Employment and welfare effects of a minimum wage order

workers averaged $1,14-an hour in the South, $1*51 in the North C e n tra l, $ 1 .6l in the N o rth e a st, and $1.73 in the West.In th ese reg io n s employees earn in g le s s th an $1*00 an hour c o n s titu te d 3^*^ p e rc e n t, 3*96 p e rc e n t, .2p e rc e n t, and 1.5 p e rc e n t o f the in d u s try w ork-force r e s p e c tiv e ly .^P r io r to 1966, only about o n e -s ix th o f a l l workers in the laundry, c le a n in g and dyeing in d u s try were covered under the p ro v isio n s o f the P a ir Labor S tandards A c t.3 But e f f e c tiv e February 1 s t, 1967, v i r t u a l l y a l l laundry, c le a n in g and dyeing e sta b lish m e n ts in the United S ta te s were re q u ire d by the Act to pay t h e i r employees a minimum wage of $1.00 an hour.**'While t h i s wage o rd er had some e f f e c t on the in d u s try ^For w orkers e arn in g le s s th an $1.15 an hour the fig u re s were?59*1 p e rc e n t in the South, l6c5 p e rc e n t in the North C e n tra l, *J-.3 p e rc e n t in the N o rth e a st, and 7*5 p e rc en t in the West."In d u stry Wage Survey-Laundry and C leaning S erv ices Mid 1966," U.S. Department o f Labor.Bureau of Labor S t a t i s t i c s , B u lle tin NoT 1 5 ^ TMdTT9^77~PP* 3-^«~"™~ ■^Almost a l l o f those workers covered by FLSA p r i o r to 1966 worked in i n d u s t r i a l la u n d rie s and lin e n supply p la n ts who so ld to o th e r firm s engaged in i n t e r -s t a t e commerce» Thus the two l a r g e s t branches o f the in d u s try , power la u n d rie s (166,^17 w orkers) and c le an in g and dyeing p la n ts (221,683 wor k e r s ) , were not covered to any s i g n i f i c a n t degree by the Fed e r a l Law."Data P e rtin e n t to an E v a lu a tio n of the Need For and the F e a s i b i l i t y o f E xtending the Minimum Wage," U. S .Departmen t o f Labor.Wage and Hour and P ublic C o n tracts D iv i-sTon.(January.I 9S2.), pp.6-10.^"A ll o th e r employees (those n o t p re v io u s ly covered] employed in laundry e n te r p r is e s , re g a r d le s s o f t h e i r previous s t a tu s under the A ct, and w ith o u t reg a rd to the annual volume o f s a le s or business done, are newly covered employees, and u n less s p e c i f i c a l l y exempt, must be paid n o t le s s thah the minimum wages fo r a l l hours worked.""L aundries and Dry Clean ing E stab lish m en ts Under the F a ir Labor S tandards Act as in a l l reg io n s of the co u n try , i t is c le a r t h a t the main impact was in the South where o n e -th ird o f the workers were e a rn in g le s s th an the m in i m u m * 5 One who is concerned not w ith the r h e t o r i c but w ith the r e s u l t s o f l e g i s l a t i o n may w e ll asks "Did the 196? minimum wage o rd er in the laundry, c le a n in g and dyeing in d u s try have those s a l u ta r y e f f e c ts which are intended by the F a ir Labor Standards Act?'8That i s , did extending the coverage o f FLSA to t h i s in d u s try h e lp to a b o lis h poverty* did t h i s a c tio n h elp to reduce the number o f people w ith low incomes?I t i s the prim ary purpose o f t h i s paper to provide an answer to t h i s q u e s tio n .While the emphasis here w i l l be on the p r e s e n ta tio n and a n a ly s is o f in d u c tiv e evidence r e le v a n t to minimum wage e f f e c t s in the lau n d ry , c le a n in g and dyeing in d u s try , a deductive a n a ly s is o f the problem must precede the e m p iric a l in q u iry .For th e o ry plays two v ery im portant r o le s in any u s e fu l e m p iric a l in v e s tig a tio n * Amended in 1966," U.S. Department o f Labor, V/age and Hour and P u blic C o n tracts D iv is io n s .P u b lic a tio n No, 1 (November, 196>6), p7~2 " %he U.S., Department o f Labor e stim a te d t h a t an average wage in c re a se of 6 p e rc e n t would be re q u ire d to b rin g the wages o f Southern workers up to the minimum."Monthly Labor Review," U.S. Department o f L abor, Vol.90, No, 6, (June, 196? ), P» 22. F i r s t , th eo ry narrows the range o f p la u s ib le outcomes and i n d ic a te s what d a ta to c o l l e c t in o rd er t h a t we may d isc o v e r what has happened.W ithout a t h e o r e t i c a l framework the in v e s t ig a to r commits the e r r o r o f m ean in g lessly "counting manhole c o v e rs ," ^ And second, th e o ry p rovides a guide fo r the i n t e r p r e t a t i o n and the e x tr a p o la tio n o f in d u ctiv e ev idence so t h a t we can a r r iv e a t the desired, r e s u l t , i e ., an answer to the q u e stio n in hand.The f i r s t few c h ap ters o f t h i s paper, th e r e f o r e , w i l l be tak en up w ith a t h e o r e t i c a l d is c u s s io n o f the w elfare e f f e c t s o f minimum wage laws in low-wage i n d u s t r i e s .A fte r having adumbrated the t h e o r e t i c a l p o s s i b i l i t i e s o f imposed wage in c re a s e s on th e w elfare o f w orkersi the e m p iric a lly t e s ta b le hypotheses which are drawn from th ese wage th e o rie s are next s t a te d in rig o ro u s fa s h io n .The n ex t two ch ap ters in tu rn d e sc rib e the in d u c tiv e procedure employed and re p o rt the f in d ings o f the s t a t i s t i c a l t e s t o f th ese hy p o th eses.The f i n a l c h a p te r of t h i s paper is th en devoted to w eighing t h i s evidence so t h a t some co n clu sio n may be reached as to the e f f e c t s o f the 1967 FLSA minimum wage order on the w e lfa re of low-wage lau n d ry, c le a n in g and dyeing w orkers, % h is e x p re ssio n has been a t t r i b u t e d to James M. Buchanan.