In the book Wage Policy, Income Distribution, and Democratic Theory wage policy is broadly defined as a set of institutions designed to bolster the wages of the middle class. Historically these institutions assumed the form of labor policies that allowed for unionization and collective bargaining, and specific wage floors.Traditionally, wage floors assumed the form of federal and state minimum wage legislation. More recently, they have assumed the form of Living Wage ordinances at the local level, and also broader proposals for basic and/or minimum incomes.
Many European countries have wage policies in the form of centralized wage setting institutions. In those countries, income inequality also tends to be less than the U.S. Aside from the welfare effects that a wage policy might have for the middle class, and its potential to reduce income inequality, it is also part and parcel of economic development. Because individuals earning higher wages will have increased purchasing power, they will be able to demand more goods and services, which in time may fuel investment and economic expansion.
Economic development is central because it is the basis of a broad middle class, which, in and of itself, militates against a dual distribution comprised of those at the very top and those at the very bottom. In that wage policy serves to enhance personal autonomy, reduce income inequality and foster economic development, it can be said to be consistent with the dictates of democratic theory.