A majority of professional economists surveyed in Britain, Germany, Canada, Switzerland, and the United States agreed that minimum wage laws increase unemployment among low-skilled workers. Economists in France and Austria did not. However, the majority among Canadian economists was 85 percent and among American economists was 90 percent. Dozens of studies of the effects of minimum wages in the United States and dozens more studies of the effects of minimum wages in various countries in Europe, Latin America, the Caribbean, Indonesia, Canada, Australia, and New Zealand were reviewed in 2006 by two economists at the National Bureau of Economic Research. They concluded that, despite the various approaches and methods used in these studies, this literature as a whole was one “largely solidifying the conventional view that minimum wages reduce employment among low-skilled workers.”

[….]

Another group disproportionately affected by minimum wage laws are members of unpopular racial or ethnic minority groups. Indeed, minimum wage laws were once advocated explicitly because of the likelihood that such laws would reduce or eliminate the competition of particular minorities, whether they were Japanese in Canada during the 1920s or blacks in the United States and South Africa during the same era. Such expressions of overt racial discrimination were both legal and socially accepted in all three countries at that time.

Again, it is necessary to note how price is a factor even in racial discrimination. That is, surplus labor resulting from minimum wage laws makes it cheaper to discriminate against minority workers than it would be in a free market, where there is no chronic excess supply of labor. Passing up qualified minority workers in a free market means having to hire more other workers to take the jobs they were denied, and that in turn usually means either having to raise the pay to attract the additional workers or lowering the job qualifications at the existing pay level— both of which amount to the same thing economically, higher labor costs for getting a given amount of work done.

The history of black workers in the United States illustrates the point. As already noted, from the late nineteenth-century on through the middle of the twentieth century, the labor force participation rate of American blacks was slightly higher than that of American whites. In other words, blacks were just as employable at the wages they received as whites were at their very different wages. The minimum wage law changed that. Before federal minimum wage laws were instituted in the 1930s, the black unemployment rate was slightly lower than the white unemployment rate in 1930. But then followed the Davis-Bacon Act of 1931, the National Industrial Recovery Act of 1933 and the Fair Labor Standards Act of 1938— all of which imposed government-mandated minimum wages, either on a particular sector or more broadly.

The National Labor Relations Act of 1935, which promoted unionization, also tended to price black workers out of jobs, in addition to union rules that kept blacks from jobs by barring them from union membership. The National Industrial Recovery Act raised wage rates in the Southern textile industry by 70 percent in just five months and its impact nationwide was estimated to have cost blacks half a million jobs. While this Act was later declared unconstitutional by the Supreme Court, the Fair Labor Standards Act of 1938 was upheld by the High Court and became the major force establishing a national minimum wage. As already noted, the inflation of the 1940s largely nullified the effect of the Fair Labor Standards Act, until it was amended in 1950 to raise minimum wages to a level that would have some actual effect on current wages. By 1954, black unemployment rates were double those of whites and have continued to be at that level or higher. Those particularly hard hit by the resulting unemployment have been black teenage males.

Even though 1949— the year before a series of minimum wage escalations began— was a recession year, black teenage male unemployment that year was lower than it was to be at any time during the later boom years of the 1960s. The wide gap between the unemployment rates of black and white teenagers dates from the escalation of the minimum wage and the spread of its coverage in the 1950s. The usual explanations of high unemployment among black teenagers— inexperience, less education, lack of skills, racism— cannot explain their rising unemployment, since all these things were worse during the earlier period when black teenage unemployment was much lower. Taking the more normal year of 1948 as a basis for comparison, black male teenage unemployment then was less than half of what it would be at any time during the decade of the 1960s and less than one-third of what it would be in the 1970s.

Unemployment among 16 and 17-year-old black males was no higher than among white males of the same age in 1948. It was only after a series of minimum wage escalations began that black male teenage unemployment not only skyrocketed but became more than double the unemployment rates among white male teenagers. In the early twenty-first century, the unemployment rate for black teenagers exceeded 30 percent. After the American economy turned down in the wake of the housing and financial crises, unemployment among black teenagers reached 40 percent.

• Thomas Sowell, Basic Economics: A Common Sense Guide to the Economy, 4^th Edition (New York, NY: Basic Books, 2011), 241; 249-251