The Racist Origins of Minimum Wage

October 29, 2016
Posted in Economics
October 29, 2016 Tim Preuss

The Racist Origins of Minimum Wage

Economic illiteracy is an epidemic that rots American politics and modern culture to its core, and nowhere can this be seen on play than when it comes to how basic economic laws of supply and demand apply to labor and wages. It should be obvious that to anyone with two brain cells to rub together than as the price of something rises, people will buy less of it. If the price of milk suddenly doubled, people no doubt would buy less milk.

So why is the cry for a $15 minimum wage, (more than double the current federal minimum wage of $7.25) not met with the same logic? If the price of labor rises, people will buy less of it – hire fewer people. Prices of anything that are not allowed to fluctuate along with ever shifting supply and demand will ultimately result in either a shortage or a surplus of that resource. In the case of minimum wage, if the price is set above where the market would set it, there will be a surplus – higher unemployment.

Unfortunately, this disproportionately effects those who lack the skills and education to attain high wage jobs in the first place. A person already earning $20/hour will not be effected directly by a rise in the minimum wage, but a person working for $10/hour will. Employers base their wages on how much a person produces. If a person produces $10/hour worth of work, then he will be paid accordingly. However, raising the wage to $15/hour does not make this worker suddenly more productive. The employer will be seeing a loss on this employee – paying $15 for $10 worth of labor. Soon enough, this $10 worker will be forced out a job, perhaps the only one he was qualified for.

And who are these low wage workers? Many of them are young people, working a part time job in high school, or their first job after graduating college, waiting for their dream job to come their way. Many are also the elderly- folks who retired but can’t get by just on their social security, so they pick up a simple part time job to help with some bills. Many others (most, actually) are people who were giving poor schooling, poor parenting, poor opportunities, and come from poor neighborhoods. The minimum wage law disproportionately negatively effects minorities who are already struggling as a result of government intervention into their communities.

This is no new phenomenon, however, as the minimum wage law was originally initialized as a way for white union members to keep bosses from hiring black non-union members. Racist bosses prefered to hire whites, but if blacks could do the same job AND do it for less money, the boss would “hold his nose” and hire a black worker over a white one. Racist white workers were angry that they were being undercut by blacks who did just as good a job, so a law was passed, making it illegal to hire someone for less than X per hour.

By creating a price floor for labor, whites couldn’t be undercut, and racist bosses were able to hire only whites, as there was no reason to hire blacks now that all labor could only be bought for a certain price. This is not unique to America either, as the exact same policy was enacted in South Africa during the apartheid era. The only difference is that in South Africa they were honest about their motivations, where as in America, a minimum wage was sold to the public as a way to increase take home pay, increase living standards, and help grow the middle class.

It has done nothing of the sort. Since the minimum wage law was passed in 1938 as part of FDR’s “New Deal” black unemployment went from LOWER THAN WHITE unemployment, to consistently more than double. Combine this with failing public schools, a phony “War on Drugs”, and a welfare state that encourages broken families, and we can see that no matter how it has been sold, government intervention has been used to keep minorities down, and keep the few at the top in power.

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Tim Preuss

Tim Preuss is the founder and CEO of Preuss Media LLC. Along with writing for PreussPodcast.com, he hosts the Tim Preuss Podcast Monday through Friday, available on iTunes, and regularly interviews prominent personalities within the liberty community.
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