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.