THE POLITICAL ECONOMY OF MINIMUM WAGE LEGISLATION

Two questions are addressed in this paper. (A) Why do labor unions and certain employer organizations respectively promote and impede minimum wage legislation? (B) Do these groups have significant impacts on minimum wages? Question (A) is examined in the context of models that identify the economic self-interest of unionized skilled workers and capitalists in legal wage floors. Question (B) is approached by a median legislator utility maximization model that leads to Tobit estimation of the relationship between state minimum wage rates and measures of statewide organized labor and capital and average hourly earnings.