November 15, 2005
Many people are blaming the riots in France on the high unemployment
rate among young Muslim men living in the ghettoes around Paris
and elsewhere. Some are blaming both the unemployment and the
ghettoization on discrimination by the French.
Plausible as these explanations may sound, they ignore economics,
among other things.
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.
Why are things so different today in the United States -- and
so different among Muslim young men in France? That is where economics
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
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.
Where minimum wage rates are higher and accompanied by other worker
benefits mandated by government to be paid by employers, as in
France, unemployment rates are higher and differences in unemployment
rates between the young and the mature, or between different racial
or ethnic groups, are greater.
France's unemployment rate is roughly double that of the United
States and people who are unemployed stay unemployed much longer
in France. Unemployment rates among young Frenchmen are about
20 percent and among young Muslim men about 40 percent.
There is no free lunch, least of all for the disadvantaged.
2005 Creators Syndicate