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Misreading the Minimum Wage—and Race

eye on the news

Misreading the Minimum Wage—and Race

A New York Times op-ed illustrates the misconceptions that dominate such discussions. August 21, 2018
Economy, finance, and budgets
The Social Order

A recent New York Times op-ed exemplifies the confused way that racial issues are framed today. Stanford law professor Lucas Guttentag calls attention to a group of fast-food workers in majority-black Birmingham, Alabama, who successfully petitioned the city council to raise the minimum wage to $10.10 an hour. Their efforts were subsequently foiled by state legislators, who passed a law prohibiting cities from setting a local minimum wage.

Alabama’s ban on city-specific minimum wages, Guttentag argues, is a “modern-day tool of racial subjugation”––an attempt by white politicians to serve themselves while perpetuating “economic inequality and racial oppression.” The fast-food workers agree. Having unsuccessfully sued Alabama for racial discrimination, they went on to plead their case with the 11th Circuit Court of Appeals, which has ruled in their favor.

But the idea that it’s racist for a state to ban local minimum wages makes little sense. For one thing, the law affects all low-skilled workers in Alabama, regardless of race. Yes, in majority-black Birmingham, this means that the law will affect more blacks than whites, but in other states with the same laws, the racial impact is reversed. In Idaho, for instance, the state ban on city-specific minimum wages hits more whites than blacks, because Idaho’s population is 91.3 percent white and only 0.6 percent black. On the whole, 24 other states have laws similar to the one passed in Alabama, including states such as Utah and Oregon, where blacks make up less than 2 percent of the population. The same reasoning that led Guttenberg to say that the law discriminates against blacks in Alabama should lead him to charge that the law discriminates against whites in Idaho, Utah, and Oregon.

More importantly, the op-ed presents raising the minimum wage as if it were a benefit rather than a tradeoff. It’s true that workers who keep their jobs gain from higher minimum wages, but workers who get laid off—or never get hired in the first place because their employers can’t afford to pay higher wages—are hurt by the law. The idea that raising the minimum wage tends to increase unemployment is uncontroversial among those who study economics. For instance, among the 166 economists surveyed by the University of New Hampshire in 2015, 83 percent agreed that raising the minimum wage would increase youth unemployment, and 76 percent agreed that it would decrease the total number of jobs available.

The burden of minimum-wage laws falls most heavily on young, low-skilled workers. It’s often assumed that raising the minimum wage helps struggling adults make ends meet, but only 5 percent of working adults earn the minimum wage. Nearly half of minimum-wage-earners are workers between 16 and 24 years old with few skills and little experience, whose ability to enter the job market while young can prepare them for better-paying jobs. Blacks have historically been overrepresented in this demographic, and have thus been hardest hit by the unemployment caused by minimum-wage increases.

For instance, in 1948, when the minimum wage was virtually nonexistent due to inflation, the unemployment rate for blacks aged 16 to 17 was 9.4 percent––lower than for whites in the same age category, as economist Walter E. Williams demonstrates in Race & Economics. By contrast, there has not been a single year since 1954 in which the white unemployment rate for those aged 16 to 17 exceeded the black rate, though there were many such years before 1954, when minimum-wage laws were weaker or non-existent. Moreover, between 1971 and 1994, in an era with strong minimum-wage laws, the black unemployment rate for those aged 16 to 17 never fell below 30 percent, at times exceeding 50 percent. Nor can the usual explanatory factors––racial discrimination, underfunded schools, and so on––explain why it was often easier for young blacks to find a job than for young whites, in an era when racism was  worse, and school funding was paltry. In short, there is no reason to believe that raising the minimum wage in Birmingham––where the overall unemployment rate is already higher than in other cities like Montgomery––would help black youth.

Nevertheless, a federal appellate court is allowing the fast-food workers to contest state law on the grounds of racial discrimination. The reasoning given for this decision, as summarized in the Times, was three-fold: “the racial history of Alabama, the white-led state action to overturn Birmingham’s ordinance, and the state law’s discriminatory effect on the city’s majority-black population.” All three reasons collapse quickly under scrutiny, but the reasoning behind the court’s decision is pervasive nowadays.

Using the “racial history of Alabama” is a poor basis for contemporary policymaking. Anyone passingly familiar with the civil rights movement knows that Alabama’s history has been riddled with both tragedies and triumphs—but does that history tell us anything about which policies are best for Alabama now? The question should answer itself. Being aware of Martin Luther King Jr.’s Birmingham campaign does not help us to devise the right tradeoff between increasing wages and promoting employment; nor does it tell us how racial discrimination should be legally defined. Moreover, it’s cold comfort to say to an unemployed black youth living in Birmingham today that he’s only out of a job because a federal court wanted to make up for what happened to his grandfather in 1960.

The court’s claim that “white-led state action to overturn Birmingham’s ordinance”––that is, the state legislators were white––justifies allowing the fast-food workers to contest the state court’s original verdict is outrageous. It’s impossible to imagine today that the race of nonwhite politicians could be cited in a legal decision as a factor in overturning legislation they passed. So why should the whiteness of the Alabama legislature be mentioned? Such reasoning could pass muster only in an ideological milieu contaminated by intersectionality, which associates being white with moral bankruptcy and being black with noble victimhood.

The final reason cited by the Federal Appeals Court, as summarized in the Times, is the “state law’s discriminatory effect on the city’s majority-black population.” Again, the law discriminates against blacks in Alabama as much as it discriminates against whites in Idaho––which is to say, not at all. And as we’ve seen, there is no reason to believe that raising the minimum wage will confer a net benefit onto low-skilled blacks in Birmingham. It will certainly benefit those blacks who keep their jobs, but it won’t benefit those who lose their jobs or never find them to begin with because of the minimum-wage increase. To argue that raising the minimum wage would be good for blacks, one would have to argue that the wage gains outweigh the employment losses––a burden that Guttentag sidesteps.

Guttentag thus manages to capture everything wrong with how racial issues are framed today: the nearly religious reverence for black history, and the assumption that policy decisions must address history, rather than the present; the a priori framing of issues as a matter of virtuous blacks versus benighted whites; and the presentation of a policy as a solution, rather than a tradeoff, whose desirability relative to other tradeoffs must be argued for, not assumed. These misconceptions appear again and again in our national conversation about racial inequality. We must begin to recognize them as wrongheaded if we hope to make any progress on this front.

Photo by Joe Raedle/Getty Images

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