Tuesday, July 12, 2016

Is this due to the minimum wage?

A Forbes Columnist opines on the spike in teenage black unemployment:
Today black teen unemployment is more than 40 percent; nearly double that for white teens. In 2007, prior to the Great Recession, the black teen unemployment rate was about 29 percent. There is no doubt the increase in the federal minimum wage from $5.15 to $7.25 per hour contributed to the higher unemployment rate. If Congress passes a new minimum wage law that makes it illegal for employers to pay less than $9 per hour, and for workers to accept less than that amount, we can expect further erosion of the market for unskilled workers, especially black teens.

 Sure, we can look to other pieces of research that say that the effects are modest, or that they’re worth it, but even that research still tells us that the negative effects are going to be concentrated down onto teens and more especially black teens. There’s more in two NBER papers for those who want more detail.

My basic objection to a minimum wage at any level (yes, I do think it should be $0 an hour) is that whatever the bad effects upon employment those effects are inevitably going to be visited upon those already being shafted by the current set up of society: those black teens. As they are being and is this really the time to be making them even worse off?


  1. I could not agree more with your assessment of the correlation between increased minimum wage and the unemployment statics of the African American communities of the United States. When the government imposes a higher minimum wage, employers face higher labor costs and are forced to respond by decreasing other production expenses. As these employers cope with the increased costs of a mandated wage raise, they often respond by cutting the jobs available to less-experienced and less-educated employees. The result is that these individuals, who already have few employment options, find it more difficult to get a job(Sullivan, 2014).

    There is a second layer of risk with increased minimum wage as well. The ability to replace human labor with technology and automation. A perfect example is the McDonald's restaurant in my town, they recently remodeled the entire restaurant replacing some of the cashiers with touchscreen technology for customers to order. People do not go into business to create jobs, they go into business to make money, labor is a cost. The higher the cost of labor, the more attractive nonhuman labor replacements become. Higher minimum wage makes labor more expensive (Goldberg, 2013).


    Goldberg, Jonah. National Review. The Robot Future is Coming, and Helping Human Laborers will Require Creative Responses. Dec 6, 2013.

    Sullivan, Cara. American Legislative Exchange Counsel. Raising the Minimum Wage: The Effects on Employment, Businesses, and Consumers. March 12. 2014

  2. The increase in minimum wage will increase unemployment not just among black teens, but all races alike. However, black teens would be the most prevalent race affected by the increase of minimum wage and as a result increase of unemployment. Not only would unemployment rise, the prices would too increase drastically. Regarding the blog, that was when employers could not pay an employee less than 9 per hour. Now, the current talks are about minimum wage being raised to 15 per hour which is a huge jump compared to the past. One article agrees with the negative results of the increase stating that the food industry would absorb the high costs thus causing unemployment causes. However, it is debatable whether there truly is a negative impact on the economy when the minimum wage increases. Apparently in the past when there were minimum wage hikes, for example, in the 1950’s the minimum wage rose from $.40 to $.75 which is an 88% increase. This had no impact on the national economy whatsoever. In fact, literally right before the minimum wage increase there were unemployment issues at an all-time high of 7.9%. The reason for this stems from the law of demand. Per the article, if prices rise on anything it reduces the demand for that thing, making it equal, (Pollin and Lim, 2016). So perhaps the increase would not be as difficult on the economy.

    Pollin, R., & Wicks-Lim, J. (2016). A $15 U.S. Minimum Wage: How the Fast-Food Industry Could Adjust Without Shedding Jobs. Journal Of Economic Issues (M.E. Sharpe Inc.), 50(3), 716-744. doi:10.1080/00213624.2016.1210382