The Connection Between Racism and the Minimum Wage

The debate over the minimum wage is often viewed in binary terms. Proponents of the minimum wage see themselves fighting for the interests of the poor, and see their opponents as siding with business and profits.

But back when the minimum wage first became a serious proposal in early 1900s, the debate was much different--and worse. Back then, there was a virtual consensus that imposing or raising the minimum wage would in fact reduce the number of jobs available. Most also understood that the negative impacts of the minimum wage would fall overwhelming on the backs of minorities and the lowest-skilled workers. But for many of the early supporters of the legislation, these outcomes were seen as a benefit, not a flaw. In fact, racism, as embodied by the terrifying eugenics movement, was at the heart of the initial push for a minimum wage, as explained in a new essay published by the Foundation for Economic Education.

Eugenics

If this sounds surprising to you, you can be forgiven. Then as now, the minimum wage was part of the progressive agenda. The problem is that eugenics was also part of that agenda (though it had some bipartisan appeal as well).

In case you're unfamiliar, eugenics was essentially an academic form of racism. It saw white people as a genetically superior race, and thought eliminating or minimizing the population of "inferior races" was an admirable goal for society. This concept was very much in vogue in the early Twentieth Century, and many methods were proposed to advance it--ranging from simply encouraging extensive procreation among the desired races to sterilization programs to outright genocide. Eugenics' most infamous adherent was Adolf Hitler, and it was at the core of his extermination program against Jews and other "inferior races" in the Holocaust. Once this horrifying episode came to light, however, the movement largely died out.

Viewed in this context, of course, the minimum wage could be seen as a minor issue. But it is instructive, and important to know where it came from. Like some other policies that haunt us to this day, the minimum wage was conceived as a racist policy.

Economic Reasoning

Before we refer you to the full piece, so you can read all the terrible arguments for yourself, we'll briefly touch on the economic reasoning that explains why the minimum wage is likely to adversely impact minorities and least skilled workers the most. The basic problem is that the minimum wage causes more, and potentially better qualified, people to enter the labor market that wouldn't otherwise be there.

To see this, first imagine a world where the prevailing wage is a mere $5 per hour. At this rate, many people who don't actually need to work, will probably conclude it's not worth their time. For instance, high school and college students that are supported by their parents might be interested in having some extra spending money. But they probably wouldn't be willing to give up nights or weekends for just $5 an hour. Conversely, people that are deeply in poverty and may need to feed their families--those people probably would be willing to work for such a wage. We can lament the fact that there are people in this position, but we still have to acknowledge that for such people, being employed at $5 an hour is likely preferable to not being employed at all.

Before proceeding to the counterexample, we should note that people in the deepest levels of poverty usually don't have the best resume. Maybe they have a criminal record or a history of drug use. Maybe they had an unstable family life that prevented them from consistently holding down a job. Whatever the exact reasons and causes, the fact is that they probably have attributes that make them somewhat undesirable to employ.

Now let's consider that a minimum wage is passed at $15 an hour. At this level, many new people will be willing to enter the job market. And for unskilled positions, all will be competing at the same $15 level. Obviously, this puts the average poor person at a large disadvantage. Prospective employers are now choosing between young (and probably white) college and high school kids with good backgrounds but no experience on the one hand, and very poor people with a rough employment history on the other. If they're all getting paid the same amount, it's not a stretch to assume many employers are going to favor the college and high school kids. Instead of the poor person being left with a bad job at $5 an hour, they have nothing at all, which is unquestionably worse. They aren't gaining any work experience, and they are completely dependent on the state or charity for their existence.

Before the minimum wage, many employers might have been willing to take a chance on an ex-con or a historically unreliable worker if they could pay a reduced rate. If they have to pay everyone the same rate, however, this is unlikely.

Above, we explained why the minimum wage is likely to have a disproportionate impact on the poorest people, regardless of race. But where race comes into it is that minorities such as blacks and Hispanics are disproportionately represented among the lowest income groups and among the prison population. These facts alone make the impacts of a minimum wage de facto racist against those groups. It is not at all required to make our case, but if one further assumes there is any kind of bias against these minorities in hiring more generally, that would make the impact of the minimum wage even worse.

Bearing these facts in mind, prepare to be shocked and appalled by the early justifications for a minimum wage:

The Eugenics Plot of the Minimum Wage

You can also check out our earlier long-form primer on the basic economic principles underlying the minimum wage debate.