Improved minimum wage floors and living wage campaigns are addressing the problems of low-wage work. These efforts are a reminder of the power of institutional change: minimum wage reforms have been so significant they have produced higher pay growth at the bottom end of the US and UK labour markets for the first time in decades. These gains, as I have stressed, are relative: the weakening of collective bargaining means that gains for low-wage workers through state intervention look better because of failures higher up the earnings distribution.

Low wages at the tail of the distribution are, however, our immediate subject. The goal of this chapter is to briefly chronicle the circumstances and forces behind arguments in favour of keeping minimum wages low. Our argument is that a policy monopoly (Meyer 2003) emerged that promoted this socially risky approach – particularly in North America. In turn, sympathetic economists and policymakers anticipated problems, proposing compensatory fiscal measures to staunch inequalities from such an approach. Our argument is that this monopoly has been disrupted over the past decade by two forces: improved evidence and analysis about the impact of higher wages and energetic policy experiments, some in response to worker mobilisation over poverty wages. This chapter deals with the first disruption: a challenge from the economics profession itself to the arguments against minimum wages as a tool of social policy. This area of economic policy-making, however, remains subject to intense disagreement. Higher unemployment in the 2020s will bring new attention to potential employment disincentives from overly ambitious wage floors. Fittingly, the final section is devoted to a consideration of economists’ arguments against the use of higher minimum wages as social policy.

Constructing a market for workers

As noted at the beginning of this book, it is no surprise that the liberal countries have been particularly influenced by neoliberal orthodoxies. These core policy and political beliefs reactivated older and bitter ideological resistances to encroaching workers’ power and the reach of government. Gradually, however, the neoliberal framework supplied the arguments and tools to establish policy monopolies in central areas of policy.