Hornberger's Blog

Hornberger's Blog is a daily libertarian blog written by Jacob G. Hornberger, founder and president of FFF.
Here's the RSS feed or subscribe to our FFF Email Update to receive Hornberger’s Blog daily.

Waging Minimum-Wage War Against Black Teenagers

by

Yesterday morning at my neighborhood Starbucks, a white woman around 20 years old who has worked there for quite some time told me that she would be leaving Starbucks within a few days. She told me the reason is that she has secured another job, a retail job that is totally unrelated to the coffee trade. She said that her new job would guarantee more working hours and would also mean higher pay.

presumably, that woman’s job at Starbucks  helped her get her new job. Her new employer undoubtedly recognized that she had performed well at Starbucks and had learned such things as how to treat customers, the importance of getting to work on time, how to handle the boss, and other important aspects of a good work ethic.

What if she had not worked at Starbucks? Then, the securing of her new job would presumably have been more difficult, maybe even impossible. The young woman’s job at Starbucks gave her the means by which she could step up to the next rung of the economic ladder.

Unfortunately, thousands of African-American young people will not have the same opportunity that that young woman has. That’s because black young people are prevented by minimum-wage laws from getting the entry-level jobs that would enable them to learn the skills and work ethic that would make them attractive to employers in higher-level jobs.

For years, there has been a chronic unemployment rate among black teenagers that ranges around 30-40 percent. Year after year, thousands of young African-Americans who would like to work find themselves unable to get jobs.

Why is that?

Unfortunately, all too many people misdiagnose the problem and, thus, prescribe the wrong medicine. For example, an article at blackenterprise.com mentions Valerie Wilson, director of the program on race, ethnicity, and the economy at the Economic Policy Institute:

Wilson and other economists cite differences in education levels, experience, and other socioeconomic factors for the discrepancy between black and white employment levels. Wilson adds, however, that discrimination also plays a significant role.

“Even when you compare blacks and whites with the same backgrounds, blacks get less employment opportunities,” says Wilson.

“When we say racial discrimination, we often have work practices in our minds, but it’s taken on different forms. It’s not as bleak as it once was, but it still plays out in decisions and perceptions about blacks,” she adds.

Wilson and those other economists get it wrong. The reason that there is a chronic unemployment rate among black teenagers is the minimum-wage law — the law that mandates that employers pay a government-established minimum wage to employees. If there were no minimum-wage laws at the federal, state, and local level, there would be no more unemployment among black youth. Every young African-American who desired work would be able to get it.

The aim of most businesses is to make money — enough money to stay in business and make a profit. They are not in the charity business, like non-profit foundations.

Thus, when a business hires someone, it’s because the employer believes that it’s worth it to the business. He figures out that the worker will bring him more revenue than what he is paying the employee. If he thinks that hiring the person will bring him a loss, he won’t hire him. It’s an entirely rational decision, given that the business aims to make a profit, not a loss

Thus, in deciding whether to hire someone, the employer makes a subjective determination on the value of the prospective employee. Suppose, for example, that a prospective employee is asking for an annual salary of $40,000, and that the employer concludes that the employee is worth only $30,000 to him. The employee won’t be hired because the employer has no interest in losing $10,000 on the deal.

The principle is no different with the minimum wage. Suppose the minimum wage is $15 an hour. If an employer subjectively concludes that a person is worth only $10 an hour to him, or $11 an hour, or $14.99 an hour, that that person will not be hired.

And that is precisely what has caused chronic unemployment among black teenagers. Because of such things as low work skills, lack of experience, and poor education, black teenagers are valued in the marketplace at less than the arbitrarily established minimum wage. The consequence is that they don’t get hired. They are prevented from setting foot on the first rung of the economic ladder, where they could learn what that young white woman learned at Starbucks, which is now enabling her to move up to the next rung of the ladder.

Wilson does have a point when she asserts that there is racial discrimination in the world of business, just as there is in all walks of life. What she fails to comprehend, however, is that the minimum wage reinforces the bigotry and that repealing the minimum wage would disintegrate it.

Suppose an employer is faced with the choice of hiring a black teenager and a white teenager. The white teenager is better educated, better dressed, and better spoken. Suppose also that the law requires the employer to pay $15 an hour. Who is he going to hire? If he is bigoted, he’ll hire the white teenager. If he isn’t bigoted, he is going to hire the white teenager because it’s economically rational to hire the better educated, better dressed, better spoken teenager.

But suppose there is no minimum-wage law. The black teenager can now compete on the basis of price. He can say to the employer, “I’ll do the work for $7.50 an hour.” The bigoted employer is now faced with a choice: Should he allow his bigotry to interfere with his economic well-being? The non-bigoted employer now finds it entirely rational to hire the black teenager because that will increase his profit margin.

The black teenager benefits because he is now able to get onto the first rung of the economic ladder. He learns work skills and a work ethic. He learns how to treat customers, the importance of getting to work on time, how to handle the boss, and other important aspects of the work environment. That enables him to move up to the next job, a higher-paying and more attractive one, just like that young woman at Starbucks.

 

This post was written by:

Jacob G. Hornberger is founder and president of The Future of Freedom Foundation. He was born and raised in Laredo, Texas, and received his B.A. in economics from Virginia Military Institute and his law degree from the University of Texas. He was a trial attorney for twelve years in Texas. He also was an adjunct professor at the University of Dallas, where he taught law and economics. In 1987, Mr. Hornberger left the practice of law to become director of programs at the Foundation for Economic Education. He has advanced freedom and free markets on talk-radio stations all across the country as well as on Fox News’ Neil Cavuto and Greta van Susteren shows and he appeared as a regular commentator on Judge Andrew Napolitano’s show Freedom Watch. View these interviews at LewRockwell.com and from Full Context. Send him email.