Minimum wage laws cause youth unemployment

Since all workers do not have the same skill or experience, minimum wage laws have more impact on some than on others. Young, inexperienced and unskilled workers are especially likely to find it harder to get a job when wage rates have been set higher than the value of their productivity, says columnist Thomas Sowell.

In France, where the national unemployment rate is 10 per cent, the unemployment rate among workers less than 26 years old is 23 per cent; among young people from the Muslim minority, the unemployment rate is even higher.

In the United States, the group hardest hit by minimum wage laws are black male teenagers; those who refuse to admit that the minimum wage is the reason for high unemployment rates among young blacks blame racism, lack of education, etc.

The hard facts say otherwise, says Sowell. Back in the 1940s, there was no less racism than today and black teenagers had no more education than today, but their unemployment rate was a fraction of what it is now -- and was no different from that of white teenagers. What was different back then?

Although there was a minimum wage law on the books, the inflation of that era had raised wage rates well above the specified minimum, which had remained unchanged for years.

For all practical purposes, there was no minimum wage law; only after the minimum wage began to be raised, beginning in 1950, and escalating repeatedly in the years thereafter, did black teenage unemployment skyrocket.

Minimum wage laws play Russian roulette with people who need jobs and the work experience that will enable them to rise to higher pay levels. There is now a glimmer of hope that more people are beginning to understand this, despite political demagoguery, says Sowell.

Source: Thomas Sowell, A Glimmer of Hope, Real Clear Politics, August 8, 2006.

For text (subscription required): http://www.realclearpolitics.com/articles/2006/08/a_glimmer_of_hope.html

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FMF Policy Bulletin/ 15 August 2006