conventional to attribute national legislation on minimum wages to the congressional
majority of northern states which coalesced to suppress competition from the smaller
number of southern states paying lower wages and which in turn voted against the Fair
Labor Standards Act. This strategy of raising rivals’ costs has of course almost invariably
been laid at the door of organized labor for virtually all labor regulation. That is,
organized labor has always and everywhere been credited with supporting labor
legislation as a means of raising the costs of nonunion labor and hence shifting demand in
its favor (i.e. reducing competition for its jobs).
The U.S. situation is necessarily complicated by the fact that much labor legislation is
state-originated/financed and administered. One of the strengths of federalism is the
opportunity it presents for the development of intergovernmental competition. The
models of Tiebout (1956) and Oates and Schwab (1988) demonstrate the efficiency
features of interjurisdictional competition, and a number of observers otherwise hostile to
labor mandates see potential benefit in some such programs, most notably workers’
compensation (from a transaction costs perspective). The argument is that the absence of
federal influence admits of substantial variation across states that can permit
experimentation that over time reveals desirable and undesirable feature, allowing the
gradual evolution of the system (Bellante and Porter, 1990, p. 673). By the same token,
there are undoubtedly negative effects (spillovers) that need to be addressed and a
potential role for government in holding the ring and monitoring competition among
states and local governments. These issues have been well rehearsed in the taxation
literature (see for example Altemeyer-Bartscher and Kuhn, 2005; Wildasin, 1989, 2004;
Wilson, 1986, 1999; Wilson and Wildasin, 2004), 2004), but to my knowledge have
largely escaped serious consideration in the labor regulation literature.
A further complication in labor regulation is the role of the common law. We will
examine the view that legislation is a potential antidote in a federal system to the
inefficiencies introduced by activist judiciaries. The issue here is the attenuation of a
specific common law doctrine, but absent this there is also the basic issue of the costs of
using the court system that we will address in the particular context of workers’