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

by Jason L. Riley

  Yes, sometimes a government policy has consequences that are not intended or anticipated. But minimum-wage laws are not an example of such. The issue today is not whether proponents of the minimum wage are motivated by the same racial animus that characterized earlier proponents. The issue is whether these wage mandates continue to harm blacks disproportionately, regardless of intent. For decades the black unemployment rate has tended to be about double that of whites, irrespective of the economic climate. At the end of 2012 jobless rates were 6.3 percent for whites, 9.8 percent for Hispanics, and 14 percent for blacks. Even during periods of strong economic growth such as the 1990s the labor participation rate for black men between 16 and 24 fell.

  Black leaders today continue to cite racism as a major cause of black unemployment (and every other socioeconomic problem that blacks face). Yet in 1930, when racial discrimination was infinitely more open and rampant, the black unemployment rate was lower than that of whites. And until around 1950 the unemployment rate for young black men was much lower than today, and similar to whites in the same age group. “Black 16-year-olds and 17-year-olds had a slightly lower unemployment rate than white youngsters of the same age in 1948 and only slightly higher unemployment rates than their white peers in 1949,” wrote Stanford economist Thomas Sowell. How come? Sowell offered one plausible explanation:

  This was just before the minimum wage law was amended in 1950 to catch up with the inflation of the 1940s which had, for all practical purposes, repealed the minimum wage law, since inflated wages for even unskilled labor were usually well above the minimum wage level specified when the Fair Labor Standards Act was passed in 1938.

  The key role of the federal minimum wage laws can be seen in the fact that black teenage unemployment, even in the recession year of 1949, was a fraction of what it would become in even prosperous later years, after the series of minimum wage escalations that began in 1950.21

  So while racism may not drive today’s proponents of minimum-wage laws, the effects of these laws continue to disproportionately harm the job opportunities of blacks in general, and young blacks in particular. Nevertheless black politicians, civil rights groups, and their liberal allies continue to ignore the empirical data and back these disastrous policies. In May of 2011 the Chicago Urban League, a civil rights group that supports minimum-wage laws, released a study of youth employment prepared by Northeastern University’s Center for Labor Market Studies. The study found that despite overall job growth in the previous year, “the nation’s teenagers did not manage to capture any of the increase in employment.” Indeed, 2010 was “the fifth consecutive year in which a new historical low for teen employment was reached,” and the center predicted that “only one of every four teens (16–19 years old) would be employed during the summer months of June, July, and August,” which would represent the “lowest ever or second lowest ever summer employment rate for teens in post-WWII history.” When the study was released, the national unemployment rate was 9.1 percent, but it was 24.2 percent for teens, and 40.7 percent for black teens. In Chicago the situation was much worse, said the Urban League, noting that “90 percent [of black teens] are jobless, including 93 of every 100 teens from families with incomes under $40,000; upper-middle-income whites were nearly four times as likely to hold a job, the data show.”

  The report went on to lament that “this national disaster has not received any substantive attention from the nation’s economic policymakers of either political party.” But that wasn’t quite true. A separate study, released around the same time by labor economists William Even of Miami University in Ohio and David Macpherson of Trinity University in Texas, detailed how recent federal minimum-wage hikes had in fact contributed to this “national disaster.” Congress had raised the federal minimum by 41 percent, to $7.25 an hour, in three stages between 2007 and 2009. The problem was not indifference, but that policy makers had made matters worse.

  The Even and Macpherson study found that for white males ages 16 to 24, each 10 percent increase in a federal or state minimum wage had decreased employment by 2.5 percent. For Hispanic males the figure was 1.2 percent. “But among black males in this group, each 10% increase in the minimum wage has decreased employment by 6.5%.” The effect on black workers was so pronounced, wrote the authors, that “employment losses for 16-to-24-year-old black males between 2007 and 2010 could have been nearly 50% lower had the federal and state minimum wages remained at the January 2007 level.”

  And as you dug into the numbers, the story got even worse. Not all states were impacted equally by the federal minimum-wage increases, because some already mandated a minimum wage above the federal requirement. But in the twenty-one states that were fully affected, 13,200 young blacks lost their jobs as a direct result of the recession, versus 18,500 who lost their jobs as a result of the minimum-wage mandates. “In other words,” wrote Even and Macpherson, “the consequences of the minimum wage for this subgroup were more harmful than the consequences of the recession.”22

  The irony is that the same liberals who complain about the dearth of employment opportunities in the ghetto—from President Obama to the Congressional Black Caucus to black mayors and MSNBC talking heads—are among the loudest defenders of the minimum wage. In his first State of the Union address after being reelected, Obama called for increasing the federal minimum by 24 percent, from $7.25 to $9 an hour, and indexing it to inflation. At the time of the speech in February 2013, unemployment was 7.9 percent overall, but 13.8 percent among blacks (versus 7 percent among whites), 14.5 percent among black men (versus 7.2 percent among white men), and 37.8 percent among black teens (versus 20.8 percent among white teens).

  In separate interviews, Professors Macpherson and Even told me that several factors contribute to the racial disparities resulting from minimum-wage hikes. “One problem is that I think blacks tend to have, on average, inferior schooling,” Macpherson said. “Also, the effects of the minimum wage differ by industry, and blacks tend to be heavily concentrated in, for example, eating and drinking establishments, where it’s easier to substitute capital for labor.” Geography also plays a role, said Even. “Fifty-seven percent of blacks [between 16 and 24] are in the South. Only a third of whites are. And only a third of Hispanics are.” He added: “The South generally has had lower wages than other parts of the country. And so a minimum of $7.25 is likely to be more binding, or affect more people in the South, than it will in other regions. So when you have these federal policies where one size fits all, and a disproportionate share of blacks live in areas where the minimum wage hits hardest, this could be part of the explanation of what’s going on.”

  The reality is that as the minimum wage has risen, the gap between the overall jobless rate and the jobless rate of young people has widened. This holds true at the federal and state level. “At least 10 states have raised their minimum wages above the federal level in the last decade, largely in response to union lobbying,” reported the Wall Street Journal in 2009. “Four states with among the highest wage rates are California, Massachusetts, Michigan and New York. Studies have shown in each case that their wage policies killed jobs for teens.” This phenomenon extends beyond U.S. borders, by the way. A study of seventeen other countries found a “highly negative association between higher minimum wages and youth employment rates,” said the Journal. “It also concluded that having a starter wage, well below the minimum, counteracts much of this negative jobs impact.”

  Minimum-wage defenders don’t have much in the way of hard data to refute the disemployment effects of these policies. Instead, they argue that minimum-wage laws alleviate poverty, which is the greater good, in their view. Here’s how Obama put it in his 2013 State of the Union address:

  We know our economy is stronger when we reward an honest day’s work with honest wages. But today, a full-time worker making the minimum wage earns $14,500 a year. Even with the tax relief we put in place, a family with two kids that earns the minimum wage still lives below the poverty l
ine. That’s wrong. That’s why, since the last time this Congress raised the minimum wage, nineteen states have chosen to bump theirs even higher.

  Tonight, let’s declare that in the wealthiest nation on Earth, no one who works full-time should have to live in poverty, and raise the federal minimum wage to $9.00 an hour. . . . This single step would raise the incomes of millions of working families. It could mean the difference between groceries or the food bank; rent or eviction; scraping by or finally getting ahead. For businesses across the country, it would mean customers with more money in their pockets.

  The belief that minimum-wage laws are an effective antipoverty tool has a long pedigree on the political left. “Without question,” said President Roosevelt in 1938 after Congress passed the federal minimum, “it starts us toward a better standard of living and increases purchasing power to buy the products of farm and factory.” Sixty years later President Clinton would say at a press conference that upping the minimum wage would “raise the living standards of twelve million hard-working Americans.” Senator Ted Kennedy would declare that “the minimum wage was one of the first—and is still one of the best—antipoverty programs we have.” And Clinton labor secretary Robert Reich told Congress in 1995 that the federal minimum was “just not enough to support a family” and that “a moderate increase in the minimum wage is one of the few steps that government can take to improve the living standards of low-income workers.”23 After the minimum wage rose in 2009, Obama labor secretary Hilda Solis announced that millions of Americans were now “a step closer to making ends meet every month.”

  The minimum wage has increased during Democratic and Republican administrations alike, though Republicans have tended to approve hikes reluctantly, and usually in return for something else to help offset the damage, like tax breaks for small businesses. And it’s true that a minimum-wage hike will improve the lot of those making the minimum, provided they keep their jobs and continue to work the same number of hours, neither of which should be assumed. Remember that minimum wages deal with wages, not employment. The government can mandate that someone be paid at a level above his productivity, but it can’t (yet) mandate that he be hired in the first place, or that he keep his job after the cost of employing him rises. So some people will lose their job or never be hired, and others will get a raise. But on balance, are low-skill workers better off?

  You can begin to answer that question by looking at who’s earning the minimum wage. And when you do, you realize how dishonest it is when proponents depict the typical minimum-wage beneficiary as someone who is poor or a household head. In reality the typical minimum-wage earner is neither. “It’s always the low-income families that policy makers say they want to help, and with good reason,” economist David Neumark told me in an interview. “But my reading of the evidence”—and he has studied as much of the literature as anyone—“is that there is zero compelling evidence that minimum-wage increases have beneficial distributional effects, that they’re helping people at the bottom. And there’s some hint that there are some negative effects.” Neumark said that “roughly speaking, over the past twenty years a third of minimum-wage workers are in families in the top half of the income distribution. The median income for a family of four is between fifty and sixty thousand dollars. Minimum-wage workers are not in poor families. They’re not even in families that are twice the poverty line. If you’re 30 and earning minimum wage, you’re probably in a poor family. But if you’re 17 and earning minimum wage, you’re more likely not to be in a poor family, because 17-year-olds in poor families probably aren’t working.” Thanks in part to the minimum wage.

  “One of the reasons the minimum wage really misses the mark and doesn’t do much for poor people is that it targets the poor really badly,” said Neumark. “The only targeting you’re doing with the minimum wage is targeting people based on wages. And the mapping between a low-wage worker and a low-income family is very fuzzy and very loose.” He was echoing a sentiment expressed by Nobel economist George Stigler in 1946. “The connection between hourly wages and the standard of living of the family is remote and fuzzy,” wrote Stigler. “Unless the minimum wage varies with the amount of employment, number of earners, nonwage income, family size, and many other factors, it will be an inept device for combating poverty even for those who succeed in retaining employment.”

  Around 5 percent of hourly workers in the United States earn the minimum wage, according to the 2012 data from the Bureau of Labor Statistics and the Census Bureau. Most are 25 or younger and 69 percent of them work part-time. They are not their families’ sole breadwinner; they come from households that don’t depend on their earnings. Thus, the beneficiary of a minimum-wage increase is more likely to be a teenager in a tony suburb than a single mom in the ghetto. And hiking the minimum wage will diminish the job prospects for that single mom. A 1995 study concluded that mothers in states that raised the minimum wage remained on public assistance an average of 44 percent longer than their peers in states where the minimum did not rise.

  If anything, minimum-wage policies have become less and less effective over time as an antipoverty tool, according to Cornell University economists Richard Burkhauser and Joseph Sabia. In 1939, the year the federal minimum was established, 94 percent of household heads who were low-wage workers were in poor families, along with 85 percent of all low-wage workers. By 1969 those figures were 45 percent and 23 percent, respectively. By 2003 they were 11 percent and 9 percent.

  “We find no evidence that minimum wage increases between 2003 and 2007 lowered state poverty rates. Moreover, we find that the newly proposed federal minimum wage increase from $7.25 to $9.50 per hour, like the last increase from $5.15 to $7.25 per hour, is not well targeted to the working poor,” wrote Burkhauser and Sabia in a 2010 paper.

  Only 11.3% of workers who will gain from an increase in the federal minimum wage to $9.50 per hour live in poor households, an even smaller share than was the case with the last federal minimum wage increase (15.8%). Of those who will gain, 63.2% are second or third earners living in households with incomes twice the poverty line, and 42.3% live in households with incomes three times the poverty line, well above $50,233, the income of the median household in 2007.

  Liberals bleat on about raising the federal floor to help the working poor, but most poor people already make more than the minimum, and most people who earn the minimum wage aren’t poor.

  With all due respect to the late Ted Kennedy, the best antipoverty program is not the minimum wage. Rather, it’s a job, even if it’s an entry-level one. Most poor families don’t have any workers. Raising the minimum wage does nothing for them, and to the extent that it reduces their employment opportunities, it’s a net negative. Reducing the number of entry-level jobs keeps people poor by limiting their ability to enter or remain in the workforce, where they have the opportunity to obtain the skills necessary to increase their productivity and pay, and ultimately improve their lives.

  Unions support minimum wages not because they want to help the working poor but because they want to protect their members, who already have jobs. “Just as businesses seek to have government impose tariffs on imported goods that compete with their products, so labor unions use minimum wage laws as tariffs to force up the price of non-union labor that competes with their members for jobs,” wrote Thomas Sowell in Basic Economics.24 What’s painful is watching black leaders align themselves with unions that are working against the interests of low-income blacks who are out of work. Walmart, for example, has a history of locating its stores in less affluent neighborhoods and providing those residents with not only jobs but low-cost goods and services. The political left claims to care so much more than conservatives about the well-being of the poor. But labor unions and Democratic politicians from Obama on down would rather have these ghetto residents stay poor and jobless if the alternative is allowing them to work at a Walmart that won’t bow to union demands. In 2012, after Walmart announced that it had dropped plans
to construct a big-box store in an economically depressed section of New York City, labor leaders and liberal activists cheered. “Walmart’s withdrawal,” said Stephanie Yazgi of Walmart Free NYC, “shows that when New Yorkers join arms, even the world’s richest retailer is no match for them.” It also showed that the actual needs of the underprivileged take a back seat to the left’s political agenda.

  05

  EDUCATIONAL FREEDOM

  One of the more worrisome trends in K–12 education is the achievement gap between black and white students in America, which has persisted for decades despite massive injections of money and resources. Federal per-pupil spending rose by an inflation-adjusted 375 percent between 1970 and 2010. School spending also grew steadily and dramatically at the state and local level, tripling between 1970 and 2005. Over the decades the government has prioritized poor children through programs such as Title I, which was created in 1965. “These federal streams accomplished precisely what was intended: helping equalize the funding of poor and affluent districts,” explained education writer Andy Smarick. “As of the 2004–5 school year, America’s highest-poverty districts had per student revenues virtually equivalent to the nation’s lowest-poverty districts.”1

  Notwithstanding this increase in overall education spending—and dogged efforts to ensure that inner-city schools aren’t financially neglected—test scores in math, science, and reading have remained essentially flat for forty years. Moreover, significant racial disparities in outcomes continue. The learning gap between blacks and whites, as measured by national-average test scores, narrowed somewhat through most of the 1980s, but began to widen toward the end of that decade, and ultimately returned to where it had been in the late 1970s. In 2004, black 9-year-olds trailed their white peers in reading by roughly the same amount that they had twenty-five years earlier.2 Black 17-year-olds scored at the same level in reading and math as white 13-year-olds. And white 13-year-olds outperformed black 17-year-olds in science. In five out of seven categories—math, science, history, physics, and geography—a majority of blacks scored at the lowest level.3