The consequences of a minimum wage increase, for some reason, still remain ambiguous at best in the eyes of the pro-minimum wage crowd, despite evidence that suggests exactly what most economists already knew-a higher minimum wage creates unemployment. (I often wonder how liberals argue that we should buy into climate change claims because the vast majority of scientists agree that it is real, yet refuse to acknowledge the negative effects of minimum wage increases that the vast majority of economists agree on). I could go ahead and make the empirically-verified argument that demonstrates the negative effects of the minimum wage. Instead, I’ll tell you the not-so great history of the minimum wage. In this story, however, it wasn’t the minimum wage’s unintended consequences that led to unemployment of certain groups of people: racist supporters of the laws put in place were fully aware of who the law would punish.
Walter Williams, the famous economist and professor at George Mason, looked back on the railroad industry at around the end of the 19th century. Back then, as Dr. Williams points out, non-unionized blacks often had to accept a lower wage than their white counterparts due to racism of employers. So the white union had a plan: raise the minimum wage to price blacks out of work. One member of the racist, Brotherhood of Locomotive Firemen union, who called for the minimum wage increase, celebrated the removal of the “incentive for employing the Negro.”
This wasn’t only a US problem, nor a problem solely targeted at blacks, as African-American economist Thomas Sowell pointed out. These minimum wage laws ranged from an effort in British Columbia to “pric[e] Japanese immigrants out of jobs in the lumbering industry” to Australia’s effort to “’protect the white Australian’s standard of living from the invidious competition of the colored races, particularly of the Chinese’” to South Africa’s apartheid effort “to keep black workers from taking jobs away from white unionized workers by working for less than the union pay scale.”
As Carrie Sheffield, citing the National Center for Policy Analysis, pointed out, the Davis-Bacon Act of 1931 drew significant support from those who hoped “‘it would keep contractors from using ‘cheap colored labor’ to underbid contractors using white labor.’”
Perhaps most shocking is the before and after effects of the movement to support significant minimum wage increases on the unemployment rate of blacks aged 16-17 in the US. You may be shocked to learn that, years before the racial progress of the 60s, the black youth unemployment rate in 1948 was actually lower than their white counterparts, and by a significant margin. That, of course, changed after the early 50s. Since then, the unemployment rate of black youth has consistently remained well over double the rate of their white counterparts. But why is this the case? Perhaps, at least in part, due to the minimum wage. It is a well known fact that the minimum wage often punishes low-skilled workers the worst. Think about it. If an employer has to pay you more than your worth, then they won’t hire you. Black Americans, of course, have received terrible primary and secondary education, something both conservatives and liberals can hopefully agree on, adding little to no value to their employability. After all, your economic worth is related to your human capital, no one can dispute that.
And yet, despite this terrible history fo racist usage of the minimum wage, minority leaders continue to see the minimum wage as a way to lift up the people they supposedly represent. Thomas Sowell saw how true this hypocrisy is when he confronted the Congressional Black Caucus on their ignorance of history. Today, many people call for the minimum wage to be raised to help the low-skilled get by, and yet they are ignorant of the fact that the minimum wage has been used throughout history to do the very opposite. How long will it be before the liberals who supposedly want to ‘help’ the minorities in this country, and others, realize how flawed the minimum wage is?