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Research finds that high minimum wage rates disproportionately hurt African-American men

Yesterday, I wrote about ‘ban the box’ laws which research shows increase callback rates for people with criminal records at the cost of reducing the likelihood that employers call back or hire young black and Latino men. I wrote that:

Policymakers, like Gov. Walz, have to ask themselves if they think the benefits of “increase[d] callback rates for people with criminal records” are worth the cost in terms of a “reduce[d]…likelihood that employers call back or hire young black and Latino men.” The evidence suggests that Minnesota’s policymakers are currently answering that question with a ‘Yes’. That is some small part of Minnesota’s much noted racial disparities.

New research suggests that Minnesota’s high minimum wage rates might also play a role and that policymakers might have to ask themselves similar questions.

High minimum wage rates hurt African-American men

A new paper titled ‘The Economic Impact of a High National Minimum Wage: Evidence from the 1966 Fair Labor Standards Act‘ by economists Martha J. Bailey, John DiNardo, and Bryan A. Stuart:

…examines the short and longer-term economic effects of the 1966 Fair Labor Standards Act (FLSA) which increased the national minimum wage to its highest level of the 20th Century and extended coverage to an additional 9.1 million workers.

They find that:

…the 1966 FLSA increased wages dramatically but reduced aggregate employment only modestly. However, the disemployment effects were significantly larger among African-American men, forty percent of whom earned below the new minimum wage in 1966. [Emphasis added]

Racism or bad public policy?

Minnesota is one of 21 states whose minimum wage rate is higher than the federal rate. Both Minneapolis and St. Paul are on track to hike it to $15 an hour. Given the apparent negative impact of high rates on the employment of black men, might these not be some part of our state’s racial disparities?

These disparities are often ascribed to ‘racism’, but that is not the whole story. Both ‘ban the box’ laws and high minimum wage rates negatively impact black Americans. Neither is motivated by racism, indeed, quite the opposite in many cases. Part of the story, at least, is just bad public policy.

John Phelan is an economist at the Center of the American Experiment. 




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