Monday, January 08, 2007

Minimum wage is a racist policy

My Aunt Terry used to live in San Jose. She is a very savvy, experienced political operative, very involved in the political scene in California. She ran the district office for a congressman, and once ran for San Jose City Council.

About the time she ran, San Jose had established a minimum wage of something around $11.00 an hour. "That will keep the riff-raff out of San Jose," I told her once. She just gave me a dirty look. I think she probably understood what I meant.

Here's what I was driving at: Let's say you are starting a business, and the minimum wage is $10 an hour. You look at all the applications from people who want jobs. Since you have to pay $20,000 a year, you have to be selective. You'll only offer a job to those people whose skills will produce at least $20K in value to you. (Actually, because you have to pay all sorts of other payroll costs associated with each employee, the number is more like $25K.)

Anybody whose skills aren't worth $20K, you simply won't hire. The fact of the matter is the state, by making the minimum wage $10 an hour, has made it illegal for low skilled people to sell their labor for what it is worth in the marketplace.

Now, what is the best way to acquire job skills? The best job skills training is a job. But if we make it illegal for low skilled people to sell their labor for its value, they will never get on the ladder of increasing their skills, and commanding higher wages. In effect, the state cuts off the first few rungs of the economic ladder.

Who gets hurt? It doesn't hurt those whose skills are above the minimum wage value, only those below it. In our society, sadly, because of the state of the schools in the poor (and often minority) neighborhoods is so bad, black teenagers are far more likely to emerge from the school system with a skill level below that of the minimum wage.

Therefore, Oregon's high minimum wage is profoundly anti-black. It disproportionately creates unemployment among black teenagers. It prevents them from selling their labor at its value, and keeps them off the job skill ladder that they could start climbing if the do-gooders who push for high minimum wage laws actually understood economics.

On second thought, I think a lot of the folks who push for high minimum wages know precisely the effects of the policy, but they don't care. Labor unions are concerned mostly with increasing the pay and benefits for their members. They have a vested interest in making sure that low income people do not have access to the labor market, because restricting the supply of labor is a sure way to drive wages up.

So, labor unions are fine with policies that ensure America's black youth are consigned to a permanent underclass, because they don't pay their union dues. And your run-of-the-mill liberal who thinks minimum wage laws help people - well, they are just well meaning dupes.


rickyragg said...

And your run-of-the-mill liberal who thinks minimum wage laws help people - well, they are just well meaning dupes.

No, they're just run-of-the mill racists. Your "well meaning" modifier is without basis. Good people assume others have good intentions. The effects of racism are the same whatever the motivations of racists.

Ignorance is no excuse.

Anonymous said...

Amen the previous.

I touched on Oregon's persistent unemployment and the minimum wage here at

Anonymous said...

Total coincidence that Oregon is both a high unemployment state and a high minimum wage state.

Anonymous said...

Having a low minimum wage just perpetuates poverty and underemployment (meaning, people work lots of hours but still can't make a family wage). Perhaps we should change our definitions of "low skill," and "menial labor" rather than advocate for a minimum wage that keeps people oppressed?!

Anonymous said...

Where I live they dropped the amount an employer had to spend to get an employee by setting the income tax at a flat rate of 16%, and halving some other taxes that were payed by the employer for the "benefit" of the employee, while in the same time making everybody pay this tax by dropping exemptions for low income.

The result was that some 200000 unregistered workers got their papers, the lower salaries grew and about half of the minimum wage people got their salary doubled, and the amount of money payed to the state budget grew too, so in 2005 and 2006 the government had to revise the budget in the middle of the year to add expenses they thought they did not afford when the budget was voted.

There were some plans to drop the income tax further to 11% while raising the added value tax from 19% to 21%.