The Waning of Classical Labor Policy

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Book Chapter

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Both changing population demographics and the movement from classical to neoclassical theories of value produced dramatic shifts in labor policy. Under classical wage-fund doctrine a “natural” rate of wages was determined by the surplus an employer had saved from previous production. Paying more would produce ruin and starvation. In contrast, the emerging marginal value theory saw wages as determined by the worker’s anticipated contribution to the employer’s business. Further, a fiercely competitive labor market and much less competitive producer market indicated that wages were less than the worker’s contribution, and that capitalists were pocketing the difference. This perspective produced purely economic justifications, in addition to traditional moral ones, for both unionization and minimum wage laws—views that were strongly resisted by traditionalists. This collision of views came to a climax in the great battles between the New Deal administration and the Supreme Court.


labor, wage-fund doctrine, marginal value, unionization, minimum wage laws

Publication Title

The Opening of American Law: Neoclassical Legal Thought, 1870-1970