Minimum wage not working so well for minority youths

The American people are being sold a bill of goods – lied to – concerning the effects of a minimum wage. Federal and state minimum wage mandates do nothing to help provide a “living wage” nor does it do anything to improve the overall employment picture. Walter E. Williams’ column today discusses how this government interference ensures about one in four minority youths are unemployed.

When the government mandates you pay employees a wage that is more than what a free market would determine, businesses have decisions to make. They can…

  1. Increase prices
  2. Cut expenses (reduced quality/service, cut employee hours, reduce benefits, layoffs…)
  3. Accept a lower profit margin, or
  4. Some combination of 1, 2 and 3.

For a small business with thin profit margins, these are very difficult decisions to make. If you are a small business employer who happens to be part of the group of 25 percent who are underwater in their home mortgage, you’re not going to be able to easily take a pay cut.

Can you increase prices? Sure … but what will the market pay? Unlike the government mandating what you must pay employees, the government does not mandate private individuals buy a product or service from you (yet).

Will you elect to work more hours and not hire those extra seasonal employees this summer? Well, that’s exactly what’s happening, and there is a staggering discriminatory effect in play.

Go read Williams’ full article, which references a study Unequal Harm: Racial Disparities in the Employment Consequences of Minimum Wage Increases from the Employment Policies Institute. The study focused …

… on 16-to-24 year-old males without a high school diploma, a group that previous studies suggest are particularly susceptible to wage mandates. Among white males in this group, the authors find that each 10 percent increase in a federal or state minimum wage decreased employment by 2.5 percent; for Hispanic males, the figure is 1.2 percent.

But among black males in this group, each 10 percent increase in the minimum wage decreased employment by 6.5 percent.
The effect is similar for hours worked: each 10 percent increase reduced hours worked by 3 percent among white males, 1.7 percent for Hispanic males, and by 6.6 percent for black males.

Why the disparity?

Why do black males suffer more harm from wage mandates than their white or Hispanic counterparts?

The authors find that they’re more likely to be employed in eating and drinking places–nearly one out of three black young adults without a high school diploma works in the industry. Businesses in this industry generally have narrow profit margins and are more likely to be adversely impacted by a wage mandate. There’s also substantial variation in regional location, as black young adults are overwhelmingly located in the South and in urban areas.

It’s also likely that unobserved differences in skill level and job experience play a role. To the extent that these differences are concentrated among young men of a particular race or ethnicity, this group would have the greatest risk of losing jobs when the minimum wage is increased.

Williams sums up…

The best way to sabotage chances for upward mobility of a youngster from a single-parent household, who resides in a violent slum and has attended poor-quality schools is to make it unprofitable for any employer to hire him. The way to accomplish that is to mandate an employer to pay such a person a wage that exceeds his skill level.

25 replies
  1. Dimsdale
    Dimsdale says:

    Yet another lefty program supposedly designed to help the poor and disadvantaged failing at its designated task.?? How many times does this have to happen before people realize that the flunkies we send to Washington (and locally) are incompetent nitwit incapable of considering the long term effects of their feel good legislation?
    ?
    Of course, if I were conspiracy minded, I would say that these so called helpful programs are actually designed to keep people poor and dependent on government, and Democrats in particular.? But I am not (much)!
    ?
    Hanlon’s Razor:? never ascribe to malice what can be adequately explained by stupidity and/or incompetence, but don’t rule out malice.

    • Jeff S
      Jeff S says:

      The flunkies we send to Washington or locally only care about one thing and that is keeping their jobs.? They will not do anything if it?means losing votes.?

  2. Don Lombardo
    Don Lombardo says:

    As long as people keep?listening to Sharpton and Jackson?- instead of? Walter Williams and Tom Sowell -?the??inner cities are doomed to poverty and illiteracy.?

  3. sammy22
    sammy22 says:

    Though I agree w/ what Walter Williams says, I do not believe that letting the market set a minimum or any other wage level (even zero), is going to improve the “employability” of? the minority youths. If they don’t have the requisite skills, employers will not hire them.

    • Dimsdale
      Dimsdale says:

      It may not improve their “employability”, but it would employ their chances of being employed.
      ?
      When liberals destroyed the black family unit, black kids took it on the chin.

  4. sammy22
    sammy22 says:

    As I said, “If they don?t have the requisite skills, employers will not hire them.” Blaming somebody for something that might have been done in some past (the Republicans are blameless?? Where was Walter Williams?), does not improve the present condition.

    • Steve M
      Steve M says:

      Stop throwing out straw-man arguments (the Republicans are blameless?) … nobody said that yet you toss it out there anyway. Republicans – in the political sense – don’t teach at schools or parent kids.

      ?

      Sure, education is an issue, but when buying a product/service or hiring an employee you expect a certain value or skill set for x dollars. There are definitely businesses out there who would hire many of those teens if the price was right – giving them at least a chance. The government mandate excludes that possibility.

    • Dimsdale
      Dimsdale says:

      I believe that Williams still teaches economics at George Mason University, a course that I would love to take, and that politicians should be forced to take.

  5. Eric
    Eric says:

    Walter Williams is a smart cookie, and when he talks about the minimum wage everyone should listen, especially the liberals in Congress. This is one of their pet issues. Just before Ted Kennedy left the floor of the Senate he co-authored the latest minimum wage increase. He had no understanding of business or how these wage increases affected profit margins. Having been born with a silver spoon in his mouth he had never worked for a living. He never ran a business. His ignorance helped to hurt more black kids then he could possibly have realized. Mandating a wage in a free market society is the absolute height of stupidity. The Fair Labor Standards Act was signed into law in 1938. Since the late 1990’s there has been much debate as to whether the minimum wage is a “fair living wage”. This is hardly the way to look at a minimum wage because, by design, ?it’s never going to be enough to live on. Because most of our elected officials are fairly ignorant when it comes to free market economics I believe they should be required to take Prof. Williams Econ 101 course at GMU before being sworn into office. The danger here of course is that they’ll be learning the finer points of screwing the American taxpayer much faster then if they had just been left alone to settle into their first term in office!

  6. sammy22
    sammy22 says:

    Steve, I believe I gave my opinion and no straw-man arguments until Dims pulled the “liberals destroyed….” line. In my opinion the negative references to “liberals” imply that someone else (who can that possibly be?) can do/has done better. Eric minced no words to insult, yes insult, liberals. And you simply opine with certitude (are there facts?) that businesses that “would hire many of those teens if the price was right”. Everybody is an ignoramus of economics, the market and how businesses “work” except for a selected few on this blog, really?

    • Dimsdale
      Dimsdale says:

      Well, what part of the breakup of the black family, that seems to have started in the 50’s, are conservatives responsible for?? It isn’t a matter of who has done better, but more what the domination of education by liberals has done to students.? Of any color.
      ?
      You might read another of Williams’ columns, titled “Black Education” wherein he states

      “Another part of the black education disaster has to do with the home environment. More than 70 percent of black children are born to unwedded mothers, who are often themselves born to unwedded mothers. Today’s level of female-headed households is new in black history. Until the 1950s, almost 80 percent of black children lived in two-parent households, as opposed to today’s 35 percent.”

      (http://econfaculty.gmu.edu/wew/articles/11/BlackEducation)

      Everybody may not be an “ignoramus of economics”, but surely, our politicians qualify.? ?bama in particular.

  7. David R
    David R says:

    The road to hell is paved with both good and bad intentions. In terms of? impact of? government policy on the black family: that assault began when the first slave stepped off the boat in VA.? Back then the colony changed the law concerning the legal status of children from the English Common Law which conferred legal status of the dad onto the kids. The new law gave the children of slave mothers the legal status of slave. In other words, white slave owners could impregnate female slaves with little or no social or moral consequence, while increasing their own net worth.? That practice went on for centuries, as did the practice of splitting families, selective breeding? and discouraging marriages.? Following emancipation and for the next 100 years, economic and social constraints hardly supported strong black families.? And many of those conditions have not gone away.? Another huge change has been that the strength of? all families has wained over the years due to economic and social conditions. Four in ten children are born out of wedlock. Divorce occurs in nearly half of all marriages.?In my view it is as ?likely that the market place, which sells sex, materialism and instant gratification to children and adults alike, ?is as responsible for these problems as any other factor.

    • Dimsdale
      Dimsdale says:

      Maybe we should focus less on intentions, and more on unforeseen, but usually predictable, consequences.

  8. David R
    David R says:

    Re. minimum wage: it’s important to base these decisions on the best available studies, which suggest that something like the earned income tax credit are more effective at reducing poverty. I tried to find who was responsible for the 1975 legislation but had no luck.?I think ?it would be great if both liberals and conservatives had a hand in it.

  9. sammy22
    sammy22 says:

    Predictably, the discussion has veered off into “who to pin the blame to in the past”. Since the past cannot be undone we should fix our attention on the present. Way back in these commentaries I said that I agreed w/ Williams. I also said that “if the youths do not have the requisite skills, they will not be hired”. Even Steve took a shot at that. Oye veyh…

    • Dimsdale
      Dimsdale says:

      The only way to undo the mistakes of the past is to not repeat them, and that can only be done by recognizing how those mistakes were made, and removing the hangers on that perpetuate them.
      ?
      Now who is in near complete control of the education system (not counting the inevitable lawyers, of course!)?

  10. Steve M
    Steve M says:

    Guys. Enough of the back and forth stuff. I’ve been completely open to letting comments breed and grow on their own for the past month or so and again I start getting email complaints … “all the comment sections include are back and forth stuff between a couple of people”.

    ?

    Comment about the post. Move on. I’m also turning off the ability to reply to someone’s comment as I think that may be part of the issue. I’m guilty of the same.

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