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These Are the Real Effects of a Minimum Wage Law

Summary:
By: Dakota Hensley In recent years, there’s been a movement among the American Left to increase the minimum wage to an hour. This is under the assumption that having a minimum wage helps workers and makes corporations pay their fair share. However, this is the opposite effect of a minimum wage, especially one that high. It keeps low-skilled (often black or other ethnic minority) workers from finding employment, forcing them to depend on government, and leads to closures of small businesses (especially black-owned businesses) which benefits corporations. To truly help workers and small businesses, we must abolish the minimum wage. In 1931 came one of the first minimum wage laws, the Davis-Bacon Act. It required ,000 (about ,000 today) for contractors working on public works

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By: Dakota Hensley

In recent years, there’s been a movement among the American Left to increase the minimum wage to $15 an hour. This is under the assumption that having a minimum wage helps workers and makes corporations pay their fair share. However, this is the opposite effect of a minimum wage, especially one that high. It keeps low-skilled (often black or other ethnic minority) workers from finding employment, forcing them to depend on government, and leads to closures of small businesses (especially black-owned businesses) which benefits corporations. To truly help workers and small businesses, we must abolish the minimum wage.

In 1931 came one of the first minimum wage laws, the Davis-Bacon Act. It required $2,000 (about $35,000 today) for contractors working on public works projects. It was introduced by Pennsylvania Senator and former Secretary of Labor James Davis and New York Congressman Robert Bacon. Davis was a eugenicist and Bacon was a racist who introduced a labor law because a Veterans’ Bureau Hospital in his district had been built by black workers. As with Davis’ other bill, this act was designed to keep low-skilled workers (mostly black) from being employed. The other Congressmen made it clear this was why they backed Davis-Bacon. Missouri Congressman John Cochran reported that he’d received “numerous complaints in recent months about southern contractors employing low-paid colored mechanics” and his colleague, Congressman Clayton Allgood, said that “cheap colored labor…is in competition with white labor throughout the country.” Thirty years later, in the 1960s, minimum wage laws again caused black people to lose their jobs. Farmers were required to pay $1 an hour (about $9 today) instead of the $3.50 a day (about $31 today) they were being paid before. This led to thousands losing their jobs, causing one man’s wife to say the dollar meant nothing if her husband didn’t have a job.

While minimum wage advocates don’t advocate for it for the racist reasons of Davis and Bacon, the effects are still discriminatory towards black people. Black workers tend to occupy low-skilled or semi-skilled trades. Immigrants, inner-city minorities, and young people also make up the majority of low-skilled trades. Making the hiring of these workers more expensive leads to poverty, homelessness, crime, and a host of other societal ills. Without a minimum wage, these low-skilled workers and their employers can agree on a wage and the worker can work as long as he or she wants. Once they have the skills (from, say, attending a trade school) and the work experience, they can move on to greener pastures to find an employer willing to pay them more. A minimum wage puts the employer in control, giving them plenty of reasons not to hire the lower-skilled. Without it, the worker is in control.

If the minimum wage is anti-corporate, why does Amazon, Google, Target, and Hobby Lobby support a $15 an hour minimum wage? It keeps out competition. They can afford almost $30,000 per employee. Small businesses can’t. As USA Today notes, “The path would be clear for even more market dominance of big business and Wall Street, gained at the expense of Main Street.” People couldn’t buy local and corporations could expand their power.

This is especially true of black-owned small businesses. Black businesses have less money to find employees and must often use their own money to fund their business. They have less employees as a result. Imagine if they had to pay $30,000 per employee out of their own pocket. They’d lose the few employees they already have. That would kill black entrepreneurship and doom black communities. This could lead to gentrification where black communities become white and the original black residents are kicked out.

According to the CBO, a minimum wage hike would lift 900,000 out of poverty but put 1.4 million out of work. Young, less educated people account for a disproportionate share of those job losses. These low-skilled workers may not have the skills to get another job. We forget what a low-skilled job is. It’s dishwashing, being a retail cashier, being a receptionist, and being a laundry attendant. It’s not plumbing or automotive mechanics or carpentry. Those jobs pay tens of thousands. Those jobs require trade school, not just a high school diploma. A minimum wage punishes those who were born poor and weren’t given the opportunities to go to trade school or college and get those skills.

The best way to help labor is to allow workers to negotiate the wages they want, not to apply a one-size-fits-all wage. The best way to save small and minority-owned businesses is not to make every employee an expensive commodity. Minimum wage laws hurt low-skilled, often black, workers. Implementing these laws lead to the growth of big business at small business’ expense. To be truly pro-labor and anti-corporate, we need to abolish the minimum wage.

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The Mises Institute, founded in 1982, teaches the scholarship of Austrian economics, freedom, and peace. The liberal intellectual tradition of Ludwig von Mises (1881-1973) and Murray N. Rothbard (1926-1995) guides us. Accordingly, we seek a profound and radical shift in the intellectual climate: away from statism and toward a private property order.

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