Public Enforcement/Private Monitoring: Evaluating a New Approach to Regulating the Minimum Wage

This paper examines compliance with federal minimum wage laws in the U.S. apparel industry and analyzes the impact of new methods of intervention designed to improve regulatory performance. Drawing on data from a randomized survey of apparel contractors, the author evaluates the impact of agreements between manufacturers and the government used to monitor contractor behavior as a means of improving compliance outcomes. Several non-regulatory variables predicted by theory to be important influences—the level of work skills, for example, and product market factors related to the elasticity of labor demand—are indeed found to be correlated with compliance. Nonetheless, stringent forms of contractor monitoring are associated with substantial reductions in violations of minimum wage standards. The results suggest that well-designed public/private monitoring efforts can lead to significant improvements in compliance with labor standards.