The Minority Case Against The Minimum Wage

Most of you have heard the standard arguments against the minimum wage – that it is a weak poverty reduction tool, it increases prices, increases unemployment, hurts small businesses, makes the economy less efficient, etc, etc, but what I want to write about today is the harm done by the minimum wage that is least discussed – its affect on minorities, especially poor and unskilled minorities.

Have you ever wondered why poor areas have more empty lots than rich areas? Why unemployment is much higher in poor areas than in rich areas? Why minorities, especially blacks, high school drop outs and those with the least amount of skills have a harder time finding a job than others? A lot of the reason for all of this is the minimum wage, and that is what I want to write about today.

Before I go on, we have to ask who is on the minimum wage? If you look at government stats (see here, here and here) you will see that most of the people that are on minimum wage are part time workers and a full four-fifths of all minimum wage workers are not poor. People like, stay-at-home moms who want to supplement their full-time spouse’s earnings, teenagers working after school, and other students. These are students that tend to live in good neighborhoods, are relatively well educated, and are already doing okay, being that mommy and daddy pays most of their bills. Of course there are some ‘single mothers of four’ and other truly poor people living on the minimum wage but they are an extremely small percentage, by far the bulk of people on the minimum wage are young college kids starting their working lives. In addition, most people on the minimum wage are on there for a relatively short amount of time. In other words, the minimum wage is only their first step in a long road ahead of higher wages and more opportunities. The minimum wage in this respect is the gate way, the entry point, where an employer takes on a relatively small risk to hire you and see what you can do, after all, a teenager fresh into the work force has little to no work experience to be evaluated on.

Okay, so what happens if the minimum wage starts to increase? While economists may disagree on the magnitude of the effects of the minimum wage, here are a few things that economists universally would agree, and all things that primarily affect minorities.

1. The minimum wage harms the least productive most

What politicians won’t tell you but what ALL economists know is that the people who are most likely to lose their job due to an increase in the minimum wage are the least educated, the ones with the least skills, and the ones that are likely to keep their jobs are the more educated, the ones with the most skills. For example, if you had to lay someone off, with all things being equal would you rather lay off someone with or without a high school diploma? With or without the ability to speak english? With or without a criminal record? Remember, as the minimum wage goes up the market becomes an employers market (supply increases and demand drops) so that employer now has more people to choose from.

So being that minorities are the ones that tend to be less educated either because of a poor public school system, or the lack of english speaking parents at home, it is primarily poor minorities that feel the brunt of the minimum wage – while middle class white students reap most of the rewards.

Free exchange, a blog provided by the Economist magazine, explains it this way:

It seems very likely to me that the small number of people made redundant as a result of a modest minimum wage hike are very likely to be the worst off of the poor: convicted felons, recovering drug addicts, welfare mothers, the cognitively disabled, high school dropouts, those whose backgrounds were too chaotic to impart good work habits. The well-connected, well-socialised middle class teenaged and twenty-something students, on the other hand, seem disproportionately likely to keep their jobs.

In short, the minimum wage is a subsidy to relatively affluent workers at the expense of poor, less educated workers.

2. The minimum wage harms poor areas over rich areas

In addition to harming primarily poor people, the minimum wage harms primarily poor areas. Think of it this way, lets say that you were a person looking to open up a new business and you were looking for communities to open that business in. Well, if you wanted to open up that business in a poor neighborhood you would have alot of things working against you – you would tend to have a lower educated work force, customers with less buying power, and sometimes an area with a high crime rate (higher security risks and costs etc). Well, if you were able to pay whatever you wanted, you could pay your employees lower wages to compensate for some of those disadvantages but a minimum wage takes that option away. So now, especially for those companies that are not extremely profitable, your choices are more limited. You can’t, even if you wanted to, open up in a poor neighborhood because your costs will exceed your profits. So what is that poor community left with? Nothing – with less companies opening up shop there. Have you ever wondered why poor neighborhoods have so many empty lots? Well the minimum wage is a big reason for that…and of course the neighborhoods that benefit are those neighborhoods with more educated citizens, with less crime, and with more disposable income. In short, the minimum wage harms the poor communities to the benefit of the richer communities.

To think of this another way, it is important to note that the minimum wage was first passed at the national level in 1938, around the time of the second wave of the great depression. If you were to look at the voting record of that legislation, one of the things you would discover is that the northern senators voted almost unanimously in favor of the minimum wage and the southern senators voted almost unanimously against the minimum wage. The reason for that is that wages were alot lower in the south, the south being the part of the country with the most ex-slaves. So the minimum wage was basically set at a level above southern wages but below northern wages. The minimum wage was set by the northerners as a way to keep jobs in the north by preventing businesses from moving to the south to take advantage of the lower wages. Who paid for this minimum wage? Unemployment during that time was almost all poor southern workers, primarily black southern workers, who were basically priced out of the labor market (the minimum wage was also used to price women out of the labor market, see here ). In short, the more you raise the minimum wage, the more you harm poor areas at the benefit of rich areas.

Is it a coincidence that the minimum wage is primarily supported by legislators from San Francisco, New Jersey, Massachusetts, and other high cost areas, where the minimum wage is more symbolic than anything else, because wages already have to be high to cover the extremely expensive living costs? I don’t think so.

3. The minimum wage makes discrimination less costly, therefore easier to discriminate

Lets talk about racism and how the minimum wage helps racists. Lets say that I was a racist and I wanted to open up a restaurant but I hated Mexicans so much that I refused to hire any in my shop. My shop is to have whites, and whites only. Well one of the first things I will learn, as any restaurant owner will tell you, is that Mexicans are extremely productive at such a cheap price. To put it another way, it is hard to get any other group of people to work so hard for such little money. Try hiring a bunch of middle class white kids to wash dishes, clean tables, sweep the floor, cook the food, all for close to the minimum wage, it just isn’t going to happen. So okay, I am a stubborn racist and decide to do it anyway – problem is, to get the same quality of workers I have to now pay them more per hour, say $8, or $10/hour. That is the beauty of the market system, I now have to pay for my racism. Whereas the non-racists are getting the same productivity from their works as I am but at a much lower rate, I have to forego precious profits to support my racist beliefs. Furthermore, in a really competitive market this is enough to put me out of business!

Now, factor in the minimum wage and what happens? Well you have just made it easier for me to be racist. Now I may have to pay $8/hour or $10/hour but you know what, so does everyone else, in other words, you have reduced and spread out the costs I previously had to incur to follow my racist beliefs….and the Mexicans that used to work there? Sure, some of them keep their job but some would surely be replaced. Think of it this way, if you were an employer and you had to pay an employee $10/hour no matter what, would you rather have one that spoke english or one that didn’t? One with more education or less? One with a criminal record or one without? In other words, the minimum wage is to the benefit of those who have more skills and makes it less costly to discriminate. For more on this, go here, here, here, and here.

With the accumulation of the above taken into account, it is easy to understand why the harm of the minimum wage falls primarily on poor, low educated, low skilled, minorities, especially blacks.

David Neumark, professor of economics at UC Irvine and Olena Nizalovaof have a NBER study on the long-run effects of the minimum wage, it states ( here ):

Exposure to minimum wages at young ages may lead to longer-run effects. Among the possible adverse longer-run effects are decreased labor market experience and accumulation of tenure, lower current labor supply because of lower wages, and diminished training and skill acquisition. Beneficial longer-run effects could arise if minimum wages increase skill acquisition, or if short-term wage increases are long-lasting. We estimate the longer-run effects of minimum wages by using information on the minimum wage history that workers have faced since potentially entering the labor market. The evidence indicates that even as individuals reach their late 20’s, they work less and earn less the longer they were exposed to a higher minimum wage, especially as a teenager. The adverse longer-run effects of facing high minimum wages as a teenager are stronger for blacks. From a policy perspective, these longer-run effects of minimum wages are likely more significant than the contemporaneous effects of minimum wages on youths that are the focus of most research and policy debate.(emphasis added)

The more the minimum wage is lifted, the harder it is for those with less skills, less education, and more barriers to climb (english, racism, etc) to overcome, leading to more and more people being priced out of the labor force, and so it should be no suprise that the minimum wage hits hardest those who are most vulnerable to racism, living in bad areas, and low education.

In addition to all of this, the minimum wage benefits large businesses and harms small businesses, it causes an increase in prices, it increases unemployment and it reduces competition, all in all, things that primarily harm the poor. But hey, it brings in votes, so who cares right?

53 Responses to “The Minority Case Against The Minimum Wage”

  • afif abdullah

    This is the best article on minimum wage I’d read so far. Good writing

  • Here’s what I’d ask you to consider, HP. I think you and even mainstream economists offer plausible theories. It seems that if you raise minimum wage then people on the margins that lose their jobs are going to be the poor and uneducated. Makes it easier to be a racist. Makes businesses unlikely to open in poor areas. So raising minimum wage exacerbates these problems. OK. Sounds plausible.

    But here’s where it goes off the rails. Is this what the data show? So take this study I linked to earlier.

    So here’s a theoretical explanation. Let’s suppose that Wal-Mart makes profits by selling crap and they need their stores stocked with stuff, and let’s say a given Wal-Mart stores needs 100 employees to get that done. If they can pay $2 an hour, then profits go up, the stock price goes up, and the wealthy stock owners are better off. But a poor person is better off making $10 an hour. If Wal-Mart was forced to pay $10 an hour then suppose Wal-Mart still needs the same 100 people to stock shelves and doesn’t lay anybody off. They can’t make profits without stocked shelves, so they’ll pay what they need to pay presuming the costs don’t get so high that profits disappear. Profits are still there, but not as much. Stock price drops. Rich people suffer at the expense of poor people. I say so what. The top 10% of the population that owns 80% of the stock aren’t going to suffer much.

    On the other hand the profits may remain. With the work force earning more money they have more to spend, so sales go up.

    Is this the way it really works? Heck if I know, but it sounds plausible. But that doesn’t make it true. You need to look at the actual data to see. This is the fallacy of neoliberalism. Sounds very plausible that if we ram NAFTA through Mexico will really benefit. Then when we do it we see that the rich alone benefit and the poor suffered. The hard facts aren’t consistent with the plausible sounding theory.

  • Thanks for responding Jon. I appreciate your honesty. Personally, I think one of the reasons you are a lefty (at least on economic issues) is that your economic knowledge is lacking. But at least you are upfront about it. You lay it all on the table. I admire that. Thats the way I am. Shit, there is a lot I don’t know. But it’s what my experience leads me to believe. So I lay it out there. If I am wrong, show me. It’s how we learn. I wish more people were like that.

    There are two problems that make your analogy more problematic than it seems. The first is the basic fact that employers will not pay an employee more an hour than the productivity that employee produces. This is a basic truism. Surely you can agree with this. Nobody, not even corporations, loses money intentionally. And this would be losing money.

    So what would happen if, say, Wal-Mart was forced to pay a slightly higher wage? Well, the same pattern I mentioned above: it would be a reshuffling of employees. The workforce would end up being more educated, more experienced, and more reliable. That’s the only way the company would decide to hire an employee. In the end, the poorest of society would still be shut out of the labor force (if they can’t find more productive workers to hire, then they will either close down or refuse to open up in that area – as Wal-Mart has been forced to do repeatedly).

    Don’t believe me? There is actually a real world test of this: compare the union run grocery chains – the Albertsons, Vons and Ralphs of the world – workforce to that of Wal-Mart’s workforce. What do you see? The union run grocery stores employees are indeed more educated, better spoken, and more reliable. They are also predominantly white. You can see why. And the lower paid Wal-Mart employees? Less educated. Don’t speak English as clearly. Often times less reliable. And also predominantly minority. Its really no coincidence. This is minimum wage economics in action.

    Which brings me to the second problem with your analogy. The next stark difference between the union run grocery stores and Wal-Mart: the price of goods. Because the price of goods is set by supply and demand (not, for example, the price of labor), whatever extra you force these stores to pay their employees, it will be passed on to the consumer in a higher price of goods. This is why the union run grocery stores have noticeably more expensive goods than Wal-Mart. This basic economic fundamental is why the unions hate Wal-Mart – they realize that the lower priced goods at Wal-Mart steal customers from the union run grocery chains, thereby making them less competitive. But this complicates your simple “for the poor” analogy. So now, on the one hand, even given a best case analogy, while you have made the employees slightly better off with higher wages you have made the consumers slightly worse off by higher priced products. So from a poor perspective, even given your best case scenario, which situation is better? I would argue that mine still is.

    Why? Well because the minimum wage is hardly ever a permanent wage. It’s a transitional wage. It’s like an internship out of college. Graduating from college, wouldn’t you have accepted even a non-paying internship at a company in order to be given the chance to prove yourself? I know I certainly would have. The higher the minimum wage, the more you lock out the least productive. The more you prevent them from even entering the work force (as you would expect this impact to be largest among poor minorities, which btw, is substantiated by studies, as my post above shows).

    Lastly, the best way I have found to think about the minimum wage (and the whole Wal-Mart vs union run grocery stores, since that issue is related) is by using hotels as a comparison. In the hotel industry, there are atleast two models: there is the luxury hotel model of places like Hilton hotels and there is the basic necessities model of places like Motel 6 and Best Westerns.

    In the Hilton hotel model you would expect that their employees are better paid with more benefits. And by extension, they tend to be more educated. Better spoken. More productive. But with that, you get a business model that primarily caters to the more wealthy segments of the population.

    In the Motel 6 and Best Western model, you would expect that their employees are less paid with less benefits. And by extension, they tend to be less educated. Speak English with trouble. Less productive. But with that, you get a business model that primarily caters to the less wealthy segments of the population.

    You have two very different economic models that cater to two different sectors of the economy. You rarely, if ever, have crossings between the two. And you would expect this, in a market based economy like ours. They wouldn’t survive.

    So which model is better for the poor? I would argue that the Motel 6 and Best Western model is. I would argue that it is only those businesses that would even open up in poor areas – not the Hiltons of the world. And it is those businesses that the minimum wage primarily harms. It pushes us towards a world where you will only have Hilton Hotels and Motel 6’s are non-existent. That, I am arguing, is a bad thing precisely for the poor.

  • Regarding the minimum wage studies:

    The first thing you have to notice about minimum wage studies is that hardly any of them look at the minimum wage from a poor minority perspective. They all look at average impact. And given that fully 3/4’s of those that make the minimum wage are not poor, you can imagine how easy it is to overlook those at the bottom. If you read my post carefully, I have even granted the possibility that some areas are better off with national minimum wage standards (higher paid, relatively rich areas, for example). So I grant that the minimum wage, given a certain sector of the economy (primarily white, educated and more productive sector) can be a net gain. But my focus isn’t on them. It’s on the poor uneducated minority. And every study I have seen that focuses on that segment, shows the minimum wage to be a net loss to them.

    1. Look more closely at what some economists are actually saying. The minimum wage is historically low. What many economists believe is that a small raise in today’s minimum wage will have little to no impact on employment. But this is different than saying a meaningful raise in the minimum wage will have no impact. In other words, they are not speaking to the economics of the minimum wage per se, only to the effect of raising the current minimum wage – being that its historically low, a small bump wouldn’t have much of an effect.

    Lets take an extreme example, to prove my point. Say that we have a minimum wage of $0.25/hour. Clearly, that minimum wage would be meaningless. Few would work at such a wage, except maybe those who are compensated by other factors (tips, for example – where its the “other factors” that matters more). So if you asked economists would doubling the minimum wage from $0.25/hr to say $0.50/hr, have an impact on employment? Of course most would say no. I would even say no. Why? Not because I disagree with minimum wage economics, but because so few would be working at that wage anyway (and those that would primarily care about tips) that raising it would do nothing to the labor force.

    But thats a big difference than saying a jump from $5 to $10 an hour wouldn’t have a noticeable affect on employment. In other words, the proper question you should ask economists is: would a slight meaningful raise in the minimum wage affect employment. My guess is that those agreeing would go up dramatically.

    2. The main study in support of the minimum wage, the Card-Krueger study, contradicts later research by the same economists. See here. (btw, even the same blog that you link to, has an economist arguing, with data, that the minimum wage does indeed cause harm, see here).

    3. Surveys of economists (see here) still show a majority support the view that increasing the minimum wage harms unemployment. Which is remarkable, considering that A) the minimum wage is at a historical low (even at this low level, more economists believe that it harms employment than do not – imagine if you raised it MORE) and B) most economists entered the field assuming the minimum wage does not harm employment (as is shown by polls of the average joe, where something like 90% believe that the minimum wage is good for labor).

    4. All of this ignores my main complaint with the minimum wage: the minority connection. Which is why I wrote the blog in my previous comment.

    5. Lastly, its important to keep in mind who the minimum wage DOES help: unions and high income areas like California, New York and New England. So its easy to see why white limousine liberals would be for the minimum wage. Don’t be fooled by their “for the poor” rhetoric. Its all politics.

  • Yeah, yeah. You’ve got your standard boilerplate about how I’m ignorant. True enough.

    Here’s my objection to your first main point, which is that Wal-Mart is cheaper. The way I see it things are complicated. It’s very easy to fall into the fallacy that since labor costs are cheaper Wal-Mart has cheaper products. Aren’t there like a ton of factors involved? Isn’t what you offer extremely simplistic? Wal-Mart gets prices down in a variety of ways. Not just reduction in labor costs. Pressures on suppliers are huge, and since this is the biggest company in the world the pressure they exert is enormous. I read of how they sold a gallon of Vlassic pickles for less than $3. This is top, name brand stuff, and a ton of it. How can they do that? They put pressure on Vlassic, who puts pressure on farmers, who put pressure on migrant workers, etc. What are the consequences of that overall? I think you sit there and spin this stuff out of your head, which is not unlike what the economists you read do. They offer theory. Higher labor costs leads to higher prices. Makes sense. But there are many factors that affect price and many complex interactions that result in the net effect on employees and society as a whole.

    Is Wal-Mart cheaper? Frankly I’m not sure. Maybe it is. But again, don’t just spin it out of your head. Check the data. I don’t have data, but I’ll say this. We shop exclusively at Kroger and Meijer for food. Both union. This has nothing to do with lefty tendencies in me. They offer a better product at a better price by my personal estimation, which perhaps is not very reliable. When I lived in Iowa I was a full blooded right winger that wanted to shop at Wal-Mart just to stick it to whiney liberals. When a Wal-Mart opened I shopped there and the prices were great. For a short period. Slowly but surely the prices went up, almost imperceptibly. I stayed, not realizing it for a while. Finally I said to my wife, Wal-Mart’s prices are not better than Hy-Vee any more. They used to be, but now they aren’t. We went back to Hy-Vee exclusively for groceries. I wanted to shop at Wal-Mart for ideological reasons, but their prices weren’t good, at least for groceries. And their efforts at deception (lull people in with good prices, get them comfortable with the routine so they’ll stay, then jack up the prices) worked for a while and probably works on a lot of poor people that really suffer due to the deception. But then that’s what companies should be doing right? Doing their best to deceive people into overpaying.

    As I proceed through your replies I see that the spinning out of your head continues. You say “I would argue that the Motel 6 model is better for poor people.” You would argue? Does it make it true if it sounds plausible to you? What if there was a third option. What if government regulators came in and demanded that Motel 6 pay more, but perhaps not as much as Hitlon? would you argue that this was worse for them? You might, but how would you know?

    What I’m looking at, since economies are complex things, and pointing to single prices as key to the overall understanding of the effect on society is I think misleading, I’m looking at the effects on overall society. I’m looking at things like the two Citigroup studies I sent you. Here’s a line from a recent speech by Bill Moyers (which incidentally included discussion of my father-in-law at the end).

    “…surely this truly educated audience will be moved by the recent analysis of tax data by the economists Thomas Piketty and Emmanuel Saez. They found that from 1950 through 1980, the share of all income in America going to everyone but the rich increased from 64 percent to 65 percent. Because the nation’s economy was growing handsomely, the average income for 9 out of l0 Americans was growing, too – from $17,719 to $30,941. That’s a 75 percent increase in income in constant 2008 dollars.

    But then it stopped. Since 1980 the economy has also continued to grow handsomely, but only a fraction at the top have benefitted. The line flattens for the bottom 90% of Americans. Average income went from that $30,941 in 1980 to $31,244 in 2008. Think about that: the average income of Americans increased just $303 dollars in 28 years.”

    Now, what has changed in that time frame? We haven’t had a liberal economic president since when? Richard Nixon? It’s deregulation and tax cuts for the wealthy across the board. When Reagan entered he informed the business community that labor laws wouldn’t be enforced. Firing someone for labor organizing is against the law, as is threatening workers that attempt to unionize that their factories would be shipped overseas. But Regan wouldn’t enforce that stuff. Let the free market reign. That’s a different world then prior to the 80’s. What are the consequences? Citigroup can see, and they are jubilant.

  • I’m curious, lets assume, arguendo, that economists know more than you. Lets assume that they know what they are talking about so that the economic theory I proposed above is actually true. If that is the case, would you then agree that the minimum wage does indeed harm the poor? Because if so, then we can just focus on the economic theory, and my point is made.

    Regarding Wal-Mart’s price savings: It’s a bit trickier than you might assume to determine just how cheap Wal-Mart is vs other chains. You can’t just randomly pick a product and compare prices. That won’t tell you much. Why? Well one thing that complicates it is competition. The lower Wal-Mart sets the price on products, the more it pushes other chains to do the same. So just because two items cost the same, that doesn’t mean that Wal-Mart has no effect. The mere fact that there is a Wal-Mart nearby probably contributed to the lower price of that good in the first place (see here for numbers). Second, stores do a lot of price discrimination. So, for example, the high end Trader Joes might put the expensive organic bread at the front entrance of the store where its easily accessible, hoping to lure the higher end customers that are not too price sensitive into buying (they trade in convenience for price). Yet a close substitute for the bread at a cheaper price might be in the isle, harder to find. Or Whole Foods might offer a deep discount on a certain type of food, say beef, in order to lure a certain type of customer in who will then buy many other higher priced goods. Wal-Mart would do the same thing, but tailored to customers with different tastes. So it all depends on what products you get. On a strict bare essentials comparison, I wouldn’t expect there to be a dramatic difference. Both stores know that the people who buy those types of products are extremely cost sensitive (cheap!) and any rise in price will be a direct hit to sales.

    Other methods that Wal-Mart helps consumers is location. Because Wal-Mart has an economic model that is able to serve low income communities, Wal-Mart is able to have much more of a presence in low income neighborhoods (just as there are more Motel 6’s in the ghetto than Hiltons). This puts competitive pressure on other chains and has downward pressure on the price of goods. Where are the Trader Joes, the Whole Foods, and the union run grocery stores in the ghetto? There are some, but not many. Wal-Mart by far dominates in the ghetto.

    Then there is convenience. Wal-Mart saves customers by having almost everything you need in one location. This saves them on gas, time and effort. All things that are extremely valuable for the poor. And finally, there is price. If you were an extreme cost sensitive person and were on a strict budget, you can get away with feeding your family on less shopping at Wal-Mart than at other union run grocery stores. Aside from you, I have not seen anybody else dispute this. In fact, even unions grant this. They argue precisely what you wont grant: that it’s because Wal-Mart is not union run that they are able to offer cheaper products, thereby stealing customers and market share from the union run grocery stores.

    Don’t get me wrong, I grant that a big part of the reason why Wal-Mart is cheaper has to do with the extreme efficiencies Wal-Mart has in lowering the costs of its suppliers. My point here is not to deny that. As I explained above, its a combination of things that makes Wal-Mart cheaper. Lower labor costs is one among many. On this point, I agree with the unions.

    So in the end, maybe the customers are not as stupid and ignorant as you so easily assume? Maybe they go to Wal-Mart, not because they are blind sheep (the minute you start assuming the stupidity and ignorance of the working class is the minute you crossed over to the left, IMHO) but because – wait for it – Wal-Mart does indeed offer a cheaper experience, on net? How crazy would that be?

  • Now getting back to the meat of our discussion, I noticed you completely ignored what I consider my strongest argument, my “first” part response to your argument: namely, that the higher the forced wages, the more educated, well spoken, reliable and plain productive the employees are (and the Whiter the employees). Certainly you don’t disagree with this, do you Jon? I mean, if indeed you have visited Wal-Marts in your life, there is one thing that strikes you immediately: Wal-Mart employees clearly come from a lower social economic sector of the economy than employees in union run stores. Wal-Mart employees are more likely to be minorities. More likely to have a problem speaking English. More likely to be less educated. And plain more likely to be less productive.

    You claim to shop “exclusively at Kroger and Meijer for food. Both union.” Since I am not familiar with either grocery chain, I have to ask you, do you indeed see the pattern I mentioned above? I would be very surprised if you said no. So since I assume the answer is yes, can you please explain to me how in your world this makes sense? You already know how it makes sense in my world. I gave you the economics of it above.

    So when you ask questions like: “What if there was a third option. What if government regulators came in and demanded that Motel 6 pay more, but perhaps not as much as Hitlon?” you can see why its misguided. Minority unemployment is already ridiculously high. Unemployment in the ghetto is even higher. When you combine the two, and you look at unemployment rates in primarily poor minority neighborhoods, its astronomical. Its well above the unemployment rate of any other sector of the economy. I’ve already quoted studies showing that the minimum wage as it is today is already hurting minorities and the poor (see here for data driven empirical research that Jon will probably ignore). So at what point would you say that the minimum wage is too high? Does poor minority unemployment have to hit 50%? 70%? or 90% for you to say, okay, enough is enough? My argument is that we need more Motel 6’s, not less. My point is that the current number of Motel 6’s is not enough. In fact, I would go the other way. I wish there were companies better than Wal-Marts. Companies that exclusively hired ex-cons, high school drop outs, and unwed mothers. I would say that that economic model is better for the poor, better for America, and better for employees. If there were such a company, I would shop exclusively at their stores. Not the union run grocery stores that deal primarily with middle class employees.

  • Here are other interesting facts about Wal-Mart that the leftist media (jab at Jon here) doesn’t want you to know:

    Did you know that Wal-Mart beats out its competitors in worker safety? Find out for yourself here. This is even in comparison to union run companies like GM, Home Depot and Target (though I’m not sure if Target is union run).

    Did you know that “According to Forbes, Wal-Mart was the most generous corporation in America in 2007 (probably the world too), giving away $301 million in cash gifts to the Children’s Miracle Network, Feeding America, The Salvation Army, the American Red Cross, the United Way of America, National Fish and Wildlife Foundation.” see here.

    Even the Wal-Mart business model has a charity attribute to it. It brings peace and prosperity abroad. “Wal-Mart might well be single-handedly responsible for bringing about 38,000 people out of poverty in China each month, about 460,000 per year. Even without considering the $263 billion in consumer savings that Wal-Mart provides for low-income Americans, or the millions lifted out of poverty by Wal-Mart in other developing nations, it is unlikely that there is any single organization on the planet that alleviates poverty so effectively for so many people. Moreover, insofar as China’s rapid manufacturing growth has been associated with a decline in its status as a global arms dealer, Wal-Mart has also done more than its share in contributing to global peace”.” See here.

    Did you know that Wal-Mart is a leader in making healthy food more affordable. So much so, that economists have argued, through empirical data driven research that Jon will likely ignore, that Wal-Mart actually reduces obesity. The study states: “Wal-Marts reduce weight while grocery-selling Wal-Marts and warehouse clubs either reduce weight or have no effect. The effects appear strongest for women, minorities, urban residents, and the poor.” See here.

    And this is in addition to the extremely valuable benefits of offering cheaper products to the poor, hiring more poor minorities, opening more in poor neighborhoods, and the rest mentioned above.

  • Regarding Jon’s wage stagnation and inequality argument, in an effort to keep this thread focused, I direct readers to his website where we hashed that out months ago (and Jon has yet to respond), see here.

    In addition to what is mentioned in the link, I just want to add two things: Jon specifies a certain period, specifically”1950 through 1980″. Does anybody even remotely familiar with history notice something unique about those dates? Those dates were the heart of the cold war. The final years of the spread of communism. Think about how this is relevant: while the rest of the world was headed towards Chomsky economics, the US – though certainly far from pure capitalist ideals – was becoming the de facto capitalist country of the world. So what would you expect? Companies came to the United States in droves. The United States was the best place, for example, to open up manufacturing plants that require a large amount of upfront costs and are risky to open up in countries where the government could decide tomorrow to cease control. These corporations naturally looked for a country that had strong property rights, the rule of law, and atleast rudimentary market policies. No other country fit the bill more than the United States. The United States then become the bedrock of technology, education, and progress.

    So it makes sense that everybody in the United States, especially those at the bottom, would benefit. But then what changed in 1980? Thats the beginning of the fall of communism. Culminating in the eventual fall of the USSR in 1989. As communism started to break down, poor countries than started opening up there borders to free trade. You started to have the East Asian tigers prosper in the 1970’s and into the 80’s. Then you had the rise of China and to a lesser extent India.

    If you follow the link to Jon’s blog where we discuss this in detail, you will see that I don’t buy the inequality and wage stagnation arguments as strongly as Jon does. But that doesn’t mean I deny it completely. And I would say a good chunk of the reason for it is China and the rise of other underdeveloped countries. Manufacturing and pure hard labor jobs are moving over there and having a negative impact on the poor in the United States. This makes sense. But that doesn’t mean its a bad thing. The United States is the richest country in the world, and if some of our growth is taken from our poor and given to the worlds poor – who are by far much poorer and destitute – I would say that that still is, on net, a good thing. This point must not be ignored.

    Lastly, I would say that a good chunk of our growth from 1950 to 1980 was based on racist policies and other policies that we don’t want to repeat again. I know Jon doesn’t like reading from sources who don’t agree with him, but I challenge him to read this post (click here) and see if it doesnt challenge the presuppositions he holds so dearly.

  • I should mention that my hotel example above is not something I came up with. I stole it from Mark Steckbeck, professor of economics at Hillsdale College, see here for his clearly superior explanation.

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