The political economy of minimum wage setting: the Factories and Shops Act of Victoria (Australia), 1896-1913

The Victorian Factories and Shops Act of 1896, the second minimum wage law in the world, empowered administrative agencies (‘Special Boards’) to set trade-specific minimum rates on the basis of age, sex, and occupation. Some Victorian supporters of minimum wages looked to end sweating and protect women and children, while others sought to use the law to protect adult men. Opponents argued that they would disrupt labour markets, increasing employers’ costs and creating unintended consequences for workers. Evidence from actual minimum wages suggests that boards were loosely constrained by market factors, but also that they had some discretion. Some Special Boards essentially followed the market for their trades while others set rates that were binding for some workers. To the extent that minimum rates were binding, they tended to reduce inequality among adult male workers, particularly after a 1907 federal law established a living wage covering employers with operations in multiple states. However, they also increased inequality across groups, increasing wages of adult men relative to those of women and youths. The act formally institutionalized gender-based pay differences, a practice that continued in Australian minimum wage setting for more than 70 years.