How The Minimum Wage Harms Minorities The Most

A while back I explained this in a post titled, “The Minority Case Against The Minimum Wage“, see here. Economist Steven Horwitz makes the same argument with less verbiage:

During his campaign for the presidency, Barack Obama promised that, in contrast to his predecessor, his presidency would be a “science presidency.” In his first year, Obama may well have taken some science more seriously than his predecessor, but one set of settled scientific research he has chosen to ignore has been the economics of the minimum wage. The result has been a nightmare for young workers, especially young workers of color.

Economic theory predicts that raising the minimum wage will cause those employees who are least productive to lose their jobs. If we raise the minimum wage from, say, $6 to $7, it’s the same thing as saying “any worker who cannot produce $7 worth of value each hour is not worth hiring.” Younger workers are, of course, among the least skilled in the economy. In addition, thanks to poor schools and historical discrimination, young workers of color are over-represented in this category. Higher minimum wages should disproportionately affect young workers and especially ones of color.

The empirical evidence to support this theoretical claim is abundant. Hundreds of studies of this relationship have been done by economists and they are nearly unanimous that higher minimum wages are associated with some level of increased unemployment among lower-skilled workers. Whatever consensus there might be among climate scientists about global warming, that among economists about minimum wage laws is at least as great. Despite what the science says, the Obama Administration supported a minimum wage increase last July.

The results are as theory predicts: unemployment among whites age 16-19 is at by far the highest rate in 10 years: 25.3% in October, up 28% from 6 months earlier and 36% from a year ago. Among African-Americans of the same age group, the unemployment rate is an intolerable 41.3%, up 19% from April and up 25% from a year earlier. The Hispanic or Latino youth unemployment rates are 35.6% (October), 26.5% (April), and 28.3% (October 2008).

The full article can be found here.

18 Responses to “How The Minimum Wage Harms Minorities The Most”

  1. Dom says:

    “The empirical evidence to support this theoretical claim is abundant.”

    And yet Ted Kennedy, who always championed a raise, denied it. And he seemed to have no end of Economists who supported him.

  2. Gerardo says:

    Either you are complacent with a low paying job, or settle for no job at all. Great! Obama should lower the minimum wage right now and he we will see a shit load of jobs being created.

  3. Gerardo says:

    Oh wait, I’m still waiting for the bush tax cuts to kick in!

  4. Dom,

    You can find an economist to support almost anything but the majority is clearly against the minimum wage. And when you take into account that almost all of them entered the profession believing the minimum wage helped, that’s a huge change.


    Minimum wage jobs for those entering the workforce are analogous to internships for college graduates, in the sense that both are needed to get your foot in the door. Graduating from college, there were companies I would have worked for for free, had it meant an opportunity for a permanent job later. However, the higher that required entry level pay, the harder it would be to get that job (more applicants and less available positions).

    Regarding Bush – what is far more important is that he didn’t raise the minimum wage as much as Clinton did, and as such I don’t think its a coincidence that unemployment for minorities was lower under Bush than under Clinton, see here and here.

  5. gerardo says:

    HP—Why dont you pick 2008 for the Bush/Clinton caomparisons instead of the 1995/2005? How is the unemployment rate calculated? What does it tell us? And what doesn’t it tell us. It’s one measure, but a flawed measure.

  6. Finance Guru says:

    Minimum wage is a foolish idea. It’s one of the major driving factors for work going overseas. All it does is drum up dislike of the lower class from the middle class which is counter productive. People just need to learn that sometimes the costs of things like minimum are far more than just monetary.

  7. Gerardo,

    I didnt want to pick any one extraordinary year – I wanted “typical”. But really that year is not unique, the average unemployment rate under Bush, especially for minorities, was lower than under Clinton.

    Of course, for you it’s a flawed measure, it disagrees with one of your pet beliefs. But it makes perfect sense to me: Bush, unlike Clinton, didn’t raise the minimum wage much (btw, by 2008, minimum wage started increasing…, guess what happened to the minority unemployment rate???).

  8. Gerardo says:

    I’m not denying the numbers and what they tell us, the point I was trying to make is that its one indicator among many others….

    Still waiting for the economic miracles that his stimulative tax cuts were going to cause…

    Look at the UR when your boy Bush took office and when he left:

    and here is Krugman on the nonsense that your pushing:

  9. Gerardo says:

    Either way, unless there are higher paying jobs created “minorities” are still going to be largely screwed…. whether they are employed or not…the problems are more severe than if they are getting a higher minimum wage or not…

    And if you cut the minimum wage, all that means is that they are going to get paid less and earn less even if they keep their jobs and more were to be hired …

  10. Gerardo,

    How do your quotes contradict what I wrote above? Also, I was looking at specifically minority unemployment, as that is the hardest hit by the minimum wage. Your view cannot explain why the minority unemployment rate was so much lower under Bush – mine can.

    Second, are you really a follower of Krugman? Do you care about minorities at all? Krugman, in case you haven’t noticed, dreams of an economic era that was largely supported by discrimination and suppression of minorities. His liberalism is a big reason why I despise liberals. Do me a favor and read this article on Krugman liberalism. Is that really a world you want for minorities? It’s no wonder he is in favor of the minimum wage…

    Regarding Krugman’s point, see these direct responses to him: here, here and here.

  11. Also, to say that “unless there are higher paying jobs created “minorities” are still going to be largely screwed” is to totally misunderstand my point.

    I likened the minimum wage to internships after college. In other words, eliminating minimum wage jobs for minorities is tantamount to eliminating entry level internships for minorities. Doing so is devastating to their future prospects.

  12. Here is Krugman on immigration.

    Allow me to give you a piece of advice when picking economists: There are usually two mutually exclusive camps. One camp is a big proponent of government, minimum wage and unions – and, not by coincidence, generally dislikes immigration, legal or not.

    The second camp is a big proponent of smaller government, no minimum wage – and, not by coincidence, generally supportive of immigration, legal or not (most are even full on open border economists).

    I prefer the second camp. It is also no coincidence that these views go hand-in-hand. You cant, for example, be a union supporter and be a supporter of immigration – the two really are, economically speaking, mutually exclusive. This is why Cesar Chavez, a hero too many, was really no different than modern day minutemen…doing what he can to stop illegal immigration. He knew very well that you have to choose sides – immigration or unions…not both.

    Personally, I choose immigration. Alot of my minority friends choose unions (or not following their arguments through, claim to support both).

  13. Last point, in case you think I am presenting Krugman in an unfairly bad light, here it is straight from his mouth: see here and here.

    This is specifically what I was referring to:

    Immigration is an intensely painful topic for a liberal like myself, because it places basic principles in conflict. Should migration from Mexico to the United States be celebrated, because it helps very poor people find a better life? Or should it be condemned, because it drives down the wages of working Americans and threatens to undermine the welfare state?

  14. Israel says:

    Gerardo- where can you find information showing us the number of people who depend on minimum as a primary source to support a family?

    It seems to me that most people who work at minimum wage are working these jobs as a starting point into the work force or to make a few extra bucks. Living in NJ, anytime I’m dealing with let’s say contractors (with some being illegals), even they would not accept minimum wage in the course of doing business. For that matter, even kids over here would say that it’s not worth it. From HP’s contention, if there are jobs that need people with no skills, they need to have a lower wage set in order to afford to hire. Why should we accept this whole premise of minimum wage? Aren’t we just artificially raising the costs to the point that a small business can’t hire the extra help?

    I ask these questions because minimum wage is a feel good liberal cause. However, I fail to see how it helps a broader spectrum of workers. If less jobs are out there due to raised cost of doing business, how can you honestly say that it helps people?

  15. Israel,

    Your instincts are correct. Check out this link on Who Earns The Minimum Wage?:

    Four-fifths of all minimum wage workers are not poor…. Part of the explanation for why so many minimum wage workers are not poor is that over two-thirds of them are in families in which at least one other member has a job.

    Which largely explains why Democrats support the minimum wage: its not that it helps the poor, because it doesn’t, its because it helps their constituents.

    Duke University’s Michael Munger said it best when he wrote, “We should just call it the “Legislation To Increase the Salaries of Middle Class White Union Workers Who Contribute Big Bucks to Ted Kennedy.” Then, at least we would be honest about who is benefitting.”

  16. LaurenceB says:

    You do a nice, thought-provoking job of arguing the facts, but why then do you ruin it all with the over-the-top anti-Democrat tirade at the end? In my opinion, that really damages your whole argument. The fact of the matter is that those of us who are reasonable folks, willing to listen to opposing arguments, and even change our opinions occasionally, are much less likely to be convinced if the person we are listening to sounds like a partisan hack (whether or not he actually is).

    In other words – I’m sorry, but my personal experience tells me that you are quite simply and obviously wrong in your anti-Democrat rant. You see I have absolutely no doubt that most, if not all, of the Democrats I personally know support the minimum wage because they believe (rightly or wrongly) that it helps poor people – not because it’s politically advantageous, as you suggest. This is a fact. I’m certain others will agree with me on this point.

    So… Now that I can see you are blinded on this point by politics, how can I trust your previous analysis on the intricacies of the minimum wage? – which, frankly, I thought was somewhat convincing at the time.

  17. LaurenceB,

    I agree with your general point – if you are referring to average joe’s on the street. But I disagree strongly, and would consider you a bit naive for believing otherwise, if you thought the same of politicians.

    Politicians, especially at the national level, do not primarily care about what policy helps who – they primarily care about the power they have and holding onto it. Sure, their secondary concern may be altruistic, but it’s so far removed from their primary concern that it could almost be ignored completely – a rounding error, if you will.

    This is one of the reasons why I am a Republican. Education reform is one of my primary concerns but because Democrats are so controlled by the unions, real constructive education reform is not likely to come out of the Democratic side (its no coincidence that real education reform: vouchers, charter schools, NCLB etc have generally come from the Republican side with Democrats kicking and screaming). Do I think Republicans fight for education reform because they are more altruistic than Democrats? No, of course not, they care about education reform for the same reason that Democrats do not: they want to hold and increase the power they already have. For Democrats, kissing up to the unions increases their power. For Republicans, fighting against unions increases their power. So the right question for those of us deciding who to vote for is: Do unions, on net, help or harm education reform? Based on that question, you vote accordingly. Not because one party ‘cares’ more than the other party.

    Take Obama as an example. If he wasn’t President of the United States, if he didn’t care about political power and all the party politics involved, I am fairly certain that he would have supported the Washington D.C. Vouchers program. Why wouldn’t he? It takes some of the poorest kids in the nation, removes them from what everybody agrees is one of the worst performing public schools in the nation, and transfers them to what everyone agrees are better schools – all, without costing the tax payer any more than what previous education subsidies cost. Yet as President of the United States, he took the drastic step of closing down the voucher program, see here. Only after a few days of rallying did he allow the current students to finish but still prevented any future students from receiving vouchers, see here.

    Did he do this because, ‘after careful consideration, decided vouchers were somehow bad for the students’? Of course not. He did this because he knew the political calculations involved. The more vouchers work and the longer they are allowed to go on, the more they create advocates and beneficiaries. IOW, vouchers threatens to pit two of the most loyal Democratic blocks against each other: the teachers unions and minorities. Political suicide for any Democrat.

    So Newt Gingrich is not parading around with Al Sharpton because he cares more about education reform than other politicians, he is doing this because education reform is in his political interest. Real education reform helps Republicans more than Democrats.

    So the way I see politics is that the choices we have as voters is not ‘what party cares more’, but instead the question is ‘how do you pit political interests against each other to gain the most for society’? To think otherwise of politicians is, IMHO, naive. So I stand behind my statement above: the reason Democrat politicians primarily care about the minimum wage is because it really does, on economic grounds, help their constituents more: white union middle class workers. The reason Republicans don’t fight as hard to prevent the minimum wage from increasing – aside from the bad PR it brings – is because the people the minimum wage harms the most (poor, non-union minorities) are not Republicans, and worst of all, don’t understand the economics of what the minimum wage does to them.

    But that doesn’t mean that me, as a voter, shouldn’t be disgusted by the whole situation.

  18. LaurenceB says:

    My apologies. Re-reading what you wrote, it’s pretty clear you were referring to Democratic politicians, not Democrats in general. Of course, I agree with you on that.

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