The Historical Argument Against the Minimum Wage

Guest post by: Ben R. Crenshaw

In my last post I argued that the minimum wage is immoral since it violates social contract law by forcing employers (who must hire laborers) to abide by arbitrary wage regulations that are not mutually agreeable. This week I shall advance the historical case against the minimum wage by showing the discriminatory origins of this popular public policy.

The first minimum wage law appeared in Kansas in 1891, with New York quickly following in 1894. However, it wasn’t until 1927 that the push for a federal wage law in certain industries began, culminating in the Davis-Bacon Act of 1931 which set prevailing wages and benefits on all federally subsidized construction projects. As economist Walter E. Williams extensively documents in his book Race and Economics, the Davis-Bacon Act was proposed specially to protect local, white, unionized workers from competing cheap labor. This cheap labor took the form of mostly unskilled black American and non-European immigrant workers in construction, agriculture, and domestic service industries who were increasingly migrating north, putting pressure on northern labor markets dominated by whites. The Act intentionally sought to disrupt this trend and protect these white workers from “colored labor” that “sought to demoralize wage rates.” It worked. Prior to the Davis-Bacon Act, black and white employment in the construction industry was virtually equal; yet after the Act, black unemployment rose dramatically relative to white unemployment. This Act paved the way for the Fair Labor Standards Act of 1938 that established a federal minimum wage for employees producing goods for interstate commerce, and which has since been greatly expanded so that it now covers 85% of the American workforce.

In addition to excluding blacks and immigrants from certain labor markets, the eugenics movement of the early twentieth century was making effective use of minimum wage laws. Eugenicists had long been opposed to immigration, fearing “race suicide,” or the overwhelming of the Anglo-Saxon race by those who were considered racially inferior, defective, and dependent. As Thomas C. Leonard compelling shows in his article “Eugenics and Economics in the Progressive Era,” Progressive economists used minimum wage laws to rid the labor force of the “unemployable” of society – from immigrants to the disabled to the delinquent. Eugenically, minimum wage laws operated in two ways: first by deterring possible immigrants and other “parasites” from working at all, and second by actually causing unemployment among these individuals. Such results were lauded, since protecting deserving workers from unfit workers was considered a social benefit as it helped maintain a race and culture that was economically efficient and independent. Minimum wage laws were popular among Progressive economists and eugenicists precisely because the laws worked so well to cull from the labor force those who were thought to be a burden on society.

At this point some might accuse me of committing the genetic fallacy by casting aspersion on the minimum wage by attacking its origins. However, this is not the case, as those who proposed, implemented, and supported minimum wage laws were fully aware of the laws’ effect on the labor force that provided employment for certain privileged social groups to the detriment of others. In short, minimum wage laws worked exactly as they were designed to work, both then and now. The difference is that today many are ignorant of the social costs of minimum wage laws and think their good intentions can atone for bad economic outcomes. The victims of the minimum wage continue to be blacks, immigrants, and unskilled and uneducated workers who are effectively priced out of the labor market as their productivity cannot meet the ever-increasing minimum wage standards.

Despite the popular public perception that the minimum wage is a humane policy design to help the poorest among us, the historical origins and consistent results of the minimum wage refute such belief. The minimum wage was originally designed to protect skilled, unionized (and usually white) workers from cheap labor and the socially “unfit.” That cheap labor, both historically and presently, has mostly been comprised of unskilled, inexperienced, uneducated, disabled, and delinquent persons – the “undesirable” workers who “pollute” the labor force according to eugenicists – willing to work at low wages to provide for themselves and their families. Demographically, black Americans, various immigrants populations, and the poor in general have comprised this social group. Thus, in practice, and despite the good intentions of policy-makers today, the minimum wage ends up being an anti-black, anti-immigrant, and anti-poor policy that denies jobs for those who desperately need them the most. If you support the minimum wage today, whether you realize it or not, you are supporting a discriminatory and unjust policy that hurts blacks, immigrants, and the poor. Knowledge of the nefarious origins and devastating consequences of minimum wage laws for these individuals should compel us to work to end this destructive public policy.

4 thoughts on “The Historical Argument Against the Minimum Wage

  1. Pingback: PowerLinks 09.17.15 | Acton PowerBlog

  2. Interesting article Ben. I would just give one piece of advise to make your argument more solid. The Irish, Germans and Italians were just as despised as immigrants as the Africans during early America, through the Progressive era, and onward. The system was designed to work against anyone different that those in power (ethnocentrism and not racism). The power brokers were Protestant and normally of decent from England. It wasn’t therefore specifically against blacks which you cited quite a bit, but rather against any non Protestant English people and especially the poor.

    The other part of this is that minimum wage laws are a joke (or a travesty) when you look at it in terms of globalization. Americans demand the lowest possible price on goods while on the other hand demanding some of the highest salaries in the world. Apple can pay Chinese workers $12 a day to build iPhones and then has to pay its employees in Seattle $15/hour. This enables the American to buy all kinds of stuff (gadgets, cars, clothes, etc…) and live at a higher standard than almost anyone in the world. On the other side of things the workers in China (and elsewhere) pay the price and can never afford the products that they make….and often can’t afford clean water, housing, food or the basics in healthcare. The whole system is set up to enrich Americans at the expense of the poor people of the world.

    • Thanks for the feedback Jack. You are right that other immigrant groups, such as those from Europe (Irish, German, Italians, etc.) were also disposed on and off throughout the nineteenth and twentieth centuries, but this was more from general xenophobia and nationalistic fervor than anything related to minimum wage laws. The work I cite, Race and Economics by Walter Williams, specifically mentions blacks and non-European immigrant groups who were the target of minimum wage laws, not European immigrants (although these might have been affected as well). And contra what you assert, prevailing wage laws were specifically anti-black because as I quoted, they were concerned about “colored labor,” i.e., black labor from the south, not European labor. Whether or not this was due to racism (a belief in superior races) wasn’t mentioned, but it is quite likely (and regardless, it was still a discriminatory measure aimed at excluding a certain demographic from northern labor markets). If you disagree with me I suggest to get a copy of Williams’ book to see what he has to say.
      In regards to your final paragraph on minimum wage laws vis-a-vis globalization, I would be cautious about postulating causal relations between Chinese and American labor markets. Prices on goods are not subject to consumer desire, but supply and demand of resources and labor; this accounts for differences worldwide in consumer prices, not what one population specifically wants. As I have argued, wages everywhere should be dictated by productivity and supply and demand, not artificial floors set by government; it could be that the Chinese wages accurately reflect the market in which these laborers work, whereas the wages in Seattle are the product of government interference in the market (i.e., setting wages artificially above what they would be). Finally, in terms of the standard of living of Chinese vs. Americas, it simply false that Americans are rich at the expense of poorer countries. China has historically been a very poor and agricultural society far before the discovery of the New World, and it wasn’t until the advent of markets and industrialization in the late twentieth century that they began to enrich themselves through production and exports; thus, current Chinese wealth actually has the West to thank for the introduction of market forces along with the emphasis on rule of law and private property (something the Chinese still need to improve upon).

      • Thanks for the reply Ben! You said that prices aren’t subject to consumer desire. I think maybe that was typed in wrong. Consumer desire is the “demand” part of supply and demand….so desire is definitely a major cause of prices.

        Unfortunately prices aren’t simply dictated by the laws of supply and demand. Governments interfere with this process every day. I live in the Philippines and electronics are very expensive (much more expensive than in America). There is a demand for televisions (less than in America, but still a demand, but there is very little supply). Globally there is no shortage of televisions (just as an example). The United States stacks the deck so that these goods (like televisions) are cheap and plentiful and the other people of the world are indirectly affected. Trade agreements and treaties make this possible.

        It is erroneous to believe that countries like China are enriching themselves through production and export. They just aren’t. 27% of the population in China lives off of $2 or less per day. A billion people in the world do not have access to clean water and two billion do not have sanitation. Every day 29000 children (EVERY DAY) die from preventable causes around the world. A small minority in China is enriching itself, but most of the people are in dire positions in life. It is more like the world has fallen in to a cesspool similar to the conditions of factory workers in the Industrial Revolution in the West. Yet there is no escape for these people because mercenary corporations will take their business elsewhere if prices are increased and Western countries protect the corporations and their own people to ensure low prices. In an unregulated system, things will continue unchecked like this. Big business owners can make billions of dollars (more than they could ever spend in a life time) while billions of people don’t even have toilets and clean water.

        The Chinese market (or the Philippines or many other countries in the world) 100% reflects the price of labor in the system. THAT IS THE PROBLEM! I know people making $1 or $2 a day working 12 hours because that is all they can make. Unchecked the system is cut throat. Pure Capitalism is based off of greed and self advancement (non Biblical principles). You try to get as much as you can at the expense of other people.

        Socialism is not the solution. The Russians proved that Socialism is not a viable alternative. Yet there has to be a way to alleviate the extreme poverty of the world due to insufficient wages. With the benefits of globalization for Americans also comes the burden of stewardship of resources. American Christians need to stand up for their brothers and sisters around the world living in unimaginable poverty. None of God’s children should be living in such a way.

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