With the possible exception of the war on drugs and public (i.e., government) schools, it would be difficult to find a government program that is more damaging to inner-city poor people, especially blacks, than the minimum wage. Yet, liberals, who have longed claimed to love the poor, needy, and disadvantaged, especially racial minorities, continue to steadfastly support this vicious and racist government program.
Those two links take the reader to lists of articles on those two websites that extol the virtues of the minimum wage. Indeed, the devotion that these two liberal websites have to the minimum wage was just recently reflected by their publication of an article entitled, “What Conservatives Mean When They Say ‘Libertarian’,” in which the author, John Sumner, criticized me for praising the virtues of economic liberty in 1800, a period characterized by the absence of a federal minimum-wage law and other interventionist programs. (My response to Sumner’s article, entitled “Economic Ignorance and Liberal Hypocrisy at Dailykos.com,” can be found here.)
The first thing one notices whenever liberals advocate the minimum wage is their stinginess, for they always limit their calls for a minimum wage to no more than $10 an hour. Despite their supposed love for the poor, you never see liberals calling for a minimum wage of, say, $100 an hour. They always keep it down to the $10-an-hour area.
Let’s examine why it’s a good thing, at least for the poor, that liberals don’t call for a $100-an-hour minimum wage. It will help us to see how liberals attack the poor, and especially the poor who are black, with their $10 or lower minimum wage.
In every economic trade, people are giving up something they value less for something they value more. That’s why they trade. They aim to improve their economic well-being through the trade.
For example, suppose A has five apples and B has five oranges. Let’s say they enter into a trade in which A gives B four apples in return for one orange. Is B the winner and A the loser in this exchange? No. They’re both winners because they both have gained from the exchange. Each of them has given up something he values less for something he values more.
It’s no different in a labor exchange. In any consensual labor relationship, each side gives up something he values less for something he values more.
Suppose, for example, an employer hires a worker at a monthly pay of $1,000. Both sides have gained; otherwise they wouldn’t have entered into the exchange. The employer values the money less than he values the work provided by the employee. The employee values the money more than the other things he could do with his time.
What’s important to keep in mind, however, is that all these valuations are entirely subjective. That is, they are in the eyes of the beholder. A person’s subjective valuation of something, including an employee, will inevitably turn on an infinite array of factors, including the amount of wealth he happens to possess and how he prefers to allocate it.
An employer, for example, will place a subjective valuation on a prospective employee. He will subjectively determine how much in additional revenue that person is likely to bring to the firm, especially compared to how much the firm is paying him. How much to offer him will be based on such factors as availability of capital and how much other firms are offering.
Suppose one day in June, a company’s employment office encounters 10 teenagers who have just graduated from high school, all of whom are seeking a job. The company and the teenagers reach a deal in which the company agrees to pay each of them $15 an hour. All of them are hired.
What that means is that the company has made a subjective valuation of their work potential, one that makes it worthwhile for the company to pay them $15 an hour. It also means that the teenagers are happy with the deal, again from an entirely subjective standpoint.
The teenagers begin work. One week later, the liberals enact a minimum-wage law requiring companies to pay their workers $100 an hour.
Do you see the problem? While the company concluded that those teenagers are worth $15 an hour, it is quite unlikely that it is going to feel the same way about paying them $100 an hour. After some quick deliberation, the company decides that it’s just not worth it to pay the higher, mandated wage rate. Its subjective determination is that the teenagers are worth no more than $15 an hour and certainly not $100 an hour.
So the law leaves the employer with no effective choice. The company lays off the teenagers. They go in search of new jobs, but every company tells them the same thing: “It’s just not worth it to us to pay you $100 an hour. We don’t have that kind of money, your skills aren’t yet sufficient to bring in significant revenues, and we’d soon go broke if we paid you that amount of money.”
So what do those teenagers do? Well, they starve to death. Or they steal. Or they push drugs. What other alternative has the $100 minimum law left them? Oh, they can also go on welfare because liberals, always concerned about the plight of the poor, enact a law that taxes the company that laid them off and uses the tax money to provide a welfare dole for the teenagers. Thus, unable to break into the labor market and learn a work ethic because of the $100 minimum-wage law, the teenagers remain on the dole through adulthood and possibly through their entire lives.
You see, the $100 minimum wage has permanently locked them out of the labor market. When libertarians show up and call for the minimum wage to be repealed, liberals hoot them down with such cries as “You hate the poor! You hate welfare! You believe in exploitation!”
But nothing can change the fact that it is the liberals — with their minimum-wage law — who have locked those teenagers out of the labor market, which then causes liberals to initiate welfare-state programs that make such people helpless, dependent wards of the state.
“But the minimum wage isn’t $100,” liberals cry. “It’s only $7.25 per hour.”
But the economic principles are no different, and this is where the racist aspects of the minimum wage come into play.
Everyone whose labor is valued by employers at less than $7.25 an hour is locked out of the labor market by the minimum wage law. It might well be fewer people than if the minimum wage were set at $100 an hour, but the fact remains: For all those people whose labor is subjectively valued in the marketplace at less than the legally established minimum, the minimum-wage law becomes a death sentence or at least one that leads to a life of crime or welfare-state dependency.
After all, don’t forget that the minimum-wage law doesn’t force any employer to hire anyone. It simply says that if you do hire someone, you must pay the mandated minimum. Thus, the law prevents those whose labor is valued by employers at less than the mandated minimum from working.
That brings us to black, inner-city teenagers, a group of people who oftentimes are extremely poor, not very well dressed, and not very well educated by the government schools they are forced to attend. Employers subjectively place a valuation on their work that is less than the government-established minimum wage.
Yet, in the absence of the minimum wage those black teenagers could find employment. They could out-compete their richer, better-dressed, better-educated, suburban white counterparts by offering to work for less. They simply would keep lowering the wage at which they’re willing to work until they met the subjectively determined valuation of an employer. That might be, say, $1 an hour. But at least the teenager could use the opportunity to learn the trade, thereby enabling him to acquire the skills that could help him start a business down the road, perhaps even competing against his employer. The $7.25 minimum wage law prevents him from ever getting that foothold. It keeps him entirely out of the labor market.
As George Mason University economics professor Walter E. Williams, who authored the book The State Against Blacks, wrote in a recent article, “The Cruelty of the Minimum Wage,” “One of the more insidious effects of minimum wages is that it lowers the cost of racial discrimination; in fact, minimum-wage laws are one of the most effective tools in the arsenals of racists everywhere….”
Empirical studies have long reinforced this theoretical analysis:
- u201CThe Lost Wages of Youthu201D (Wall Street Journal editorial, April 2010)
- u201CWaging War on Black Teensu201D by Richard W. Rahn and Izzy Santa (March 2010)
- u201CMinimum Wage Teen-Age Killeru201D by Bruce Bartlett (May 1999)
- u201C50 Years of Research on the Minimum Wageu201D by the Joint Economic Committee (February 1995)
- u201COutlawing Jobs” by Murray N. Rothbard (1995)
So why do the liberals at Daily Kos and Alternet and other liberals continue to do it? Why do they continue to support a program that is so clearly an attack on the poor, and a racist one at that?
The most likely explanation is the one I provided in my response to Sumner’s article — economic ignorance. When it comes to understanding economics, liberals have a blind spot. They honestly believe that all that is needed to end poverty in the world is passing laws.
Poverty in Haiti? Just pass a law forcing every employer to pay a minimum wage of $100 an hour, or at least $7.25 an hour. Voilà! Poverty is eliminated.
But as we all know, life is not so simple. If poverty could be eliminated by the enactment of minimum-wage laws and other welfare-state laws, poverty in the world would have come to an end a long time ago. After all, it doesn’t take much for a government to enact a law.
Instead, such laws always have terrible consequences for the very people liberals claim to help — the poor. When faced with such consequences, they always have a ready response: “Please judge us by our good intentions. We really do mean well.”
But why should we care about their good intentions? Why should the poor care about them? Why should inner-city blacks whom they have damaged so severely care about them?
All that matters are the consequences of government programs. The minimum-wage law has done untold damage to the poor, especially inner-city black teenagers. Liberals should be ashamed of themselves for continuing to support this vicious, destructive, and racist program.