Jobs Bill's Minimum Wage Would Hurt Black Teens

Friday, 12 Mar 2010 10:05 AM

By Richard Rahn and Izzy Santa

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Congress believes it has the solution to America’s epidemic of joblessness: a so-called jobs bill whose centerpiece is a tax credit for companies that hire one of the 15 million unemployed.

Many legislators from the Congressional Black Caucus criticize the bill for not going far enough. And they are right. It doesn’t remove one of the many factors that have caused higher unemployment: a government-imposed minimum wage.

Today, black unemployment is almost 16 percent and at a 25-year high, even as the overall unemployment rate declined from 10 percent to 9.7 percent.

The recession has been the most damaging to teenage black males, whose unemployment rate is 44.9 percent, up from 39.2 when the minimum wage hike took effect in July. In fact, November — five months after the wage hike — saw unemployment for this demographic reach 57.1 percent—the second-highest rate on record at the Bureau of Labor Statistics.

Three years ago, then-Sen. Barack Obama and prominent African-American organizations thought a hike in the minimum wage would empower minorities.

So how much should workers be paid? $100 an hour? $25 an hour? $7.25 an hour (the current federal rate)? Or zero? For 95 percent of workers, a wage of a $100 an hour would be a significant raise. But most people understand that very few people would have jobs at a minimum wage of $100 an hour — so there are few, if any, advocates for that rate.

After a nine-year battle, when July’s increase in the minimum wage took effect, the Democratic Policy Council declared, “This was a long overdue raise for American workers.” Maybe for some workers, but the 3 million blacks now unemployed are feeling the pain.

The minimum wage hike has cost employers more, an additional $2.10 an hour, and forced employers to lay off many minimum-wage workers — most of them young people who had their first real job, causing an overall rise in black unemployment.

Think back to when you were a teenager who needed, or wanted, some extra cash. Would you have been better off not getting a job at the set minimum wage, or would you have been better off getting a job at 20 percent less than the minimum wage at the time? It’s hard to argue that no job is better than a lesser-paying job.

These alarming unemployment figures have prompted the Congressional Black Caucus and others who advocated higher wages to fix their first mistake by asking the president and Congress to develop a job creation plan that targets areas of chronic unemployment.

Congress’ latest jobs proposal, however, completely undermines the argument for a higher minimum wage. The logic for the tax credit is that, if labor becomes cheaper, by way of a credit subsidy, businesses will hire more people. The cognitive dissonance on display is astounding.

Employers will hire more workers of any given experience and skill level when the cost of doing so is lower. The fact is, few people stay at the minimum wage for very long. Once they learn basic job skills — showing up on time, working hard, and the mechanics of the job they are doing — their value to their employers increases, which is reflected in higher wages.

It is unconscionable that these young people with relatively few skills are prevented from being productive members of society because politicians choose to ignore basic economics. The fastest and most straightforward way to empower minorities and reduce unemployment is to end the imposition of mandatory minimum wages at levels well above what the market can afford.

But, as is the case all too often in Washington, politics trumps rational argument and true compassion.

In 1968, weeks before Martin Luther King Jr.’s death, the civil rights leader proclaimed: “If a man doesn’t have a job or an income, he has neither life nor liberty nor the possibility for the pursuit of happiness. He merely exists.”

In this case, the ones merely existing are the most disadvantaged, in particular, black male teenagers who pay the price with their forcible exclusion from the workforce.

Richard W. Rahn is a senior fellow at the Cato Institute and chairman of the Institute for Global Economic Growth. Izzy Santa is an adjunct researcher at the Center for Freedom and Prosperity.


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