Lawmakers Should Focus on Consequences of Minimum Wage Hikes, Not Mere Intentions

Michael Schaus

By Michael Schaus

It didn’t take the new Nevada legislature long before it started toying with the idea of raising the minimum wage.

Introduced within the first week of Nevada’s 79th legislative session, SB106 would incrementally increase the minimum wage from the current $8.25 per hour to a grand total of $12 per hour. Another more aggressive proposal — AB175 — was introduced the following week, and it called for a $15 minimum wage.

As with the national “Fight for $15” movement, advocates of both proposals have done their best to avoid discussions regarding the economic consequences of such wage hikes — instead focusing their sales-pitch on the supposed moral imperative to “do something” about poverty.

Focusing heavily on poverty rates among minority groups, these advocates routinely praise minimum wage hikes as a sure-fire way to bridge the so-called “minority wage gap.”

Economic reality, however, disagrees.

According to a recent Heritage Foundation report, many industries that currently depend on low-skilled labor would be forced to immediately increase their prices. The study, based on observations made in markets where the minimum wage has already been increased, suggests that a $15 minimum wage would translate to a roughly 38 percent hike in fast-food prices alone.

Just as troubling is the impact such increases have on the labor market — specifically among minority groups, which already tend to have higher unemployment and more under-employment than the rest of the workforce.

For example, a report from the Nevada Policy Research Institute indicates that for every $1 per hour the minimum wage is increased, there will be a nearly 1 percentage point increase in unemployment among Hispanics.

Other studies have shown similar correlations between government-mandated wage increases and minority-worker unemployment.

What’s even more interesting, however, is that this correlation isn’t some sort of accidental, or unforeseeable, consequence of artificially inflating wages. It is a well-documented phenomenon.

In fact, at one time, it was actually the intent behind minimum wage mandates.

In the 1920’s, white-supremacist labor unions in South Africa were unabashedly focused on keeping South Africa’s trades “white,” using race-based labor policies. While most apprenticeships were reserved for white workers, unskilled black Africans still were managing to get a foothold in the labor market by accepting work at lower wages, and “learning on the job.”

Companies welcomed the low-skilled labor, and black workers depended on the experience to begin earning higher wages.

But the labor unions in South Africa felt that their entirely white membership was threatened by this growing minority labor force — and enthusiastically threw full support behind a new minimum wage law in 1926.

Known as “the rate for the job” regulation, its lynchpin was a government-mandated floor for wages — and it quickly priced inexperienced workers out of the market, thus preserving the white-only union’s monopoly in the region’s most important trades.

And South Africa wasn’t alone in such thinking.

In the U.S., about the same time, Harvard University praised similarly discriminatory minimum wage laws in Australia as a prime example of how “whites” could protect their “standard of living from the invidious competition of the colored races.”

In the early 1930s, a similar minimum-wage scheme was proposed as federal law in America — the 1931 Davis-Bacon Act — with supporters enthusiastically declaring that mandated minimum wages would help ensure the “racial status quo” of the nation.

Candidly out to rig the system against unskilled immigrant and minority workers, Congress wholeheartedly endorsed the nation’s first federal attempt to mandate a minimum wage.

How ironic that modern-day “social justice” warriors and “progressives” — oblivious to the actual harm minimum-wage policies do to the underprivileged — continue to demand the very same policies used to discriminate against disadvantaged communities just 90 years ago.

Of course, a lot has changed since the 1930s.

Today’s campaigns for increasing the minimum wage reflect a genuine — if historically and economically ignorant — desire to help low-wage workers increase their incomes.

But a change in proponents’ intent does not change the damaging impact their policies would bring to businesses, labor markets and consumers.

Rather than blindly focusing on the “good intentions” of minimum wage advocates, maybe — just maybe — it’s worth looking at the demonstrated impacts of their policies.


Michael Schaus is communications director for the Nevada Policy Research Institute.

This article was originally published in the Nevada Business Journal.