Trapped in Poverty

The fact that minimum wage laws create unemployment has been well-known to economists for decades, but it is akin to political suicide for politicians to publicize that fact, because they risk disfavor by the unions. In fact, for more than half a century it has been a truly anti-competitive practice by unions to limit low-paid competition for jobs by using government to impose minimum wages. Those most severely impacted are those who have limited resources for higher education.

Prior to about the 1940′s the path to a career for the poor was traditionally entry-level jobs, instead of higher education. But when minimum wage laws were enacted, the poor were trapped in their poverty. They couldn’t afford education and they couldn’t get their “foot in the door” with a low-paid job. If they went on government assistance, they were further trapped in poverty, because the motivation to work was no longer the wage, but the difference between the wage and what they were already getting from government relief.

Here’s a good audio recording of Professor Hans-Hermann Hoppe, lecturing at New York Polytechnic University in 1986. He explains in detail the relationship between minimum wage rates and unemployment, especially black unemployment. He explains that minimum wage rates were intentionally designed to keep “blacks, women, and teenagers” out of the job market to reduce competition for union jobs. He said that unions will “only make the minimum wage high enough to disemploy the people they don’t really care about, but never push it so high that they start to disemploy union workers with seniority.” He mentioned evidence of the unemployment/minimum wage relationship even 20 years earlier, however at that time statistics had a shorter history. But by 1986, the trends were undeniable. (His discussion of minimum wages begins at about 22 minutes into this recording.)