Job creation or not

As Bret explained in this post, high enough levels of taxation can limit paying work that would otherwise be available to people. Another way of depriving people of jobs is through regulations. Thomas Sowell offers up this article which presents information which I'm pretty sure most people are unaware of...

Let us go back a few generations in the United States. We need not speculate about racial discrimination because it was openly spelled out in laws in the Southern states, where most blacks lived, and was not unknown in the North.

Yet in the late 1940s, the unemployment rate among young black men was not only far lower than it is today but was not very different from unemployment rates among young whites the same ages. Every census from 1890 through 1930 showed labor force participation rates for blacks to be as high as, or higher than, labor force participation rates among whites.

People who are less in demand -- whether because of inexperience, lower skills, or race -- are just as employable at lower pay rates as people who are in high demand are at higher pay rates. That is why blacks were just as able to find jobs as whites were, prior to the decade of the 1930s and why a serious gap in unemployment between black teenagers and white teenagers opened up only after 1950.

Prior to the decade of the 1930s, the wages of inexperienced and unskilled labor were determined by supply and demand. There was no federal minimum wage law and labor unions did not usually organize inexperienced and unskilled workers. That is why such workers were able to find jobs, just like everyone else, even when these were black workers in an era of open discrimination.

The first federal minimum wage law, the Davis-Bacon Act of 1931, was passed in part explicitly to prevent black construction workers from "taking jobs" from white construction workers by working for lower wages. It was not meant to protect black workers from "exploitation" but to protect white workers from competition.

Even aside from a racial context, minimum wage laws in countries around the world protect higher-paid workers from the competition of lower paid workers.

Often the higher-paid workers are older, more experienced, more skilled or more unionized. But many goods and services can be produced with either many lower skilled workers or fewer higher skilled workers, as well as with more capital and less labor or vice-versa. Employers' choices depend on the relative costs.

The net economic effect of minimum wage laws is to make less skilled, less experienced, or otherwise less desired workers more expensive -- thereby pricing many of them out of jobs. Large disparities in unemployment rates between the young and the mature, the skilled and the unskilled, and between different racial groups have been common consequences of minimum wage laws.

That is their effect whether the particular minimum wage law applies to one sector of the economy like the Davis-Bacon Act, to the whole economy like the Fair Labor Standards Act of 1938 or to particular local communities like so-called "living wage" laws and policies today.

The full effect of the Fair Labor Standards Act of 1938 was postponed by the wartime inflation of the 1940s, which raised wages above the level specified in the Act. Amendments to raise the minimum wage began in 1950 -- and so did the widening racial differential in unemployment, especially for young black men.

There have been some studies implying that minimum wage laws are not that bad... but upon careful examination they have been found to be, shall we say, garbage. Wage, benefit mandates and other labor market regulations might sometimes achieve the stated good effects. Often they do not and they always come at a price.