Minimum wage hikes not so good for black and Hispanic employment

A week ago, the Daily Wire published an article showing how Minnesota hiking its minimum wage from $6.15 to $8.00 an hour in 2014 put a damper on the growth of limited service restaurants.  Data from Minnesota's Department of Employment and Economic Development provide evidence that this policy disproportionately affected blacks and Hispanics (Figs 1 & 2).


Fig. 1.


Fig. 2.

From 2014 to 2015, the gap between black and white unemployment in the North Star State jumped from about 6% to 11.2% (Fig. 1).  Black unemployment in Minnesota increased by more than a third because people of color disproportionately rely on the minimum-wage jobs often provided by limited service restaurants.  White unemployment was not significantly affected, but what about other minorities?  If Hispanics also compete for these jobs, why did their unemployment decline when so many black Americans were losing their jobs (Fig. 2)?

According to Foreign Policy Magazine, high minimum wages compel small businesses to hire illegal aliens.  Since a Pew survey determined that 5% of Minnesota's population is Hispanic and 2.7% of her labor force is illegal, a substantive portion of the Hispanic labor force in Minnesota is probably being paid under the table.  When your profit margin is only 2%, hiring illegal aliens might be the only way to stay in business following a hike in minimum wage.

Prior to the implementation of the federal minimum wage, nationwide black labor participation was the same as that of whites.  "Non-white" unemployment started to diverge from that of whites following implementation of the Davis-Bacon Act in 1931 and the Fair Labor Standards Act in 1938.  This gap grew dramatically following a series of wage hikes that raised the minimum wage from 40 cents an hour in 1949 to $1.00 an hour in 1956.  In effect, the federal minimum wage deprived black Americans of the most important leverage they had for competing with whites.

People who are offended by the notion that bargaining for less pay should be a "right" do not understand the struggles of job-hunters lacking in experience or marketable skills.  Anyone who has succeeded in private enterprise understands that a low-paying job is better than no occupation at all, and private employers pay workers based on perceived value.

In a free market, employers who pay blacks less due to racism will be unable retain their best workers.  Employers who are willing to hire blacks with less experience provide a valuable service to the community, even if they are paid less.  We should never trust the government to decide whether an employer is motivated by racism or economic necessity, and while some may think it is necessary to regulate wages to ensure more "equity," the divergent effects of minimum wage on workforce participation along racial and ethnic lines suggest otherwise.

Antonio Chaves teaches biology at a local community college.  His interest in economic and social issues stems from his experience teaching environmental science.

A week ago, the Daily Wire published an article showing how Minnesota hiking its minimum wage from $6.15 to $8.00 an hour in 2014 put a damper on the growth of limited service restaurants.  Data from Minnesota's Department of Employment and Economic Development provide evidence that this policy disproportionately affected blacks and Hispanics (Figs 1 & 2).


Fig. 1.


Fig. 2.

From 2014 to 2015, the gap between black and white unemployment in the North Star State jumped from about 6% to 11.2% (Fig. 1).  Black unemployment in Minnesota increased by more than a third because people of color disproportionately rely on the minimum-wage jobs often provided by limited service restaurants.  White unemployment was not significantly affected, but what about other minorities?  If Hispanics also compete for these jobs, why did their unemployment decline when so many black Americans were losing their jobs (Fig. 2)?

According to Foreign Policy Magazine, high minimum wages compel small businesses to hire illegal aliens.  Since a Pew survey determined that 5% of Minnesota's population is Hispanic and 2.7% of her labor force is illegal, a substantive portion of the Hispanic labor force in Minnesota is probably being paid under the table.  When your profit margin is only 2%, hiring illegal aliens might be the only way to stay in business following a hike in minimum wage.

Prior to the implementation of the federal minimum wage, nationwide black labor participation was the same as that of whites.  "Non-white" unemployment started to diverge from that of whites following implementation of the Davis-Bacon Act in 1931 and the Fair Labor Standards Act in 1938.  This gap grew dramatically following a series of wage hikes that raised the minimum wage from 40 cents an hour in 1949 to $1.00 an hour in 1956.  In effect, the federal minimum wage deprived black Americans of the most important leverage they had for competing with whites.

People who are offended by the notion that bargaining for less pay should be a "right" do not understand the struggles of job-hunters lacking in experience or marketable skills.  Anyone who has succeeded in private enterprise understands that a low-paying job is better than no occupation at all, and private employers pay workers based on perceived value.

In a free market, employers who pay blacks less due to racism will be unable retain their best workers.  Employers who are willing to hire blacks with less experience provide a valuable service to the community, even if they are paid less.  We should never trust the government to decide whether an employer is motivated by racism or economic necessity, and while some may think it is necessary to regulate wages to ensure more "equity," the divergent effects of minimum wage on workforce participation along racial and ethnic lines suggest otherwise.

Antonio Chaves teaches biology at a local community college.  His interest in economic and social issues stems from his experience teaching environmental science.