The amazing Thomas Sowell, still writing a regular column at the age of 84, reminds us of the racist legacy of minimum wage laws.
It is not a breakthrough on the frontiers of knowledge that minimum wage laws reduce employment opportunities for the young and the unskilled of any age. It has been happening around the world, for generation after generation, and in the most diverse countries.
Low-income minorities are often hardest hit by the unemployment that follows in the wake of minimum wage laws. The last year when the black unemployment rate was lower than the white unemployment rate was 1930, the last year before there was a federal minimum wage law.
The following year, the Davis-Bacon Act of 1931 was passed, requiring minimum wages in the construction industry. This was in response to complaints that construction companies with non-union black construction workers were able to underbid construction companies with unionized white workers (whose unions would not admit blacks).
Looking back over my own life, I realize now how lucky I was when I left home in 1948, at the age of 17, to become self-supporting. The unemployment rate for 16- and 17-year-old blacks at that time was under 10 percent. Inflation had made the minimum wage law, passed ten years earlier, irrelevant.
But it was only a matter of time before liberal compassion led to repeated increases in the minimum wage, to keep up with inflation. The annual unemployment rate for black teenagers has never been less than 20 percent in the past 50 years, and has ranged as high as over 50 percent.
Incidentally, the black-white gap in unemployment rates for 16-year-olds and 17-year-olds was virtually non-existent back in 1948. But the black teenage unemployment rate has been more than double that for white teenagers for every year since 1971.
In a free labor market, unhindered by the minimum wage, the equilibrium wage adjusts to equate the number of qualified job seekers with the number of available positions. In this case, the market is said to “clear,” and many employers will hire a capable black teenager rather than see a position go unfilled.
But if a minimum wage is imposed, the market no longer clears, and there results a surplus of labor. Employers have more qualified applicants than available positions. The same black teenager now finds himself competing for a single job with a white teenager. The employer might evaluate the two workers nearly equally, and would hire them both if only he had two positions. But with only one position available, he is forced to choose, and even the slightest degree of prejudice means that the black teenager doesn’t get the job. In this way, the minimum wage invites discrimination and greatly exacerbates the effects of employer prejudice.
Students take note. All your professors say that racial discrimination is morally abhorrent and that they would oppose any policy that increases discrimination. At the same time, most of them also support the minimum wage, and none of them perceives the contradiction.