Minimum wage laws have been one of the most successful government actions in U.S. history which is precisely why we should consider getting rid of them.
That statement is bound to turn a few heads in confusion, but when you look at the history of wage laws, why they were introduced, and what things look like today for certain groups of workers, you will understand where that statement comes from.
Starting in the late 1800s, a few states began to tinker with minimum wage laws. The federal government didn’t step into the wages fray until the Davis-Bacon Act was passed by Congress and then signed into law by President Herbert Hoover in 1931. In hindsight, this Act is often seen and taught as one of the few positives that came from the Great Depression and the Hoover administration. Today, it is seen as an obvious way to protect workers struggling at the lower rungs of the economic ladder.
And who would disagree with that? The minimum wage puts more money in peoples’ pockets. More money means more purchasing power. More purchasing means a better economy for all. It’s a no brainer, right? Anyone who objects to that must either hate the poor or want to see the economy continue to suffer. People even go as far as to claim that racism and/or sexism is to blame for objections to minimum wage increases due to the disparate impact low wages have on women and people of color. But this common point of view is wrought with flaws and a bit of irony as well. First, the irony.
The Davis-Bacon Act was inspired by the hiring of a Southern construction company composed of mainly Black workers that was awarded the task of building a veteran’s hospital on Long Island, NY. The company that used Black labor was able to underbid the local (White only) unions to get the job. To get an idea of the reaction to this, here are some statements that were made by people in support of the Davis-Bacon Act, which aimed to force any company to pay their workers the prevailing local wage no matter where the company originated:
The superabundance or large aggregation of Negro labor is a problem you are confronted with in any community. – Rep. William Upshaw (Georgia)
Rep. Robert Bacon’s (Long Island, NY) response was “…the same would be true if you should bring in a lot of Mexican laborers or if you brought in any non-union laborers from any other state.”
“That contractor has cheap Colored labor that he transports … and it is labor of that sort that is in competition with White labor throughout the country.” Rep. Clayton Allgood (Alabama)
It is by no coincidence that immigration laws establishing quotas appeared around the same time. Representative Bacon himself entered into the Congressional record a statement from several college professors who supported the passing of the new immigration law. Here is an excerpt:
“Only by this method can that large proportion of our population which is descended from the colonists…have their proper racial representation…. Congress wisely concluded that only by such a system of proportional representation…could the racial status quo be maintained.”
These on-the-record statements and others like them make the true intent of these wage laws pretty clear – to prevent Blacks and other people of color from taking White jobs.
Some people of the curious lot might wonder why unions would be so supportive of minimum wage laws when their members traditionally have made much more then the minimum wage laws dictated. The reason involves simple economics coupled with self-interest.
If only a few Blacks and other people of color were allowed to be members of the early unions (most early unions accepted none at all), Black laborers had no choice but to work for small, private contractors. These small companies had very little name recognition. Combine this with barriers like prejudice, discrimination, and racism and it became very tough for these businesses to get hired in public works projects. The only advantage they had was the ability to charge lower prices. Often, that was the only thing that enabled them to get their foot in the door. After that, word of mouth and recommendations would lead to other work. Over time, Black workers could slowly overcome those barriers by proving their value. When more people demand Black labor (the desire to save money has a way of changing people’s attitudes about race, at least temporarily), more work comes and wages go up. In fact, that was exactly what was happening throughout the South. It’s basic free-market, supply and demand economics. But the White unions of the North were not interested in free-market competition. They wanted all the work for themselves. To accomplish that, they had to subvert the free-market and pressure government to take away the only advantage that Black businesses and their workers had – lower prices. Forcing the price of labor up by law would make it more likely that people would choose White union labor.
And it worked. Although unemployment during the Depression rose for all groups, it was often Black employment that took the biggest hit. Some would say it has never really fully recovered. According to economist Dr. Walter E. Williams and his book, Race and economics, the Black youth unemployment rate (ages 16-17 year olds) in 1948 was 9.4% (lower than Whites by the way). Since then, as the minimum wage has increased over time, that trend has reversed dramatically. As of 2009, 52.2% of Black youths of that age were unemployed. Although the percentages differ, the trend is true for all other age groups as well. When the wages are forced up, you take away the only advantage low skilled workers (the youth of all races, the poor, new immigrants, etc.) have and that is the ability to charge less for their labor. Take that away and there is zero incentive to hire these people. As stated earlier, saying you are against the minimum wage usually is followed by cries accusing you of hating the poor and even of racism. See the irony?
People in the social sciences often use the phrase “correlation does not imply causation.” In other words, just because A occurred before B doesn’t automatically mean A caused B. This is true. There are many factors that influence the hiring of workers in an economy. Unfortunately, most social scientists, people in the media, and politicians refuse to even consider the increasing minimum wage as a negative factor contributing to unemployment.
For a moment, let us pretend that the statistics mentioned above were reversed. Let’s say the minimum wage was very high in 1948 and unemployment among Black youths was at the low rate of 9.4%. Over time, let’s say the minimum wage was decreased and altogether eliminated by 2009 and the number gradually jumped to 52% unemployed among Black youths. Does anyone think for a second that the media and the social science community would say the drop in the minimum wage was in no way affecting Blacks in a negative way? Would they use the “correlation doesn’t imply causation” line? Of course not! They would be screaming on a daily basis about the injustice of it all and the obvious connection. But when we see the reverse today, what does the media and the social sciences say? Nada. Nothing. Not a peep. That is because the media, the social science community, and politicians of both parties are focused only on the power of good intentions. If the current intention of the increasing minimum wage is to help the poor, then that’s all that matters. Anything contrary to that is not even allowed to enter the debate. All that is permitted today are discussions of how high we should raise it.
But good intentions are not helping the youth of America, especially Black youth. Increasing the minimum wage simply prevents them from getting entry-level jobs where the work experience and good references are worth much more than the money they are paid.
Reasonable people can debate the economic merits of minimum wage laws but let us not ignore why they were created – to protect White jobs. They are rooted in racism and have been enormously successful in achieving what they were intended to do. That success is precisely why we need to consider getting rid of them.