Is The Minimum Wage Beneficial?

Another study has come out showing that the minimum wage actually hurts those it intends to help: unskilled workers.  This is not the first of these studies, but simply another study that will go unrecognized by those who favor high unemployment among minorities.  The author goes on to say:

Minimum-wage proponents argue that a higher wage floor will improve the standard of living for poor families. The reality is that higher labor costs reduce employment, especially for younger workers, and the greatest amount of pain is felt by black men. The Even and Macpherson study finds that among whites males ages 16-24, each 10% increase in a federal or state minimum wage has decreased employment by 2.5%. For Hispanic males, the figure is 1.2%. "But among black males in this group, each 10% increase in the minimum wage has decreased employment by 6.5%."

The effect on the black community is so pronounced, write the authors, that "employment losses for 16-to-24 year-old black males between 2007 and 2010 could have been nearly 50% lower had the federal and state minimum wages remained at the January 2007 level."

It gets worse. Not all states were fully affected by the federal minimum wage increases because some already mandated a minimum wage above the federal requirement. But in the 21 states that were fully affected, 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. "In other words," write Messrs. Even and Macpherson, "the consequences of the minimum wage for this subgroup were more harmful than the consequences of the recession."

In an interview, Mr. Macpherson told me that racial disparities in the employment consequences of minimum-wage hikes result from a number of factors. "One problem is that I think blacks tend to have, on average, inferior schooling," he said. "Also, the effects of the minimum wage differ by industry, and blacks tend to be heavily concentrated in, for example, eating and drinking establishments, where it's easier to substitute capital for labor."

Milton Friedman discusses the paradox of the minimum wage law:



It is actually interesting to note that the precursor to the minimum wage law was based on racism.  Powerful white unions were intimidated by having to compete against lower-cost black workers, and this led to the passage of the Davis Bacon Act.  Dr. Thomas Sowell discusses this in the following clip: