Minimum wage bill would kill black, Latino jobs

April 24, 2012

By John Seiler

It seems that no bad idea goes unpassed in the California Legislature. Yesterday the Assembly Labor and Employment Committee passed AB 1439, by Assemblyman Luis Alejo, D-Watsonville. It would increase the minimum wage in California by the rate of inflation, while preventing decreases during times of deflation. Currently, California’s minimum wage is $8 an hour, 75 cents above the the federal minimum of $7.25.

But copious research shows that minimum wage laws destroy the jobs of just those workers Alejo and others want to help: black and Latino minorities.

Black economist Walter Williams has pointed out how a high minimum wage “cuts off the bottom rung of the ladder” of employment. Few people stay for long at the minimum wage. Once they prove competence and show up for work on time, employers usually raise their wages above the minimum, or risk losing such good workers to other employers.

What the minimum wage does is make low-level jobs prohibitively expensive for employers. The employers then just don’t hire people, farm out the work to India or China, move the whole company to another state or country or go out of business. Alejo does not propose putting a shotgun to employers’ heads and forcing them to hire people at his new minimum wage.

Williams wrote a classic study on this in 1977, “Government Sanctioned Restraints that Reduce Economic Opportunity for Minorities.”

He pointed out, for example, that if someone’s labor value is only at the minimum wage, but not higher, then raising the minimum wage means that person will lose his job.

Youth and minorities

Williams wrote that two groups of people especially are affected by the minimum wage: youngsters, who have little work experience; and minorities, who may have suffered discrimination, or went to bad schools. And most affected of all are minority youngsters. “These workers are not only made unemployable by the minimum wage, but their opportunity to upgrade their skills through on-the-job training also are severely limited,” he wrote.

He noted that youth employment always is higher than general unemployment, even during prosperous times. And black youth unemployment has been especially bad; it “has ranged from two to three times the unemployment for white youths.” Black youth unemployment, he reported in 1977, in some areas is as high as 50 percent.

That’s one dismal statistic that hasn’t changed in 35 years. The Bureau of Labor Statistics reported that today black youth unemployment remains at 50 percent.

But it wasn’t always that way. Williams pointed out that in 1948 black youth unemployment actually was 9.4 percent —  less than the 10.2 percent of white youth. That situation held until the late 1950s.

So, what happened in the late 1950s to cause the crash in jobs for blacks, especially black youngsters?  Was it racism? It can’t be that, Williams wrote, because racism was a lot stronger in 1948, when Jim Crow laws segregated blacks in the South; and in the North, tacit discrimination was rampant. The great Jackie Robinson debuted as the first black player in Major League Baseball only in 1947. Race relations improved in the 1950s.

The real culprit: the minimum wage was hiked to freeze out black workers, in the late 1950s going up 33 percent, to $1 an hour.

As Williams described it, “The minimum wage law gives firms effective economic incentive to to hire only the most productive employees which means that firms are less willing to hire and/or train the least productive which includes teenagers and particularly minority teenagers. But holding all else constant, such as worker productivity, such a wage law gives firms the incentive to indulge in whatever preferences that they may hold.”

For example, a company might be able to hire 1) a white youth who went to a decent public school at $9 an hour; or 2) a Latino youth who went to a wretched public school, but can be trained, at $8 per hour, the current minimum wage in California. So the company saves some money by hiring the Latino, puts some effort into training, and gets a good employee. But if the minimum wage is hiked to $9 an hour (or higher) by Alejo’s AB 1439, then the Latino youth never will be hired. The white youth will be hired instead because he went to a decent school and doesn’t require training.

That’s how insidious minimum-wage laws are in destroying jobs. As Williams wrote, it allows a prejudiced employer to “discriminate at zero cost.”

Paying for discrimination

But if there’s no minimum wage, then what about discrimination? What if an employer doesn’t like Latinos or blacks? Then it’s going to cost him. With no minimum wage, he’ll have to pay the higher wage to the white worker, instead of the lower wage to the minority worker. He’ll lose money.

By contrast, his competitor in the same business who isn’t prejudiced, is happy to gain a competitive edge by hiring, and training, minority youth. That competitive edge might be just what it takes for him to survive in the dog-eat-dog world of competitive business, while his prejudiced competitor goes broke.

Unfair?

Is it unfair to the minority youth who’s paid less? Yes. As President John F. Kennedy said, “Life is unfair.” But what’s worse: a job that pays less but delivers crucial job experience and a slot on a resume — or having no job at all because the minimum wage prevented one from being hired? Obviously, working is better. And as mentioned earlier, a first, low-paying job rarely is the last job one will hold.

Williams wrote that it’s “offensive to the sensibilities of many people” that some workers are paid less just because of their race or color. But he then noted that in South Africa, which still suffered under the full force of apartheid in 1977, white racist unions supported minimum wage laws and “equal pay for equal work” laws for blacks precisely to freeze out the black workers.

And Williams pointed out that it has been unions in America that also have backed minimum-wage laws to keep minorities from competing with white workers. That hasn’t changed. AB 1439 is supported by the American Federation of State, County and Municipal Employees; the Laborers’ International Union of North America, Locals 777 & 792; and the National Association of Social Workers, California Chapter.

Back in 1977, Williams warned that increasing the minimum wage, which happened in 1978, would keep high unemployment for minority youth, discourage such youth from pernanently entering the work force by cutting off that “bottom rung” of the crucial employment ladder, create more dependency on government programs and “some of these youth will turn to various forms of anti-social behavior.”

Shortly after the minimum wage was hiked, despite Williams’ warning, the crack epidemic hit America’s inner-city youth. And even today, as noted earlier, black youth unemployment remains at 50 percent.

If AB 1439 is passed, it could raise that number even higher.

 

29 comments

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  1. Beelzebub
    Beelzebub 24 April, 2012, 11:17

    I saw a stat that said 50% of the mimimum or sub-minimum wages in Los Angeles were paid under the table. That’s wouldn’t surprise me a bit. The underground economy is growing like a wild fire. As Kotkin pointed out – the producers are leaving CA in droves. And those who remain behind are going Galt. Small mom and pop businesses are are understating revenue like you wouldn’t believe to avoid paying tax. That’s why the cities and state have been sending out investigators into these businesses to check their daily receipts. The little people have been lied to and strongarmed by the government and the TBTF’s and now you are seeing the backlash. It was inevitable. No wonder Cali is coming up short on revenue expectations month after month. The head of the fish has rotted off and the rot has spread to it’s tail. People are followers. When they see rampant crime and corruption at the top they are going to follow suit. It’s human nature.

    And keep in mind when you lower or eliminate minimum wage laws that means more people will have to go on the dole. Why would you work for $5/hr when you could make more collecting welfare and food stamps? Even at the $8/hr. minimum wage the Walmart workers were qualifying for medicaid and were reportedly being encouraged to apply for state benefits WHILE WORKING! How could a person live on $8/hr. in Cali without collecting simultaneous handouts – from government or from family?

    People won’t work for $5/hr. except maybe for newly arrived illegals who work off the books anyway. So the additional jobs it would create is a mute point IMO. I think eliminating minimum wage laws would hurt society in the long run.

    Reply this comment
  2. Wayne Lusvardi
    Wayne Lusvardi 24 April, 2012, 12:26

    Hiking the minimum wage for non-existent jobs? What a policy.

    Reply this comment
  3. Beelzebub
    Beelzebub 24 April, 2012, 12:43

    Wayne, what about low wage earners collecting welfare (ie, food stamps, health care, etc…) If an $8/hr. wage earner was forced to accept $5/hr would his welfare benefit increase or decrease? Who exactly would pay for that? Your response would be appreciated.

    Reply this comment
  4. CalWatchdog
    CalWatchdog Author 24 April, 2012, 14:03

    Mr. B: Good point. The minimum wage is another thing, along with high taxes and absurd regulations, that encourages an underground economy.

    — John Seiler

    Reply this comment
  5. Beelzebub
    Beelzebub 24 April, 2012, 14:17

    “Mr. B: Good point. The minimum wage is another thing, along with high taxes and absurd regulations, that encourages an underground economy”

    John, my overriding point is that people won’t work for $5/hr. when they are able to collect public benefits that average out to $10/hr.

    We know that Walmart employees were collecting public benefits WHILE WORKING!

    So if they go from $8/hr to $5/hr they need more benefits to survive!

    Taxpayers make up the difference, John. I would rather have business pay a living wage so they will leave the taxpayer alone! Taxpayers should not have to subsidize wages paid by private businesses!!!

    Please – would you or Wayne respond to that argument?

    Reply this comment
  6. PJ
    PJ 24 April, 2012, 14:40

    Sure the minimum wage law does not work, but it makes for a good campaign slogan: “I’m Looking Out For You!” And then you can always blame the other party when the unemployment rises and rises…

    Reply this comment
  7. Beelzebub
    Beelzebub 24 April, 2012, 15:01

    “Sure the minimum wage law does not work, but it makes for a good campaign slogan: “I’m Looking Out For You!” And then you can always blame the other party when the unemployment rises and rises…”

    PJ, question for ya.

    If you were interested in making money and were offered a job paying $5/hr would you:

    1) Take the job and work hard.

    2) Go on the public dole and make $10/hr so you could enjoy your leisure time

    (Remember – your goal is to maximize your earning power).

    Reply this comment
  8. Bob
    Bob 24 April, 2012, 17:45

    Minimum wage type jobs are stepping stone jobs. If you goal is to maximize your earning power you forego the dole and take the job even if you make less than being on the dole because you will step into a higher paying job later (or receive raises after you prove yourself).

    If you never take the job and go on the dole how do you maximize your earning power in the long run?

    Reply this comment
  9. Beelzebub
    Beelzebub 24 April, 2012, 17:54

    “If you goal is to maximize your earning power you forego the dole and take the job even if you make less than being on the dole because you will step into a higher paying job later (or receive raises after you prove yourself)”

    You mean so he can go from the fry basket to flipping paddies? Let’s get real here. We are talking underclass. These aren’t super achievers who are clawing their way to the top of corporate America. Welfare provides minimum comforts and the basics. That’s what most of these folks want. Come on, Bob. Read “Stealing from Each Other” by Browning. Get it for free at your local library. Learn how the game is played.

    Reply this comment
  10. Ted Steele, Janitor
    Ted Steele, Janitor 24 April, 2012, 19:46

    Now Beezy Boob— don’t you agree with me that your last comment was…

    A. a bit pedantic in that you lord some odd book over old Bob that maybe was read to you by your babysitter, and

    B. … sort of condescending when you add…”Learn how the game is played” (sic).

    Truly Beezy old girl? Can you do better?

    Reply this comment
  11. Bob
    Bob 24 April, 2012, 19:47

    “Taxpayers make up the difference, John. I would rather have business pay a living wage so they will leave the taxpayer alone! Taxpayers should not have to subsidize wages paid by private businesses!!!

    Please – would you or Wayne respond to that argument?”

    So your answer is just to make business provide a “living wage?” Who decides what that is? Let’s say $15 an hour. (That could be low for SF.) You want a business to pay $15 an hour plus healthcare for flipping a burger? (OK, you want socialized medicine but now business in many places are forced to pay for health insurance so now you have to tack that onto your living wage.) And you think taxpayers won’t pay for this? Well, if you pay taxes and buy nothing made by the living wagers maybe not, but if you buy a hambuger you sure will pay for it.

    Reply this comment
  12. Beelzebub
    Beelzebub 24 April, 2012, 19:47

    BTW, just a reminder:

    @ 9pm PDT on PBS tonight (4/24) Frontline will present the 2-hour documentary “Wall Street, Power & Money”. Check your local listings. It will reveal more pieces to the fraud and corruption puzzle that you would NEVER see on the major networks or cable stations – liberal or conservative. It is being deliberately concealed by the mainstream media – TV networks and newspapers! Please tune in and educate yourselves.

    Reply this comment
  13. Hondo
    Hondo 24 April, 2012, 22:52

    Beelzebub:
    The Problem is not the minimum wage, it’s the welfare state!!!!! People choose welfare when it becomes generational, when moms pass the victim skills (instead of work skills)down to their kids.
    I agree that there is huge white collar crimes and I support the DEATH PENALTY for people like Bernie Madoff and, or, Jon Corzine who stole a billion dollars from the segregated accounts at MF Global.
    And why, for gods sake, doesn’t Obummer prosecute Corzine? Because Obummer is still receiving hundreds of thousands of bundled dollars to his campaign from Corzine. Why isn’t ‘Occupy anything’ occupying Corzine’s lawn? Because he is a Democrat. The wire transfers from MF Global’s segregated funds to Goldman Sacs were documented days after the bankruptcy. The facts are there for an arrest and conviction. Much more than Zimmerman is facing( and I think he is a Bozo too).
    Walter Williams is right. And you are wrong Mr. Beelzebub.
    Hondo

    Reply this comment
  14. Ted Steele, Janitor
    Ted Steele, Janitor 24 April, 2012, 23:02

    Hondo– The DP for fraud crimes? Ya think that would pass 8th Amndmnt muster?

    Reply this comment
  15. Beelzebub
    Beelzebub 24 April, 2012, 23:39

    “Walter Williams is right. And you are wrong Mr. Beelzebub”

    I have no idea what the hell you’re talking about, Hondo. I agree with most everything you said. Minimum wage is needed to conteract the welfare state. Nobody is going to work for $5/hr when they can go on the dole and make $10/hr. I have been driving home the message that Obama turns his head to white collar crime because the criminals are his sugar daddies. OWS did protest Corzine, btw. You just refuse to acknowledge when OWS protests dems. They have protested Obama repeatedly and his acceptance of dirty money. Again, you refuse to acknowledge because you go out of your way to find fault with Wall Street protesters. Of course there is sufficient evidence for indictment, arrest, prosecution and conviction. You’ve got a flim flam man named Holder running the DOJ for Christ sakes. He’s nothing more than a puppet for the oligarchs. That is as obvious as the nose on your face. We are supposed to have a legal process in America that is followed step by step. It’s being ignored. I don’t like George Zimmerman. I think he’s an ahole. But the shooting of Trayvon Martin was justified based on all the evidence that we’ve seen so far. Again, the legal system has gone haywire. Now we are seeing political prosecutions of innocent people and no prosecutions of hardened white collar crooks who are guilty as sin.

    So, specifically, tell me where I’m wrong, Hondo. You lost me completely with that statement.

    Reply this comment
  16. Beelzebub
    Beelzebub 25 April, 2012, 00:04

    Anybody else watch Frontline’s “Power, Money and Wall Street” on PBS tonight? Excellent show. I think the next 2 hour segment plays tomorrow night. Tonight they explained all the shennanigans that happened on Wall Street to cause the crash. Tomorrow they will discuss the government’s response to it. Come on, folks. A 7 YO can figure this stuff out. We’ve been raked over the coals by these financial terrorists. You would NEVER see what you saw tonight on the major networks or in the newspapers. Why??? BECAUSE THEY ALL SOLD OUT A LONG, LONG TIME AGO!!! If they opened up their mouths the TBTF banks would refuse to roll over their loans and they would go under. heh. They don’t own PBS. There is your difference!!! heh. The nation has be Pravdatized!!! Deal with that!!! 🙂

    Reply this comment
  17. Beelzebub
    Beelzebub 25 April, 2012, 00:36

    “So your answer is just to make business provide a “living wage?”

    Again, bob, if they don’t then the taxpayer has to subsidize the business with our taxdollars. Otherwise the worker who can’t make ends meet with burglarize your home during the day so he can meet his basic needs. Can’t you understand that? Do you want to subsidize WalMart workers with your tax dollars? That’s exactly what is happening. Walmart employees collect gov benefits WHILE WORKING because Walmart is too cheap to fork over a living wage plus benefits.

    If consumers must pay a dime more for a hamburger so that low wage earners don’t have to scrounge off the taxpayer for a living wage – I am all for it. That is the way it should be. The price of low wages should not be borne by the taxpayers and that is what is happening today. Walmart is living proof!

    Reply this comment
  18. Bob
    Bob 25 April, 2012, 11:43

    So to double the wage (or more) to turn the minimum wage into a living wage a hamburger will only go up a dime? The price of everything a business that employs large numbers of living wage people make will go up dramatically and the demand for living wage earners will go down. That will only make the economy worse, especially for those struggling to get on the first rung of the employment ladder.

    Reply this comment
  19. Beelzebub
    Beelzebub 25 April, 2012, 13:28

    Bob,

    We need to be an honest society. If it takes an increase in store item prices to pay a living wage then that’s what it takes. Much more honest than forcing taxpayers to SUBSIDIZE private business so that they can take home more profit. You know that.

    Most the crap we buy these days is from China – made with slave labor that you and I indirectly support with the purchase of Chinese goods. Plus, you are indirectly promoting the offshoring of American jobs with your purchase. The stores mark those items up tremendously – and do not pass along the marginal profits to the employees. Don’t tell me that WalMart (as big as it is) can’t afford to pay it’s workers a LIVING WAGE plus BENEFITS! Instead they pay crap w/ no benefits and then tell their workers to go apply for Medicaid and food stamps. Come on, Bob. Wake the hell up. I thought you were smarter than that.

    “That will only make the economy worse, especially for those struggling to get on the first rung of the employment ladder”

    Running massive deficits because the welfare system is subsidizing private employers for paying crap wages and benefits is insidiously dangerous because people don’t understand how the money changers are cutting deals in back rooms to screw the taxpayers. At least if the price of goods went up we could understand the cause and take action to combat it. There would be a DIRECT RELATIONSHIP. But they fool people like you. They rip you off in a roundabout way while you champion the elimination of minimum wage laws. heh. It’s just another sign of people taking the head fake. And that is the primary reason we’re in the hole that we’re in.

    Reply this comment
  20. Beelzebub
    Beelzebub 25 April, 2012, 15:30

    “The Ways and Means Committee’s $32.3 billion budget that’s has been flying through the House includes a provision banning the use of “electronic benefit transfer cards” – welfare cards that recipients can use to withdraw cash from ATMs – to purchase alcoholic beverages, lottery tickets, tobacco products, pornography, firearms, show tickets, cosmetics, legal services, travel services, health clubs, tattoos, piercings, jewelry, bail or gambling”

    http://news.bostonherald.com/news/politics/view/20120425today_the_day_for_ebt_showdown/srvc=home&position=recent

    Gee. I guess that means that at the present time and up to the present time the welfare leeches have been able to spend their welfare cash benefits on all these extra goodies. hmmmm. It would seem that when the welfare policies and laws were created by the political clowns that there would have been clauses in the legislation expressly prohibiting such purchases. Why would they wait until 2012??? hmmm??? It will be very interesting to note whether it passes and which clowns will vote against it.

    Don’t you people see the obvious yet??? The leeches are being ENCOURAGED and PRODDED to apply for welfare. Now do you see why $5/hr wages won’t work without YOU, the taxpayer, paying through the nose to fund it by subsidizing businesses for their paid hires??? Can’t you follow the bouncing ball???

    This is why the welfare system needs to get revamped TOP TO BOTTOM!!! Those who claim that we need to leave the welfare system alone and not cut the fraud, waste and corruption are ulterior motives. There is something that is pushing them to give their stamp of approval to such a rotten to the core system.

    Use your own brains to figure that one out. 😉 It’s not that hard.

    Reply this comment
  21. Ted Steele, Janitor
    Ted Steele, Janitor 25 April, 2012, 19:40

    “Use your own brains to figure that one out. It’s not that hard.”

    Nice and typical condescension from the beezboob….lol

    Reply this comment
  22. Beelzebub
    Beelzebub 25 April, 2012, 20:50

    “Nice and typical condescension from the beezboob….lol”

    Since you ain’t got none….it doesn’t apply to you. Disregard. lol

    Reply this comment
  23. Ted Steele, Janitor
    Ted Steele, Janitor 25 April, 2012, 21:11

    the beezy boob remains constant in his child-like hubris.

    Reply this comment
  24. nowsane
    nowsane 26 April, 2012, 10:22

    Walter Williams is not the only economist who argues against minimum-wage laws. The famous Black economist Thomas Sowell, some would say a protegé of Milton Friedman, who spent years in the Department of Labor (DOL)early in his career, couldn’t understand why the DOL could not understand what the minimum-wage was doing to poor minority citizens. See RealClearPolitics “Ignoring Economics”, November 15, 2005, http://bit.ly/IbMUZZ , Dr. Sowell finishes his article with:
    “There is no free lunch, least of all for the disadvantaged.”

    Reply this comment
  25. Beelzebub
    Beelzebub 26 April, 2012, 11:06

    nowsane,

    Folks like you still fail to address my point.

    Today taxpayers are subsidizing companies and corporations for their hires who cannot survive on even minimum wages $8/hr. I cited Walmart. A huge corporation that was reported to encourage it’s workers to apply for medicaid/MediCal and food stamps. So what happens when wages go to $5/hr, nowsane? How much will the taxpayer have to subsidize big business?

    You need to respond to my argument. If you don’t then I will assume that you understand how wrong you really are.

    Reply this comment
  26. Ted Steele, Janitor
    Ted Steele, Janitor 26 April, 2012, 11:28

    Beezy—- many of us don’t respond to your “arguments” because they are often childlike drivel laced with hubris. Sorry.

    Reply this comment
  27. doodle doo
    doodle doo 2 May, 2012, 13:17

    Wadge deflation is going to continue, the average Joe has no idea yet whats happening yet, there are still buying the dollar going to be worthless and inflations coming because #&*%?? The crab mentality works great politically, that’s when someone else is making a dollar more they need to be pulled down instead of asking how can I move myself up – yep third world thinking.
    Glad I’m a one percenter.

    Reply this comment
  28. Edward Rasen
    Edward Rasen 15 May, 2012, 22:13

    Johnnie Perez will push through new minimum wage so he proclaim his compassion for the poor and downtrodden. But, as we all know, he will be richly rewarded by the big unions who support such nonsense. This is simply another example of the political graft that permeates politics at the State House.

    Reply this comment
  29. Roger
    Roger 21 March, 2013, 04:54

    When ppl make more money they spend more money, and the ppl up above, make more. Its called basic economics ppl, wake up !! Small business may feel it in the begining, but as more ppl make more they will make it up with MORE revenue as ppl spend thier increase in pay. BTW, i own a small business and already start my employees at $10 an hour. My friends 26 yr old son makes min wage, and after taxes takes home $ 218.00, after the $75 a week for gas, that leaves him with $143.00. His rent is $ 125.00 a week. that leaves him $18.00, for food, phone and electric, no where near enough. Since his job offers no overtime, he has to work weekends at another min wage job and still comes up short every week. Problem is too many ppl who used to have good paying jobs are now forced to try and pay thier bills on min wage or slightly above abd its just not cutting it. How can the economy recover if there isnt enough jobs that can pay a living wage? If ppl are having a hard time paying bills, then they have no extra money to spend on other things and the economy struggles.

    Reply this comment

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