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Minimum Wage Reality in America

Posted By Ericka Andersen On May 16, 2011 @ 1:45 pm In Economics | Comments Disabled

Economist Walter Williams knows that minimum wage laws are hurting poor, African-American teenagers and his new book, “Race and Economics: How Much Can Be Blamed on Discrimination?” [1], attempts to dispel the myth that higher minimum wage laws help. Simple economics recognizes that if the price of labor increases, employer demand for labor decreases.

When the minimum wage increased from $5.15 to $7.25 between 2006 and 2009 – a dramatic 40% rise – unemployment noticeably took a turn for the worse and the trend continues today.

Thanks to the minimum wage; the poor, teenagers and specifically young, African-American males have lost many opportunities to find work. The well-intentioned increase in minimum wage has done nothing to help those for which it was intended. More importantly, the skills learned in low-paying jobs are essential for movement up the career ladder and earning higher pay later. Without the opportunity to earn the low-ladder skills, they miss the boat on ever finding good-paying jobs.

Even without another wage increase, the results of previous minimum wage hikes are glaringly negative. In March of this year, the teenage unemployment rate was 24.5%, with black teens claiming a whopping 42% unemployment rate.

In William’s book, he argues that not only is the minimum wage hurting that segment of the population, but it’s the labor unions who have a stranglehold on the legislation that makes it happen – an attempt to reduce competition and protect their own jobs.

“It is a redistribution of income and opportunity from low-skilled people to higher-skilled people and if you ask the question – who are the major supporters of the minimum wage law who spent millions and millions of dollars lobbying for its increase, it turns out to be labor unions,” said Williams in a recent Fox Business interview [2].

Economists William E. Even and David A. Macpherson  found [3] that in the 21 states fully affected by the most recent minimum wage hike, “about 13,200 black young adults lost their job as a direct result of the recession, versus 18,500 who lost their job as a result of the minimum wage mandates…”

This means the minimum wage hike hurt more than the recession for this particular demographic.

As Heritage’s James Sherk writes [4],

Good intentions aside, minimum-wage supporters cut off this bottom rung of many workers’ career ladders.

Policy-makers can argue whether trading higher wages for some against lost jobs for others makes sense in normal times. But even minimum-wage supporters should recognize that the American economy cannot afford to lose more jobs right now.

Williams’ book takes on the double whammy that faulty economic policies create for young African-Americans and the reality isn’t one we can afford to ignore.


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URL to article: http://blog.heritage.org/2011/05/16/minimum-wage-reality-in-america/

URLs in this post:

[1] “Race and Economics: How Much Can Be Blamed on Discrimination?”: http://www.amazon.com/Race-Economics-Blamed-Discrimination-PUBLICATION/dp/0817912452/ref=sr_1_1?ie=UTF8&qid=1305563637&sr=8-1

[2] interview: http://dailycaller.com/2011/05/12/walter-e-williams-explains-how-unions-scheme-to-keep-blacks-out-of-high-paying-jobs/

[3] found: http://epionline.org/study_detail.cfm?sid=137

[4] writes: http://www.heritage.org/Research/Commentary/2009/07/Minimum-Wage-Maximum-Trouble

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