Minimum wage laws don’t help minorities

Joe biden and the democrats are pushing to increase the u.s. federal minimum wage to $15. Some supporters of the policy have suggested that black and other visible-minority workers would benefit most, since they are disproportionately in low-wage positions. but as February is black History Month, they may want to look back on the 90-year history of minimum wages in the united States. The fact is that black and other minority workers have suffered most severely from the jobs destroyed by minimum wage laws and are at highest risk of unemployment if minimum wages are raised again.

The united States’ first federal minimum wage law was the davis-bacon Act of 1931. The stated intention of many congressmen and union leaders who supported it was to prevent black workers from competing with unionized white workers for construction jobs by offering to work at lower wages. They were not alone: around the same time in apartheid South Africa, unions supported minimum wages to deliberately price black workers out of jobs, and in Canada, minimum wages were instituted to do the same to Asian immigrants.

“The davis-bacon Act, still on the books today,” observed the late Walter Williams in 2013, “virtually eliminated blacks from federally financed construction projects when it was passed.” Over time, the stated intentions of the minimum wage improved, but the harmful effects did not. The minimum wage in the u.s. was sharply increased from $0.40 to $0.75 in 1950, and then again to $1 in 1956, with devastating unemployment effects concentrated on the black population.

before 1956, the unemployment rate for white and black teenage boys was about the same, at under 11 per cent. but within two years of the 1956 minimum wage increase, unemployment had risen to 14 per cent for the white cohort but more than doubled to 24 per cent for their black counterparts, a disparity that has not improved in the intervening decades. economists have repeatedly noted the continuing harmful effects of minimum wage laws on the most disadvantaged workers, who are disproportionately from minority backgrounds.

When in 1996 Congress was debating a minimum wage hike, the Wall Street Journal surveyed a handful of prominent economists on the issue. One of them, William Poole, lamented that minimum wage advocates were willing to sacrifice the jobs of some people to raise the wages of others. “I do not understand this callous position,” he said. “Those who will lose their jobs are the weakest and most vulnerable members of the labour force.”

In the same survey, Martin Feldstein and robert barro both identified minority youth as the group of workers who would be most seriously harmed by the unemployment effects of minimum wage increases. elsewhere, Milton and rose Friedman wrote that the “high rate of unemployment among teenagers, and especially black teenagers, is both a scandal and a serious source of social unrest.” This, they said, was “largely a result of minimum wage laws.”

In Canada, too, racial minorities and immigrants are at disproportionately higher risk of being priced out of the labour market when minimum wages rise. A study published in 2017 in the journal Contemporary economic Policy concluded, based on 185 provincial minimum wage increases over a period of three decades, that increasing the minimum wage by 10 per cent was linked to a two per cent decrease in employment for immigrants aged 25 to 54 years old.

Many minimum wage advocates say that some studies show no effects, or even positive effects, of minimum wages on employment. but the downward-sloping demand curve, which is at the core of economics, holds that as the price of something increases, people will buy less of it. We cannot say on the basis of “some studies” that the demand curve does not apply to labour, especially since those studies are in the minority.

Last month, a National bureau of economic research working paper, written by economists david Neumark and Peter Shirley, reviewed American studies since the early 1990s and concluded that “there is a clear preponderance of negative estimates (of minimum wages on employment) in the literature.” The results were consistent with an earlier review, done by Neumark and William Wascher, which included 102 studies around the world and similarly found “relatively consistent” indications of negative employment effects.

There is simply no escaping basic economic facts. A minimum wage rate makes it harder for the most disadvantaged members of the labour force, who are disproportionately from minority backgrounds, to get jobs. If those celebrating black History Month want to redress the historical effects of government policy on black workers, they could start by advocating abolition of minimum wage laws.

BLACK AND OTHER MINORITY WORKERS HAVE SUFFERED MOST SEVERELY FROM THE JOBS DESTROYED BY MINIMUM WAGE LAWS.