Monday, February 09, 2009

Question of the Day

In 1930, there was a higher rate of employment among blacks than whites. In 1931, a federal minimum wage law was enancted. In 1931 and thereafter, the rate of unemployment for black people has exceeded that of whites. Coincidence?

11 comments:

Jb said...

I don't get it -- what is the implication?

Anonymous said...

It is about the wonderous invisible hand (sarcasm) of the wage market - or wage slavery - depending on whether you believe in God or the devil.

Denis Navratil said...

Jb, think supply and demand. When the cost of something increases, the demand for it decreases. If that something is jobs, it means unemployment. My suggestion is that minimum wage jobs may have harmed black people disproportionately. If, on average, black people had lower levels of education and/or were less desired as employees for whatever reason, then they would have had greater difficulty finding entry level jobs. With restricted access to entry level jobs, one loses the opportunity to increase skills and increase salary over time. Perhaps minimum wage laws have harmed black people. That is the implication.

Mixter said...

I see no cause and effect here.

Mixter

Urban Pioneer said...

Mixter with respect, please look at the statistics. The highest unemployment rate for years and years is Black Males and especially younger Black males. Of course the education system and Gang behavior as well as attitude and drugs are certainly factors, it is also true that if the Minimum wage were lower, (or better yet, Non-existant), More business would locate in those communities, and other business would be more inclined to give that first step on the ladder that is necessary, to break the cycle.
Minimum Wage is nothing but a Feel good legislation which makes a few politicians feel good, but actually backfires, every time! U may have noticed the first INCREASE in Minimum wage in 15 years resulted in the unemployment rate go up, check it out it was with in the last year! Bush should have vetoed it; the Dem's passed it. But in his Last year Bush did many things he could to appease the Dem's, and sold out the Right, and his own Business principles.

Mixter said...

I have to disagree with the cause and effect theory that unemployment rose due to an increase in the minimum wage, considering the financial crisis we find ourselves in today.

I'm not arguing in favor or against a federally mandated minimum wage. I do, however, disagree with the cause and effect argument being discussed here. There are too many other factors at play.

Mixter

Denis Navratil said...

Mixter, if the price of bananas goes up relative to other food products, people will buy fewer bananas. We know this to be true. It is pretty much true of any product or service, so why should employment be any different? Why are companies moving some operations overseas? There are often other factors, but one of them certainly is the opportunity to buy labor at a cheaper rate. Obviously, if the cost of labor increases beyond its worth to an employer, said employer will not purchase the labor or will seek to purchase it elsewhere (overseas?) for a lower price. Unpurchased labor is also known as unemployment. Do you really think the price of labor has no impact on the amount of labor purchased? Granted there may well be a myriad of other factors in play, but the price of labor is certainly one of them.

Mixter said...

Again, I'm not commenting on whether or not a federally mandated minimum wage is a positive or negative. I don't have enough info to go on. But, you can't base a pure cause and effect on one factor when there are so many other factors at play. It just can't be done.

Mixter

Denis Navratil said...

Mixter, is "pure cause and effect" is the standard that you use for all judgements? We pretty much know that smoking can cause lung cancer but there are other factors that can cause cancer. Should I smoke three packs a day because there is no pure cause and effect relationship re smoking and lung cancer? After all, we do hear stories of people who smoked all their lives and died of old age or the person who never smoked but got cancer at age 35.

Also and more importantly, I didn't claim a pure cause and effect relationship between min wage and unemployment. Indeed when I wrote "there may be a myriad of other factors at play" I pretty much stated outright that there is not a pure cause and effect relationship. But is there a relationship on a macro scale? Of course there is and we just have to imaging the price of bananas going up to $40 per and we will realize that there is a relationship between price and consumption. If you think that this is not the case with the price of labor, well, I would sure like to hear your reasoning.

Mixter said...

Denis, earlier you stated: Perhaps minimum wage laws have harmed black people. That is the implication. And, perhaps they haven't. My point is this: There's really no way to tell. I'm really not trying to be smug or anything.

Mixter

Denis Navratil said...

Fair enough Mixter. I guess I moved on a bit from my original point, thought they are related. My argument is that there is a relationship between prices and consumption. When the price goes up, as in the min wage, the consumption goes down, which results in unemployment. I believe this is one of perhaps many factors impacting unemployment among black people.