Dragged Down by the Net

Tuesday, February 07, 2012

Regarding Mitt Romney's recent remark to the effect that he doesn't worry about the poor because "have a very ample safety net", Thomas Sowell takes the opportunity to indicate that said net is actually trapping many in poverty:

We have gotten so used to seeing unemployment rates of 30 or 40 percent for black teenage males that it might come as a shock to many people to learn that the unemployment rate for sixteen- and seventeen-year-old black males was just under 10 percent back in 1948. Moreover, it was slightly lower than the unemployment rate for white males of the same age.

How could this be?

The economic reason is quite plain. The inflation of the 1940s had pushed money wages for even unskilled, entry-level labor above the level specified in the minimum wage law passed ten years earlier. In other words, there was in practical effect no national minimum wage law in the late 1940s.

My first full-time job, as a black teenage high-school dropout in 1946, was as a lowly messenger delivering telegrams. But my starting pay was more than 50 percent above the level specified in the Fair Labor Standards Act of 1938.

Liberals were of course appalled that the federal minimum wage law had lagged so far behind inflation -- and, in 1950, they began a series of escalations of the minimum wage level over the years.

It was in the wake of these escalations that black teenage unemployment rose to levels that were three or four times the level in 1948. Even in the most prosperous years of later times, the unemployment rate for black teenage males was some multiple of what it was even in the recession year of 1949. And now it was often double the unemployment rate for white males of the same ages.
Sowell's column puts to the lie the notion that minimum wage laws constitute some kind of safety net, but it doesn't address what's really wrong with minimum wage laws: They violate the freedom of employers and employees alike to enter into contracts on terms of their own choosing. The victims of these laws include not just those who are arbitrarily priced out of work, but employers who have to "choose" between getting work done short-handed or charging higher prices to their customers. In turn, he misses a chance to show that customers thus also become victims of whatever higher prices or shortages result from the impact of minimum wage laws on businesses throughout the economy.

Sowell is right that Romney is too quick to pass over the plight of the poor, but Sowell's own focus on just the poor causes him to miss the chance to mention that indexing the minimum wage, which Romney advocates, would not only perpetuate tyranny, it would harm everyone.

-- CAV

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