Return to main page
Return to Welfare; History, Results and Reform
The Minimum Wage
The following chart demonstrates that right as the welfare transition was occurring, remarkable changes were taking place in the black male labor market. Chart 30 (39):
This difference is even more interesting when one considers that the civil rights movement was in full force in the 60s and many segregationist and discriminatory practices were (supposedly) ending. One would have expected the above graph to show almost the exact opposite. It would be interesting to look at the rates since welfare reform, but no figures/charts are available. Why would these differences occur? Relieved from the responsibility of having to provide for a family, perhaps some black men worked less? I realize this is just speculation, but it is worth considering. A more likely cause might be raises in the minimum wage which, counter-intuitively, hurt the populations most people think they were designed to help. (101), (102)
In the mid 1950s the minimum wage laws were changed to apply to all sectors of the economy, not just manufacturing (251), and were drastically raised, until they reached their peak in the late 1960s (ironically, right around the time when Welfare spending and payments were also at an all time high). When employers are required to pay their employees higher wages then they are less likely to hire, and more likely to fire, leading to higher unemployment (example: present day Europe (252)). Worse, the lowest wage earners, stereotypically young unskilled African Americans in high crime areas, are priced out of the job market because any employer that hires them takes a 'loss' every hour they are on the job because the employer is forced to pay them more then he/she believes their labor is really worth. Eliminating these 'entry level' type jobs also eliminates opportunity for future advancement and skill learning. This is more clearly seen by contrasting the following 4 Charts:
Chart 30 (39): Chart 61 (253):
Chart 62 (254): Chart 63 (255):
Around 1980, when the minimum wage begins to decline, the rate of black unemployment begins to move back towards the rate of white unemployment. Notice the white teenage employment rate is also adversely affected (Chart 62) and that, as we might predict, the effects are most pronounced as the age of the worker declines (Chart 30). In 1999 black and white teenage unemployment reached at a 30 year low and the income gap has narrowed (can't find exact statistics for the present). (258)
Very similar political battles took place over the minimum wage. Liberals demagogued Republicans as being out to hurt the poor, minorities, women, and children etc.. and as selling out to 'big business'. As documented previously, the exact opposite actually occurred. The Liberals harmed those they claimed to be defending. In reality the big pushers behind the minimum wage hikes were unions. The press never asked these union leaders why they lobbied so hard and gave millions of dollars to the Democratic party in order to pass laws that wouldn't even help a single member of their union directly; all of their members typically made much more then the minimum wage. What it did was decrease the competitiveness of rival nonunion companies by forcing them to raise their bids on contracts. Interestingly, businesses were hurt by the minimum wage laws too. The same good policy (a $0.00 minimum wage) helps both the lowest income workers AND 'big business'. This is true of almost every policy put before Congress, yet our friends on the left will attempt to pit one group against the other in an attempt to satisfy special interest contributors - all shadowed in a veil of compassion.
Yet, for some reason, even today the debate is not framed in the above terms. Republicans, like President Bush, often publicly claim to be in support of raising the minimum wage, yet work behind the scenes to kill it. It is almost if they actually believe the rhetoric being spouted on the left, or are afraid of the political consequences of appearing 'cold hearted' by the media. Why don't they just call a spade a spade? And, where are the African American leaders standing up for their youth? In the 1980s the National Conference of Black Mayors (NCBM) actually supported a Reagan administration initiative:
The National Conference of Black Mayors (NCBM), along with other organizations, has endorsed an experimental program which would establish a sub-minimum wage for youth working in the summer months. Unemployment for all youth is a tragically high 19%. However, black teens have an intolerable unemployment rate of close to 45%. (256)
This illustrates another notable pattern, when government officials 'screw up' policies they never admit the original policy was a complete failure, rather they attempt to further expand government in a way that fixes their mistake. Soon this fixing will need adjusting and further fixing, which will need further fixing and on and on and on...
In the 1990s a group called 'Campaign for a Fair Minimum Wage' formed and led the successful fight to raise the minimum wage in the 1990s, thus opposing the prosperity of many young and poor Americans, specifically young African American teenagers. You might recognize the 'Co-Chairs' of this group: John Sweeney President, AFL-CIO, Anita Perez-Ferguson President, National Women's Political Caucus, Kweisi Mfume President and CEO, NAACP, Hugh Price President, National Urban League, Dorothy Height Chairman of the Board, National Council of Negro Women. (257)
The Minimum Wage (Posted 4/17/05)
An excerpt expanded and added to 'Welfare; History, Results and Reform' (and 'African Americans and Welfare'). Some readers liked my previous health care graphs, so I've included some new charts that detail the results of government hurtfulness resulting from the tyrannical minimum wage laws.
The rational for these laws arise from the government's premise that the citizens of this country are too stupid and greedy to know what to pay each other for an hourly wage and so have decided to throw employers in jail if they pay their workers less than the government, in it's infinite wisdom, arbitrarily decides. Some interests groups (unions) make money when their competitors have to raise prices due to their artificially inflated labor costs and so these unions generously donate a portion of their ill-gotten money back to the corrupt politicians who passed the unconstitutional laws. Of course, a minor side effect is that many employers don't find it particularly advantageous to hire people to work for them at inflated costs. Luckily, most people, notably white male professionals, weren't directly effected by this as they tend to make more then minimum wage. However, these laws had a huge effect on poor unskilled people, teenagers, and especially poor unskilled African American teenagers in inner city neighboorhoods, who, already being ravaged by the destructiveness of government inflicted welfare, were even further devastated by these policies. In 1954 the minimum wage laws were changed to apply to all sectors of the economy, not just manufacturing, and were soon drastically raised. Around 1980, when the minimum wage begins to decline, the rate of black unemployment begins to move back towards the rate of white unemployment:
[previously shown graphs]
Yet some 90% of African Americans apparently didn't view the transfer of wealth from their youth to union members as terribly problematic and so continue(d) to vote for Democratic candidates. In fact, the NAACP, National Urban League, and National Council of Negro Women, along with almost every major black political leader, fought to raise the minimum wage in the 1990s.
It turned out that with greater freedom to fire, the risks of hiring declined. This increased flexibility contributed to the ability of the economy to operate with both low unemployment and low inflation.
of a Jan. 14, 1987 New York Times Editorial
The Right Minimum Wage: $0.00.
Employment Policy Institute: Further insights on the minimum wage.
'African Americans and Welfare': Another excerpt dealing with issues effecting blacks.
for Nothing: Part III
3/2/06 Thomas Sowell
The Economist magazine reports that the official unemployment rate in South Africa is 26 percent but that the real unemployment rate there may be even higher. The South African economy is growing. Why then this extremely high unemployment rate? What is going on?
Minimum wages in South Africa have been set higher than the productivity of many workers, so employers have no incentive to hire those workers, even though such workers are perfectly capable of producing much-needed goods and services.
South African labor unions say that they are not going to let their workers become "the West's sweatshop." But the irony is that a South African firm which has been manufacturing aluminum wheels solely in South Africa for two decades has begun expanding its output by outsourcing the additional jobs to Poland.
Does that mean that Poland is becoming South Africa's sweatshop? Or does it mean that there are economic consequences to setting wage levels in disregard of productivity levels?
The South African government refuses to admit that an unrealistically high minimum wage rate has anything to do with the high unemployment rate.
Added to 'Sweat Shops and Welfare' and 'The Minimum Wage.'
Posted 1/4/07 (By Travis)
Owners Cut Jobs as Wages Increase
12/31/06 Colorado Gazette
A good article illustrating the harmful effects of increasing the minimum wage. Of special interest:
For example, some restaurant owners wondered whether tipped workers could perform the duties of nontipped workers, such as kitchen prep work, to offset some labor costs. Attorneys and labor experts told association members this would not be legal, Symonds said.
Private businesses cannot pay people what it thinks they are worth or have them do jobs they need done.
Interestingly, some Medical Residents do not make minimum wage, even now. Maybe they should sue. Amazing how one can fall afoul of the law...
Posted 1/15/07 (By Travis)
Life at $7.25 an hour
1/9/07 Washington Post
Posted 2/14/07 (By Travis)
New Minimum Wage Puts Squeeze Across Arizona
Some Valley employers, especially those in the food industry, say payroll budgets have risen so much that they're cutting hours, instituting hiring freezes and laying off employees. And teens are among the first workers to go.
Return to Welfare; History, Results and Reform
Return to main page