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Why the Minimum Wage Law Causes Unemployment
The Effects of the Minimum Wage on Minority Employment
Nonwhites historically have had disproportionately lower levels of income than whites, on the average:23
- Beginning with the immediate post-Civil War era, nonwhite family income has remained quite stable as a percentage of white income.
- Representative estimates are 59 percent in 1880, 60 percent for 1907-09, 51 percent in 1947, 54 percent in 1964 and 58 percent for 1992.
Various explanations for these differences have been advanced: lack of education, limited skill levels and/or labor market discrimination. Whatever their cause, their existence indicates that employment levels of nonwhites are more likely to be affected by changes in the minimum wage. This is confirmed by Figure IV, which shows that the unemployment rate for nonwhites closely parallels the real minimum wage.
It is also worth noting that the unemployment rate for nonwhites typically is twice or more that for whites.24 This was not true prior to the widespread adoption of a minimum wage in the United States.
- In the three decennial censuses prior to the enactment of the Fair Labor Standards Act in which unemployment data are available (1890, 1900 and 1930), the white unemployment rate averaged 5.82 percent and the nonwhite 5.90 percent.
- Only after the enactment of a national minimum wage law did nonwhite and white unemployment begin to diverge.