Walter Williams on proposals to raise the minimum wage in the USA:
The crucial question for any policy is not what are its intentions but what are its effects? One of its effects is readily seen by putting yourself in the place of an employer and asking: If I must pay $6.25 or $7.25 an hour to whomever I hire, does it make sense for me to hire a worker whose skills enable him to produce only $4.00 worth of value per hour? Most employers would view doing so as a losing economic proposition. Thus, one effect of minimum wages is that of discriminating against the employment of low-skilled workers.For the most part, teenagers dominate the low-skilled worker category. They lack the maturity, skills and experience of adults. Black teenagers not only share those characteristics, but they are additionally burdened by grossly fraudulent education, making them even lower skilled.
Bureau of Labor Statistics unemployment data confirms the economic prediction about minimum wage effects. Currently, the teen unemployment rate is 16 percent for whites and 32 percent for blacks. In 1948, the unemployment rate for black teens (16-17) was lower (9.4 percent) than white teens (10.2 percent). Plus, black teens were more active in the labor force.
How might we explain that? How about arguing that there was less racial discrimination in 1948, or back then black teens were more highly educated than white teens? Of course, such arguments would be nonsense. The fact of the matter is that while there was a minimum wage of 40 cents an hour prior to 1948, it had been essentially repealed by the post-World War II inflation; however, with successive increases in the minimum wage, black teen unemployment rose relative to white teens to where it has become permanently double that of white teens.
Walter Williams does not mention in this article the changes in welfare benefits. These stop the statistics he mentions being so powerful The drop in black youth unemployment could be due to rises in such benefits or lower conditionality. However his main point is surely true. And it is not only young blacks who are left out of work - with likely damage to their civility and willingness to remain law-abiding. I visited a small manufacturer East of London who had a middle-aged worker of below-average intelligence and ability. That worker was happy to be paid piece-work. She worked slowly but was still employable on that basis. Then Labour introduced the minimum wage. The woman's employer said she would keep the worker on since she was already with the company. However she would not employ a similar worker in future. A similar person would be unemployed. Certainly she would be on benefits. But, as described in the chapter on Social Security, the psychological effects of unemployment are very damaging.
For the full column by Walter Williams, click here.
Posted by James Bartholomew • Indexed in Welfare benefits
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An employer who can't pay a minimum wage which is less than £6 an hour must be incompetent indeed.
Footwear and clothing manufacture is the only part of the manufacturing sector in which low pay is widespread. Low pay is otherwise concentrated in retail and personal services, all of which have to be provided in this country if they are to be provided at all.
So employers in these sectors have a captive market, and if the minimum wage were to be increased to a level sufficient to support a family they could, without difficulty, pass their increased labour costs on to their customers.
The Government are well able to whip the unemployed into taking dead end jobs like these - they aren't so keen on whipping employers into giving them 'yes' for an answer when they apply for jobs, and better wages and conditions.
Posted by: Michael Petek at November 21, 2005 07:39 PM