The Minimum Wage and Democrats: Screwing Blacks for over 70 years

My tribute to Dr. Martin Luther King, Jr.: 

The best thing that we could do to honor Martin Luther King’s legacy would be to repeal Federal Minimum Wage laws. As a big admirer of Martin Luther King’s legacy, I thought I appropriate to discuss the effects of a particular piece of legislation upon the African American Community. Federal Minimum wages have over 70 years of putting the government between the employer and employee.

Brief History – It was Once Deemed Unconstitutional

The first attempt at establishing a national minimum wage came in 1933, when a $0.25/hour standard was set as part of the National Industrial Recovery Act. However, in the 1935 court case Schechter Poultry Corp. v. United States, the United States Supreme Court declared the act unconstitutional and the minimum wage was abolished. The United States Constitution only gives the Federal Government the right to regulate interstate trade and Schechter Poultry Corp only did business in its home state.  The minimum wage was re-established in the United States in 1938 (pursuant to the Fair Labor Standards Act), once again at $0.25/hour ($3.22 in 2005 dollars). It had its highest purchasing value ever in 1968, when it was $1.60/hour ($9.12 in 2005 dollars).

Does it help the working poor?

Who is the minimum wage intended to help? John Sweeney, AFL-CIO was quoted as saying, "I'm so sick of hearing that the minimum wage is about teenagers and high school kids," he said. "It's people who are working, raising kids, it's single parents.” The proponents of the legislation say it supports working poor families. The data state otherwise, via heritage:

• Average household income of a minimum wage earner: $49,885
• Proportion of minimum wage earners under 25: 53 percent
• Proportion of all adult hourly workers who are single parents working full time: 6.3 percent
• Proportion of adult minimum wage earners who are single parents working full time: 6.1 percent

Well then why have Federal Minimum Wage Laws?

However, just because it is ineffective at increasing the standard of living of the target, doesn’t mean it is completely impotent. It is a powerful tool to increase unemployment among teenagers and minorities, and especially teen minorities. Don’t take my word for it. Look at the amount of research on the subject (see ).

Bauer, P.T. 1959. Regulated Wages in Under-developed Countries. In The Public Stake in Union Power, ed. Philip D. Bradley. Charlottesville, VA: University of Virginia Press, 324-349.
Argues that the negative effects of minimum wage laws in LDCs is even greater than in industrialized countries, because there is greater diversity of supply and demand for labor in LDCs. Also points out that in South Africa minimum wages helped whites at the expense of blacks.

Williams, Walter. 1977a and b. Youth and Minority Unemployment. Study prepared for the Joint Economic Committee, U.S. Congress. Joint Committee Print, 95th Congress, 1st session. Washington: U.S. Government Printing Office.
Points out that in 1947, prior to expansion of the minimum wage, black teenage unemployment was actually lower than white teenage unemployment, and that teenage unemployment generally was sharply lower than it is today.

Iden, George. 1980. The Labor Force Experience of Black Youth: A Review. Monthly Labor Review, vol. 103 (August): 10-16.
Concedes that the minimum wage has had a significant negative effect on teenage employment, especially for blacks.

Datcher, Linda P., and Loury, Glenn C. 1981. The Effect of Minimum Wage Legislation on the Distribution of Family Earnings Among Blacks and Whites. In Minimum Wage Study Commission (1981), vol. 7, pp. 125-146.
Finds that an increase in the minimum wage increases white family incomes more than black family incomes. Also, middle- and high-income families benefit more than low-income families.

Phillips, Llad. 1981. Some Aspects of the Social Pathological Behavior Effects of Unemployment among Young People. In Rottenberg (1981a): 174-190.
Finds that primary impact of minimum wage is on young males, especially black males. This has encouraged continued school enrollment and entry into the armed forces. However, it has also encouraged "illegitimate" alternatives to employment, such as crime.

Linneman, Peter. 1982. The Economic Impacts of Minimum Wage Laws: A New Look at an Old Question. Journal of Political Economy, vol. 90 (June): 443-469.
Finds that the disemployment effects of the minimum wage fall mainly on blacks, females, restricted individuals, residents of small cities, those with low education, the old, and non-union members. Beneficiaries of the minimum wage mainly are males and union members.

Behrman, Jere R.; Sickles, Robin C.; and Taubman, Paul. 1983. The Impact of Minimum Wages on the Distributions of Earnings for Major Race-Sex Groups: A Dynamic Analysis. American Economic Review, vol. 73 (September): 766-778.
Finds that the minimum wage has helped white males and females while hurting black males and females.

Meyer, Robert H., and Wise, David A. 1983a. The Effects of the Minimum Wage on the Employment and Earnings of Youth. Journal of Labor Economics, vol. 1 (January): 66-100.
Estimates that abolition of the minimum wage would have led to significantly higher employment among youth, especially black youth. Finds no evidence of higher earnings from the minimum wage.

Burkhauser, Richard V., Kenneth A. Couch, and David C. Wittenburg. 2000. “Who Minimum Wage Increases Bite: An Analysis Using Monthly Data from the SIPP and the CPS.” Southern Economic Journal. Vol. 67, No. 1 (January), pp. 16-40.
Minimum wage increases significantly reduce the employment of the most vulnerable groups in the working-age population--young adults without a high school degree (aged 20-24), young black adults and teenagers (aged 16-24), and teenagers (aged 16-19). While we also find that minimum wage increases significantly reduce the overall employment of young adults and teenagers, these more vulnerable subpopulations are even more adversely affected.

David Neumark and Olena Nizalova, “Minimum Wage Effects in the Longer Run,” National Bureau of Economic Research Working Paper No. w10656, June 2004.
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. 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.

What is the relevance in 2010?

It doesn’t end. In fact it only get’s worse. Those most affected by the current recession has been black teens. Teens in general have a lower employment rate, but the unemployment rate among black teens is harmful to the fabric of the United States. Teen employment is important because it provides important skills and work history needed for later employment. You have to ask yourself, who is on their side and why do we allow minimum wage laws to harm those most in need? Dirk Van Dijk, CFA via Zacks recently commented on the tragedy.
“The rate for black teens fell to 48.4% from 49.8% in November and is up from 33.3% a year ago. When you consider that almost one in two unemployment rate, also keep in mind that the participation rate among black teens in the workforce is also extremely low. The participation rate for black teens is just 27.5%, and only 14.2% of all black teens are employed. Those are rates one associates with Africa, not with African Americans. “
Why has the African-American community so heartily accepted the Democrats agenda which has the effect of pushing their young people into unemployment and even crime? I think it was partly the Republicans acceptance of the Dixiecrats who broke off from the Democrats in the sixties is the obvious answer. However, that was years ago and there were more Republicans who signed the Civil Rights legislation than Democrats. A better answer would be the democratic coalition would be dissolved and the self-annointed African American elite would lose their status and power.  That and plus the fact that there are a lot of ideas that sound great on paper that end up doing more harm than good. 


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