The Ruinous ‘Compassion’ of Minimum Wage

By Thomas Sowell

Minimum Wage
The Ruinous ‘Compassion' of Minimum Wage

Thomas Sowell

California -( It is fascinating to see brilliant people belatedly discover the obvious — and to see an even larger number of brilliant people never discover the obvious.

A recent story in a San Francisco newspaper says that some restaurants and grocery stores in Oakland's Chinatown have closed after the city's minimum wage was raised. Other small businesses there are not sure they are going to survive, since many depend on a thin profit margin and a high volume of sales.

At an angry meeting between local small business owners and city officials, the local organization that had campaigned for the higher minimum wage was absent. They were probably some place congratulating themselves on having passed a humane “living wage” law. The group most affected was also absent — inexperienced and unskilled young people, who need a job to get some experience, even more than they need the money.

It is not a breakthrough on the frontiers of knowledge that minimum wage laws reduce employment opportunities for the young and the unskilled of any age. It has been happening around the world, for generation after generation, and in the most diverse countries.

It is not just the young who are affected when minimum wage rates are set according to the fashionable notions of third parties, with little or no regard for whether everyone is productive enough to be worth paying the minimum wage they set.

You can check this out for yourself. Go to your local public library and pick up a copy of the distinguished British magazine “The Economist”

Whether it is the current issue or a back issue doesn't matter. Spain, Greece and South Africa will be easy to locate in the table near the back, which lists data for various countries. Just look down the unemployment column for countries with unemployment rates around 25 percent. Spain, Greece and South Africa are always there, whether or not there is a recession. Why? Because they have very generous minimum wage laws.

While you are there, you can look up the unemployment rate for Switzerland, which has no minimum wage law at all. Over the years, I have never seen the unemployment rate in Switzerland reach as high as 4 percent. Back in 2003, “The Economist” magazine reported: “Switzerland's unemployment neared a five-year high of 3.9% in February.”

In the United States, back in what liberals think of as the bad old days before there was a federal minimum wage law, the annual unemployment rate during Calvin Coolidge's last four years as president ranged from a high of 4.2 percent to a low of 1.8 percent.

Low-income minorities are often hardest hit by the unemployment that follows in the wake of minimum wage laws. The last year when the black unemployment rate was lower than the white unemployment rate was 1930, the last year before there was a federal minimum wage law.

The following year, the Davis-Bacon Act of 1931 was passed, requiring minimum wages in the construction industry. This was in response to complaints that construction companies with non-union black construction workers were able to underbid construction companies with unionized white workers (whose unions would not admit blacks).

Looking back over my own life, I realize now how lucky I was when I left home in 1948, at the age of 17, to become self-supporting. The unemployment rate for 16- and 17-year-old blacks at that time was under 10 percent. Inflation had made the minimum wage law, passed ten years earlier, irrelevant.

But it was only a matter of time before liberal compassion led to repeated increases in the minimum wage, to keep up with inflation. The annual unemployment rate for black teenagers has never been less than 20 percent in the past 50 years, and has ranged as high as over 50 percent.

You can check these numbers in a table of official government statistics on page 42 of Professor Walter Williams' book “Race and Economics

Incidentally, the black-white gap in unemployment rates for 16-year-olds and 17-year-olds was virtually non-existent back in 1948. But the black teenage unemployment rate has been more than double that for white teenagers for every year since 1971.

This is just one of many policies that allow liberals to go around feeling good about themselves, while leaving havoc in their wake.

About Thomas Sowell:

Thomas Sowell is a senior fellow at the Hoover Institution, Stanford University, as well as a prolific author including Black Rednecks And White Liberals. His website is To find out more about Thomas Sowell and read his articles visit his website above.

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5 years ago

I’m going to skip the other comments first:
What’s really painful is hearing my fellow working-poor people talk about how eager they are for minimum wage to go to $10.00.

5 years ago

Given the low I.Q and depraved nature of his readership, it’s no wonder this guy can make a living blowing smoke up your asses.

5 years ago
Reply to  irontiger

I really hate that you think of me as “depraved and low IQ.” Strangely I seem to be smart enough to understand that people won’t (can’t) pay $10.00 for a Cheeseburger sadly it seems you cannot fathom this reality. Just like the business owners were quick to figure out that they could cut everyone’s hours and magically get out of providing insurance benefits (that is why the unemployment number look so good it takes two people to do the same job that one person used to do,) so will all of these companies WILL cut massive numbers of people. It… Read more »

5 years ago

Low minimum wages have done 2 positive things. Kept the economy going, and served to teach young people that they better get a marketable skill if they don’t want to work for peanuts the rest of their lives. If they do not do that it means they have made a poor choice. If their parents did not see the importance of it, that means that it was their mistake, not society’s. However, we live in a culture that is always looking for someone else to blame.

5 years ago

The author should have included Obama care in the mob rule economics. Another case of economic redistribution of wealth to the poor.
People want high wages yet many of those asking for it , dropped out of school , no college or trade school and has done nothing to educate themselves .
For years I worked 2-3 high paying jobs to get ahead and got taxed more paying for social programs of the poor.
the last 100 years America has fallen to Socialism with Fascism mixed.
Time for change.