Because people differ in many ways, those who are unemployed are not likely to be a random sample of
the labor force. In country after country around the world, those whose employment prospects are
reduced most by minimum wage laws are those who are younger, less experienced or less skilled.
This pattern has been found in New Zealand, France, Canada, the Netherlands,
and the United States, for example. It should not be surprising that those whose productivity
falls furthest short of the minimum wage would be the ones most likely to be unable to find a job.
In early twenty-first century France, the national unemployment rate was 10 percent
but, among workers under the age of twenty five, the unemployment rate was more than 20 percent.
In Belgium, the unemployment rate for workers under the age of twenty five was 22 percent and
in Italy 27 percent. During the global downturn in 2009, the unemployment rate
for workers under the age of 25 was 21 percent in the European Union countries as a whole,
with more than 25 percent in Italy and Ireland, and more than 40 percent in Spain.
In Australia, the lowest unemployment rate for workers under the age of 25, during the entire
period from 1978 to 2002, never fell below 10 percent, while the highest unemployment rate
for the population in general barely reached 10 percent once during that same period.
Australia has an unusually high minimum wage, relatively speaking,
since its minimum wage level is nearly 60 percent of that country’s median wage rate, while the
minimum wage in the United States is just over one-third of the American median wage rate.
Some countries in Europe set lower minimum wage rates for teenagers than for adults,
and New Zealand simply exempted teenagers from the coverage of its minimum wage law until 1994.
This was tacit recognition of the fact that those workers less in demand were likely to be
hardest hit by unemployment created by minimum wage laws. Another group disproportionately
affected by minimum wage laws are members of unpopular racial or ethnic minority groups.
Indeed, minimum wage laws were once advocated explicitly because of the likelihood that such
laws would reduce or eliminate the competition of particular minorities, whether they were Japanese
in Canada during the 1920s or blacks in the United States and South Africa during the
same era. Such expressions of overt racial discrimination were both legal and socially
accepted in all three countries at that time. Again, it is necessary to note how price is a
factor even in racial discrimination. That is, surplus labor resulting from minimum wage laws
makes it cheaper to discriminate against minority workers than it would be in a free market,
where there is no chronic excess supply of labor. Passing up qualified minority workers in a
free market means having to hire more other workers to take the jobs they were denied,
and that in turn usually means either having to raise the pay to attract the additional workers
or lowering the job qualifications at the existing pay level—both of which amount
to the same thing economically, higher labor costs for getting a given amount of work done.
The history of black workers in the United States illustrates the point. From the late nineteenth
century on through the middle of the twentieth century, the labor force participation rate of
American blacks was slightly higher than that of American whites. In other words, blacks were
just as employable at the wages they received as whites were at their very different wages.
The minimum wage law changed that. Before federal minimum wage laws were instituted
in the 1930s, the black unemployment rate was slightly lower than the white unemployment rate
in 1930. But then followed the Davis-Bacon Act of 1931, the National Industrial Recovery Act of 1933
and the Fair Labor Standards Act of 1938—all of which imposed government-mandated minimum wages,
either on a particular sector or more broadly. The National Labor Relations Act of 1935,
which promoted unionization, also tended to price black workers out of jobs,
in addition to union rules that kept blacks from jobs by barring them from union membership. The
National Industrial Recovery Act raised wage rates in the Southern textile industry by 70 percent
in just five months and its impact nationwide was estimated to have cost blacks half a million jobs.
While this Act was later declared unconstitutional by the Supreme Court, the Fair Labor Standards Act
of 1938 was upheld by the High Court and became the major force establishing a national minimum
wage. The inflation of the 1940s largely nullified the effect of the Fair Labor Standards Act,
until it was amended in 1950 to raise minimum wages to a level that would
have some actual effect on current wages. By 1954, black unemployment rates were double
those of whites and have continued to be at that level or higher. Those particularly hard
hit by the resulting unemployment have been black teenage males. Even though 1949—the year before a
series of minimum wage escalations began—was a recession year, black teenage male unemployment
that year was lower than it was to be at any time during the later boom years of the 1960s.
The wide gap between the unemployment rates of black and white teenagers
dates from the escalation of the minimum wage and the spread of its coverage in the 1950s.
The usual explanations of high unemployment among black teenagers—inexperience,
less education, lack of skills, racism—cannot explain their rising unemployment, since all
these things were worse during the earlier period when black teenage unemployment was much lower.
Taking the more normal year of 1948 as a basis for comparison, black male teenage unemployment
then was less than half of what it would be at any time during the decade of the 1960s
and less than one-third of what it would be in the 1970s. Unemployment among 16 and
17-year-old black males was no higher than among white males of the same age in 1948.
It was only after a series of minimum wage escalations began that black male teenage
unemployment not only skyrocketed but became more than double the unemployment rates among white
male teenagers. In the early twenty-first century, the unemployment rate for black teenagers exceeded
30 percent. After the American economy turned down in the wake of the housing and financial crises,
unemployment among black teenagers reached 40 percent.