By Rob Roper
With institutional racism becoming an increasingly discussed topic in Vermont, it is ironic that some of our legislators are again promising to pass a very high state minimum wage of $15 per hour. After all, the origin of minimum wage laws were rooted in institutionalized racial discrimination.
Early minimum wage laws were adopted specifically to keep black laborers from competing on price — and winning — with their white counterparts. For example, around the turn of the 20th century, as Dr. Walter Williams points out, “On some railroads — most notably in the South — blacks were 85–90 percent of the firemen, 27 percent of the brakemen, and 12 percent of the switchmen.”
The response from unionized, white laborers was to first try to outright legally ban blacks from doing these jobs. When that failed, they settled for the next best thing: a high minimum wage to be applied equally to all. That may sound racially sensitive, but the motivation and the effect were to keep blacks unemployed. The motivations may have changed today, but the effects have not.
As economist Thomas Sowell, who also happens to be an African American, points out in his book “Discrimination and Discrepancies,” before the real impact of The Fair Labor Standards Act law kicked in “there was no significant difference in the unemployment rates of black and white teenagers in 1948, [each being around 10 percent]. … After the effectiveness of the minimum wage law was restored by recurring minimum wage laws in later years, not only did teenage unemployment rates as a whole rise to multiples of what they had been in 1948, black teenage unemployment rates became much higher than the unemployment rate for white teenage males, usually at least twice as high for most years between 1967 on into the 21st century.” A similar story plays out for labor force participation rates.
The reason for this is that in a competitive labor market, employers face a real cost if they discriminate against minority workers: they pay more for labor than their non-discriminating competition. This creates a positive Darwinian dynamic of survival of the least-racist. But, creating an artificially high wage that all employers have to pay has the effect of removing that economic pressure to not discriminate, and actually enables a racially biased employer to let racial considerations drive hiring decisions.
People will — and should — say that hiring minorities for less than whites is a form of discrimination and an injustice in and of itself, and that’s true. But using the minimum wage as tool to solve this problem is counter-productive, exacerbating and perpetuating race-based disparities.