Disclaimer: The views and opinions expressed by this author are their own and do not represent the official position of the Barbados Today.
by Adrian Sobers
“Many things that are supposed to help blacks actually have a track record of making things worse. Minimum wage laws have had a devastating effect in making black teenage unemployment several times higher than it once was.” – Thomas Sowell
The analysis from the nonpartisan Congressional Budget Office (CBO, cbo.gov) concerning the Raise the Wage Act Of 2021, comes as a timely reminder of the dangers of policies that sound good but have the opposite effect in reality. A more accurate title for this act would be: The Minority Unemployment Act.
To be clear, the issue is not with the apparent nobility of intent but the fact that we need a lot more than noble intentions to help people.
The CBO’s analysis also hints at deeper macroeconomic implications heading our way, and while this is the place, now is not the time. The CBO says the policy would increase the cumulative budget deficit for 2021–2031 by $54 billion.
Additionally, “Higher prices for goods and services—stemming from the higher wages of workers paid at or near the minimum wage, such as those providing long-term health care—would contribute to increases in federal spending.”
A Wall Street Journal report mentioned the other side of the analysis, noting that it would “deliver raises for 27 million workers and lift 900,000 Americans above the poverty threshold.”
However, the CBO also said the “policy would cost 1.4 million Americans their jobs over the next four years.” Which brings me to the crux of the matter.
It is not just any Americans that will lose their jobs, it will be mainly Americans of the minority variety: Latinos, and closer to home, those of African descent.
The Journal’s Editorial Board formally commented in Reality Check for a $15 Minimum Wage, but, as per usual, knowledgeable commenters shed the most light. Brandon James’s comment reminded me (again) why John F. Cogan’s book – The High Cost of Good Intentions – was so aptly titled. Mr. James opens, “As Thomas Sowell and other economists have long pointed out, the true minimum wage is, and always has been, zero.”
“In aggregate, it results in some people getting a raise but many more people getting replaced with a machine or their jobs shipped overseas or themselves replaced by a more experienced worker who can produce output truly worth $15/hr.
This has been proven so many times that it’s barely even controversial.” The great economist Walter E. Williams echoed this sentiment in a 2014 column: Politics and Minimum Wage.
“There’s little debate among academic economists about the effect of minimum wages. University of California, Irvine economist David Neumark has examined more than a hundred major academic studies on the minimum wage. He reports that 85 percent of the studies ‘find a negative employment effect on low-skilled workers.’ […] The only significant debate about the minimum wage is the magnitude of its effect.”
The point is not that it is purely academic, but to frame it as greedy capitalists vs. the poor/oppressed (as is often the case in politics/culture) does not correspond to reality. Truth be told it is: good intentions vs. reality.
Mr. James ends, “And what are the demographics of the workers getting shafted by a minimum wage increase? It is pre-voting age teens, especially low-income inner city kids, trying to gain work experience.” Bluntly, and to use a popular racist category: young, black Americans.
Professor Williams also asked this question: “Who are these workers?” “For the most part,” he writes, “they are low-skilled teens or young adults, most of whom are poorly educated blacks and Latinos.”
Mind you, these same political masters (aided and abetted by the Social Justice Brigade), will turn around in a few years (or the very next day, for they have plenty of gall) and denounce the “inequality” in the unemployment rate – that they created – among minorities.
They will loudly and roundly condemn it as one or a combination of the usual suspects: systemic racism/oppression, greedy capitalists, and so forth. This is, of course, complete nonsense.
It will never occur to them that the minorities who they are supposedly fighting for are reaping the high costs (in the form of unemployment rates and prices) of their good intentions.
What “hurted” me the most though, is the new abnormal economic context in which this is being proposed. Not the economic fallout from the pandemic, but a factor that will accelerate said fallout.
The most important thing to note about macroeconomic factors that move at glacial pace, is that they move. During the period from the 1970s to 2000, world economies (especially China) benefited from a growth in the labour force and improved dependency ratios.
This demographic sweet spot is now souring and the implications do not make for pleasant reading. Thomas Sowell once said that it doesn’t matter how educated you are if you don’t stop and think. It is time to do both.
Adrian Sobers is a prolific writer and social commentator. This column was submitted as a letter to the editor.