Iron law of wages

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The Iron Law of Wages, also known as The Subsistence Theory of Wages, is a "law" of economics named and popularized by Ferdinand Lassalle in the mid 1800s. This generalization asserts that wages cannot fall below subsistence level because laborers will not be able to work for long with out the means to subsist. Ceteris paribus (and they never are) competition among unskilled laborers for employment will drive wages down for unskilled work to this minimal level. Conversely competition among employers for skiled labor may drive up wages.

To prevent a race to the bottom in terms of wages there are two strategies. The first strategy is to decrease the competition by decreasing the number of available workers. You can do this by raising entry costs to joinging a particular labor market or by pasing overtime laws, child labor laws, banning prison and slave labor, and organizing unions. The second strategy is Minimum Wage laws.

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