RAISING THE MINIMUM WAGE

Halacha and Minimum Wage Regulation /
By Rav Yitchak Grossman, Rosh Chaburah, Senior Lecturer

Greater Washington Community Kollel and
Dayan at The Bais HaVaad

Increasing the minimum wage is in the
national debate again. In this article, we consider the basic idea of a
mandatory minimum wage from various Torah perspectives and the attitude of
Halacha towards the regulation of minimum wage.

Native Halacha

Halacha has no native minimum wage regulation.
Indeed, Halacha has no general notion of “fair” pricing;
the laws of Ona’a merely prohibit pricing goods (and,
according to some, services) differently from the going market rate, but have
nothing to say about the establishment of this rate, and in any event, the
protections afforded by these laws can be waived by the participants in a
transaction, insofar as they know the actual going rate and explicitly
acknowledge that they are nevertheless diverging from it. In general, the halachic system is strongly laissez-faire, with
parties to a contract having very wide latitude to set whatever terms they
wish.

Enactments by Guilds and Municipalities

The Talmud states
that “municipal residents are permitted to stipulate regarding measures, prices

[of goods]

and the wages of workers”. Although it may be anachronistic to
understand this as referring to minimum wage legislation, some understand it to
actually refer to maximum wage legislation, prohibiting employers from
paying – and employees from receiving – daily wages above some ceiling. Some
apparently understand that the “stipulation” here is not even a regulation at
all, but merely the establishment of a standard rate that governs transactions
that are not otherwise specified, but the halachic consensus takes for granted the general
right of communities to regulate prices.

Is Minimum Wage Legislation Binding Upon Jews?

Halacha recognizes the legitimacy and
authoritativeness of temporal law under the principle of “dina
de’malchusa dina” (“the
law of the government [lit. “kingdom”] is the law”), but there is considerable
debate over the scope and application of this principle. In particular, some
limit it to legislation involving a direct governmental interest, such as
taxation or currency regulation, while many extend it to any legislation “for the
benefit of the inhabitants of the state”.

This latter, more
expansive interpretation of dina de’malchusa dina would therefore cover minimum wage
legislation insofar as such legislation is deemed to be “for the benefit of the
inhabitants of the state” – a loaded question that depends on one’s political
and economic convictions and assumptions. In various other contexts, we find
widely different attitudes among the Poskim of the last century or so toward various
instances of modern social legislation.

The Example of Rent Control Legislation

A classic case
study is rent control legislation. Some halachic authorities are strongly opposed to the
recognition of such legislation, arguing that – barring emergency situations – such
laws are grievously unjust takings of private property that unfairly favor the
tenant class against the landlord class (as well as incumbent tenants against
those in search of housing). These, they contend, are the product of
“free-thinking representatives, holding the doctrines of the communists and the
socialists, to squeeze the rich and take their money, whereas all these
doctrines are contrary to Da’as Torah”.

Other authorities,
however, are quite enthusiastic about rent control legislation, insisting that
“it is fair, appropriate and acceptable, especially in big cities, for it is
directed against price gougers and those who flay the hides of the poor”.

A third,
compromise view distinguishes between prohibitions against eviction and rent
stabilization provisions that compel the landlord to continue renting the
property at below-market rents: the former are binding, as they have precedent
in the classic Talmudic rules governing landlord-tenant relations, while the
latter are not, as they do not.

Similar arguments
can be made with regard to minimum wage legislation: on the one hand, it
certainly derives from a socialistic, egalitarian ideology and a concern with
income inequality, and perhaps should be considered an unfair taking of private
property, as it compels employers to pay more than market forces would
naturally require. On the other hand, it is certainly directed against “price
gougers” and “those who flay the hides of the poor”.

According to the
third view mentioned above, the key question is whether there is halachic
precedent for such
legislation: on the one hand, as has been previously noted, there is ample
precedent for price and wage regulations of various sorts, but on the other
hand, these regulations were generally for the benefit of sellers, the general
public, and employers, not employees! It would seem, however, that there is no
real conceptual difference between protecting the livelihoods of sellers and
workers – on the contrary, if protecting sellers is legitimate, a
fortiori should protecting
the typically less well-off workers be.

Even the first
view discussed above might have no objection to minimum wage legislation, since,
unlike rent control legislation, which deprives an owner of the free use of his
property without any prior agreement thereto, minimum wage legislation merely
restricts the types of employment contracts which can be legally enacted. One
who does not wish to pay the minimum wage is perfectly free to keep his money,
by refraining from hiring employees.

Is Minimum Wage Legislation an Economically Sound Idea?

R. Aaron Levine
has argued that due to “economic realities”, a mandated minimum wage will not
achieve its stated goals, and is therefore “not in keeping with the principles
of halakhah”:

Economists are almost unanimous in
condemning the minimum wage concept as self-defeating. They point out that
raising the wage level above what it would be if market forces were left to
their own devices inevitable results in unemployment. While it is true that
those who will be hired will be better off, the very existence of the higher
wage requirement will encourage employers to substitute capital for labor and
to utilize labor-saving devices in a variety of ways. …

But economists are
no longer “almost unanimous”; the Washington
Post Fact Checker did give President Obama two Pinocchios for flatly
declaring that “there’s no solid evidence that a higher minimum wage costs
jobs”, but it also acknowledges that:

The [2013 Economic Report of the
President] noted that most economists had once believed an increase in the
minimum wage would reduce employment but that “the consensus view among
economists has since shifted as more evidence has accumulated.”  It also cited a 2009 meta-analysis of 64
studies of the minimum wage that found “no evidence of a meaningful adverse
employment effect” of the minimum wage.

On the other hand:

The problem is that while there may be
a new consensus emerging on the left-leaning side of economic theory, there is
an equally fierce response from other economists.

In 2006, economists David Neumark and
William Wascher published a survey of more than 100 studies, and came to an
opposite conclusion, directly contradicting the results of the so-called New
Minimum Wage Research. They found that the majority of the studies showed that
“raising the minimum wage leads to economic distortions and often has
unintended adverse consequences for the employment opportunities of low-skilled
workers.”

In the final
analysis, it is probably fair to say that “objective”, “neutral” economics will
not settle this debate, and one’s understanding of the Torah’s view of minimum
wage legislation will ultimately depend on the sorts of economic ideologies
articulated in the rent control debate.