The Law and Economics of the Minimum Wage

Abstract

'social dimension' to economic and political integration. The unwillingness of the United Kingdom to agree upon a programme of minimum regulatory standards in the labour market - as exemplified most recently in its apparent exemption from the Social Chapter of the Maastricht agreement - is a reflection of the erosion of employment rights under British governments since 1979, a process which is still continuing. A central aspect of this is the absence of an effective floor to wages. Most industrialized countries set a legal minimum level to wages, either in a form prescribed by statute or through collective agreements which have the force of law.1 Britain is one of the very few exceptions to this pattern. Selective statutory protections exist for the 220,000 workers covered by the Agricultural Wages Board and for the 2.5 million workers employed in sectors regulated by the Wages Councils. The powers of the non-agricultural Wages Councils were, however, considerably cut back by the Wages Act 1986, and it is currently the view of the British government that these bodies 'have no permanent place in our system of wage setting'.2 In sectors of the economy without these minimal statutory protections, the decline of multi-employer collective bargaining and the absence of legal mechanisms for ensuring the application of collective agreements at either plant or sector level have meant