent person." Even though it upheld the rights of the employer, the Court inherently acknowledged the wage established by the employer was insufficient to permit a person to support himself, i.e., it was not a living wage. In so doing, the Court identified the two sides of the argument.
The first is a criticism of the employer, allegedly taking advantage of "non-organized" (i.e., non-union) workers, who have unfair bargaining positions and cannot negotiate a fair wage for themselves. Alternatively, the employers argue that if they did not at least "partially employ" these workers, the entire burden of their support would fall upon the governmental welfare system paid for by the taxpayers and society at large.
Thirteen years after the Adkins decision, in a case originating in our own Chelan County, the Court again addressed a minimum wage law for women. The Court upheld the Washington law in West Coast Hotel v. Parrish, 300 U.S. 379 (1937), and apparently accepted the argument that employers should bear more of the costs of under-employment:
The exploitation of a class of workers who are in an unequal position with respect to bargaining power and are thus relatively defenseless against the denial of a living wage ... casts a direct burden for their support upon the community. What these workers lose in wages the taxpayers are called upon to pay. The bare cost of living must be met. We may take judicial notice of the unparalleled demands for relief which arose during the recent period of depression and still continue to an alarming extent despite the degree of economic recovery which has been achieved.... The community is not bound to provide what is in effect a subsidy for unconscionable employers.
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