Please Stop Helping Us_How Liberals Make It Harder for Blacks to Succeed

by Jason L. Riley

  In 2008 economists David Neumark and William Wascher published a book that surveyed the minimum-wage literature of the previous three decades. They reviewed more than one hundred academic studies on the impact of such laws and found “overwhelming” evidence that younger, lesser-skilled workers suffer what economists call “disemployment effects,” or a loss of employment when the minimum wage goes up:

  Our overall sense of the literature is that the preponderance of evidence supports the view that minimum wages reduce the employment of low-wage workers. . . . Moreover, when researchers focus on the least-skilled groups that are most likely to be directly affected by minimum wage increases, the evidence for disemployment effects seems especially strong.”5

  When the government mandates that an employer pay someone more than the employer thinks the person is worth, fewer people get hired.

  When I asked Neumark, a professor of economics at the University of California, Irvine, about research that shows no harmful effects on hiring when the minimum wage is increased, he told me that those studies are outliers. “There’s quite a bit of agreement,” he said in an interview. “You do see papers sometimes claiming that there are no disemployment effects from the minimum wage. They tend to come from the same people. And clearly some of them, the ones coming out of the UC Berkeley group”—a reference to the famously liberal flagship campus of the University of California—“clearly they have a political agenda.” Neumark also said that the press has a tendency to play up contrarian studies, which gives them more weight than they might deserve. “Most of the studies say there’s a disemployment effect, so that’s not really news anymore. So you get disproportionate attention in the media and sometimes in the profession to studies that find surprising results.”6

  Two go-to academics for the pro-minimum-wage crowd are the aforementioned David Card of Berkeley and Alan Krueger of Princeton. In 1994, when both men were teaching at Princeton, they coauthored a widely cited case study that compared employment changes in fast-food restaurants in New Jersey and Pennsylvania after New Jersey’s minimum wage rose from $4.25 to $5.05 per hour. Following the increase employment fell in New Jersey, as most economists would have predicted. But because it also fell by just as much in Pennsylvania, which hadn’t hiked its own minimum, Card and Krueger argued that the drop in both states must have been caused by something else. “Contrary to the central prediction of the textbook model of the minimum wage,” the authors concluded, “we find no evidence that the rise in New Jersey’s minimum wage reduced employment at fast-food restaurants in the state.”

  In their subsequent book, Myth and Measurement: The New Economics of the Minimum Wage, the authors went even further.

  Under close scrutiny, the bulk of the empirical evidence on the employment effects of the minimum wage is shown to be consistent with our findings . . . which suggest that increases in the minimum wage have had, if anything, a small, positive effect on employment, rather than an adverse effect.7

  But others immediately pushed back at that notion, and quite hard. Becker wrote that the Card and Krueger studies had “serious defects,” and other economists—including Donald Deere, Finis Welch, and Kevin Murphy—spelled them out in detail. A major flaw, it turned out, was the shortness of the sample periods used in the case studies, which didn’t allow enough time for the negative employment effects to show up. “Subsequent research has tended to confirm evidence of adverse longer-run effects of minimum wages on employment,” explained Neumark and Wascher. Similarly, a 1997 study from the union-backed Employment Policy Institute claimed that employment didn’t decline after a 1996 increase in the federal minimum wage. But later studies showed that EPI obtained that result by using just six months of data. Adding three more months of data would have reversed the conclusion:

  The research on this issue suggests that studies claiming to find no minimum wage effect on employment should be discounted unless the evidence points to no effects in both the short run and the longer run. Indeed, this issue turns out to figure prominently in our assessment of the research literature, as the studies that fail to detect disemployment effects typically do not allow for a longer-run impact.8

  The preponderance of evidence continues to show, as it has for decades, that minimum-wage laws tend to lead to overall job loss, which is bad enough. But the most insidious aspect of these policies is that the job loss is concentrated among the least-educated and least-skilled workers—the same group that minimum-wage advocates are trying to help. And blacks, it so happens, are overrepresented in this segment of the population. According to 2011 Census Bureau data, the median age for blacks in the United States is 31, versus 37.3 for all Americans. The black population is growing faster than the total population—it grew by 15 percent between 2000 and 2010, compared with growth of 9.7 percent among all groups over the same period—and the young black population is growing especially fast. The Census Bureau projects that the number of black persons under age 18 will grow by 5 percent between 2015 and 2025, “while white, non-Hispanic juveniles will decrease by 4%.”9

  Blacks are also more likely than the general public to be living in poverty—28.1 percent versus 15.9 percent—and their median household income of $33,460 significantly trails the national median of $50,502.10 When it comes to educational achievement, the gap between blacks and whites is especially pronounced. A 2010 Schott Foundation for Public Education survey of all fifty states concluded that just 47 percent of black males complete high school. In some major cities like New York and Philadelphia, that rate is 20 percentage points lower. Blacks who do proceed to college are also much less likely than whites to graduate. A 2012 article in the Journal of Blacks in Higher Education, citing U.S. Department of Education figures, noted that among students who entered college in 2005 and earned their degree within six years the graduation rate was 60.2 percent for whites and 37.9 percent for blacks, a 22-point difference.11

  Minimum-wage mandates don’t impact all workers equally, but they are especially harmful to those who are young and those who are living on the margins, where many blacks for various reasons find themselves. What such individuals want and need are job opportunities, which minimum-wage laws reduce by pricing people out of the labor market. These laws keep the large number of blacks who lack the right education and skills from being able to compete for jobs by offering to work for less money, get on-the-job experience, and ultimately increase their skills and pay. Alan Greenspan, the former chairman of the Federal Reserve, told a congressional hearing in 2001 that he would abolish the minimum wage if he could. “I’m not in favor of cutting anybody’s earnings or preventing them from rising,” he said, “but I am against them losing their jobs because of artificial government intervention, which is essentially what the minimum wage is.”12

  The well-meaning liberals who defend these laws today ignore their racial impact, but it is undeniable that race was on the minds of those who initially championed a federal wage floor. States took the lead in establishing a minimum wage, with Massachusetts going first in 1912. Within a decade, fifteen states and the District of Columbia had minimum-wage laws on their books. This was the Progressive Era, and proponents said that workers were being exploited and needed more bargaining power. Employers disagreed, and challenged the laws in court on the grounds that they “violated employers’ constitutional rights to enter freely into contracts and deprived them of their private property (i.e., their profits) without due process,” wrote economists Neumark and Wascher.13 The Supreme Court agreed in a 1923 ruling against the District of Columbia’s minimum-wage law. And by the end of the decade similar laws in most other places had been declared unconstitutional, repealed, or otherwise neutered to avoid a legal challenge. They would reappear in 1933, when President Franklin D. Roosevelt signed the National Industrial Recovery Act, which called for workweeks of thirty-five to forty hours and minimum pay of $12 to $15 per week. The Supreme Court would find that unconstitutional as well in 1935, but not before an estimated ha
lf a million black workers lost their jobs due to the minimum-wage requirements.

  “Blacks were major victims of the NRA [the National Recovery Administration]. The labor codes were drawn up by craft unions that excluded blacks as members and did everything they could to promote the interests of white workers and to subvert the interests of blacks, who were seen as competition,” wrote Jim Powell in FDR’s Folly. “Moreover, by sanctioning compulsory unionism, the NRA labor codes effectively excluded blacks from many jobs.”

  There were an estimated 2.25 million union workers in 1933, and only about 2 percent were black. “Daily the problem of what to do about union labor or even about a chance to work, confronts the Negro workers of the country,” said the NAACP publication the Crisis in November 1934. “Union labor strategy seems to be to form a union in a given plant, strike to obtain the right to bargain with the employees as the sole representative of labor, and then to close the union to black workers, effectively cutting them off from employment.”14

  But the Supreme Court would not have the last word. Three years later, at the urging of unions, Congress would establish a federal minimum wage with the Fair Labor Standards Act of 1938. As former Labor Department economist Morgan Reynolds explained,

  During the confusion of the Great Depression, Congress supplied six major pieces of labor legislation favored by unionists: Davis-Bacon, Norris-La Guardia, National Industrial Recovery Act, National Labor Relations (Wagner) Act, Walsh-Healey, and Fair Labor Standards Act. Three of the bills (Davis-Bacon, Walsh-Healey, and Fair Labor) authorized direct federal regulation of wages, hours, and working conditions in various sectors of the economy.15

  The Norris-La Guardia and Wagner acts would make it unlawful for an employer to discriminate against a worker for belonging to a union. Walsh-Healey allowed the secretary of labor to determine minimum-wage scales for nearly all government contractors, but a 1964 court decision rendered it inoperable on due process grounds. However, the Fair Labor Standards Act and the Davis-Bacon Act, which was passed in 1931, remain in force today and continue to destroy jobs for millions of people, many of them black. This is not an accident. It was the intent.

  The express purpose of Davis-Bacon is to protect the wages and employment of union workers in the buildings trades. Under the law, which is really just a super-minimum wage for the construction industry, workers on federally funded construction projects must be paid wages at “prevailing” rates. “The methodology used to calculate this prevailing wage sets it close to union wage scales and well above average wages,” explained the Heritage Foundation in a 2007 report. “Davis-Bacon rates are typically 15 to 40 percent higher than average wages for the same job. In some cases, Davis-Bacon rates more than double the competitive wage.” In Nassau and Suffolk counties on New York’s Long Island, for example, Davis-Bacon required a minimum wage for brickmasons of $49.67 per hour, according to a 2008 Wall Street Journal editorial, “though the more common area wage for that work is $22.50.”

  That the law discriminates against nonunion contractors and in the process inflates the cost of federal projects for taxpayers should be reason enough to scrap it, especially at a time when the government is running trillion-dollar deficits. But blacks have long had a separate legitimate gripe with Davis-Bacon because most black construction workers today, just like in the 1930s, aren’t unionized. “Democrats support these blanket Davis-Bacon policies even though minorities are still victimized by the wage law,” reported the Journal. “A 2001 study by economists Daniel Kessler of Stanford and Lawrence Katz of Harvard found that when states have repealed their Davis-Bacon laws, this ‘is associated with a decline in the union wage premium and an appreciable narrowing of the black/nonblack wage differential for construction workers.’”16 In fact, Davis-Bacon has been so effective at putting blacks out of work that 1930, the year before the law passed, was the last year that the black jobless rate was lower than the white rate.17

  “While blacks were excluded from most major construction unions, they were nonetheless a formidable force in the construction industry,” noted economist Walter Williams of George Mason University, who has written extensively about blacks and labor law.

  In 1930, the industry in the South provided more jobs to blacks than any other except agriculture and domestic services. In six Southern cities, blacks represented more than 80 percent of the unskilled labor force. . . . During this period, significant demographic changes were taking place. Blacks were increasingly migrating northward and establishing a foothold in the Northern construction workforce.18

  We don’t need to guess what politicians were thinking when they moved to implement federal minimum-wage laws and Davis-Bacon statutes. We still have the transcripts of what was actually said by proponents. And it’s crystal clear that Congress passed these statutes to protect white union workers from competition from nonunion blacks. As with the minimum wage, states took the lead in implementing prevailing-wage laws. Kansas went first in 1891, and New York followed three years later. Both efforts were the brainchild of American Federation of Labor president Samuel Gompers. The push at the federal level started in 1927, when a contractor from Alabama won a bid to construct a Veteran’s Bureau hospital on Long Island and brought black workers from the South to complete the job. Because it was a federal contract, New York’s prevailing-wage law didn’t apply. Congressman Robert Bacon, who represented the district where the hospital was located, received complaints from constituents that contractors were bidding wages down and displacing local workers. The following year Bacon introduced federal legislation that would require contractors working on federal public works projects to comply with states’ prevailing-wage laws. It would ultimately be cosponsored by Senator James Davis of Pennsylvania and go through numerous iterations before finally becoming law in 1931.

  During hearings, Representative William Upshaw of Georgia sympathized with Bacon, noting “the real problem that you are confronted with in any community with a superabundance or large aggregation of negro labor.” Missouri Representative John Cochran, another supporter, said that he had “received numerous complaints in recent months about Southern contractors employing low-paid colored mechanics getting work and bringing the employees from the South.” Alabama Representative Miles Allgood recounted the story of “a contractor from Alabama who went to New York with bootleg labor. This is a fact. That contractor has cheap colored labor that he transports, and he puts them in cabins, and it is labor of that sort that is in competition with white labor throughout the country.”

  Nor did organized labor stand by idly while the national Davis-Bacon debate raged. “Testimony by union representatives reveals a definite racial element to their support,” wrote David Bernstein in Only One Place of Redress, a history of blacks and labor regulations.

  William J. Spencer, secretary of the buildings-trades department of the American Federation of Labor, told the committee, “There are complaints from all hospitals of the Veteran’s Bureau against the condition of employment on these jobs. That is true whether the job is the States of Washington, Oregon, Oklahoma, or Florida. The same complaints come in. They are due to the fact that a contractor from Alabama may go to North Port and take a crew of negro workers and house them on the site of construction within a stockade and feed them and keep his organization intact thereby and work that job contrary to the existing practices in the city of New York.”19

  The debates over the federal minimum wage are no less revealing. Since the Fair Labor Standards Act passed in 1938, Congress has amended it repeatedly to increase the legal minimum and extend its coverage. “The loss in jobs caused by the minimum wage is not an accidental byproduct of higher minimum wages. It is the consequence intended by those who most avidly support increasing minimum wages,” explained economist David Henderson in his 2002 book, The Joy of Freedom.

  Northern unions and unionized firms, for example, have traditionally supported higher minimum wages to hobble their low-wage competition in the South. . .
. Forty years ago, the politicians who pushed for the increased minimum wage did not hide their motives. Nor, in an era of state-sanctioned segregation, did they feel the need to hide their knowledge of who the intended victims of minimum-wage increases would be.

  Here is Senator John F. Kennedy of Massachusetts, who supported increasing the minimum wage, addressing an NAACP official at a Senate hearing in 1957:

  Of course, having on the market a rather large source of cheap labor depresses wages outside of that group, too—the wages of the white worker who has to compete. And when an employer can substitute a colored worker at a lower wage—and there are, as you pointed out, these hundreds of thousands looking for decent work—it affects the whole wage structure of an area, doesn’t it?

  Roughly a decade later, in 1966, Senator Jacob Javits of New York would make a strikingly similar argument in favor of raising the federal minimum. “I point out to Senators from industrial states like my own that a minimum wage increase would also give industry in our states some measure of protection,” said Javits, “as we have too long suffered from the unfair competition based on substandard wages and other labor conditions in effect in certain areas of the country—primarily in the South.”20