Twenty-two states have increased the minimum wage beyond the federal level of $7.25, which hasn’t increased since 2009. The new rates in many states are $15. But as many commentators have pointed out, the increase won’t affect too many workers, since most people in those states already earn more than that. And this raises a foundational point: What is the purpose of the minimum wage if it is essentially non-operational for most low-wage workers?
The answer: It’s to continue to keep marginal workers with less experience out of the market. This is why labor unions love the minimum wage. It reduces labor-market competition. A huge swath of workers, particular young workers looking for their first jobs, are thereby excluded from entering the markets.
This fact is widely understood by economists, and how could it not be? The minimum wage is a price floor, and price floors create surpluses by stopping the market from clearing, in this case a surplus of laborers who would work but are forbidden from doing so by law.
From most of the second half of the 20th century, labor force participation in the age group from 16 to 19 was 60 percent. Today it is 36 percent.
You could believe that this is a good thing. It isn’t. Young people are being denied super valuable marketplace experience, which affects everything from their knowledge of business to their work ethic to their ability to deal with the public and all the exigencies of the human personality. The minimum wage is hardly the only reason for the shift, but it does work as a deterrent to getting that first job.
This is usually chalked up as an unintended consequence of government action. There is no evidence, however, that it’s unintended. It was always the intention, even from the earliest years of the 20th century when minimum wages were first proposed.
The whole idea of the minimum wage was to exclude people from the workforce. Worse, it was meant to starve the undesirable populations out of mainstream life. This is the dream and ambition that was made very obvious from the writings of its earliest proponents.
This shouldn’t surprise you in the slightest. Let’s say your community passed a law that said no house in this town can be bought or sold for less than $300,000. You would naturally assume the motivation: trying to skew the market toward homes for the well-to-do while driving out smaller and less fancy places. That’s pretty obvious. It’s no different from a law that says no one can work for less than $15.
The dark history shows a more malevolent motivation. A careful look at its history shows that the minimum wage was originally conceived as part of a eugenics strategy—an attempt to engineer a master race through public policy designed to cleanse the citizenry of undesirables. To that end, the state would have to bring about the isolation, sterilization, and extermination of nonprivileged populations.
The eugenics movement—almost universally supported by the scholarly and popular press in the first decades of the 20th century—came about as a reaction to the dramatic demographic changes of the latter part of the 19th century. Incomes rose and lifetimes had expanded like never before in history. Such gains applied to all races and classes. Infant mortality collapsed.
All of this was due to a massive expansion of markets, technology, and trade, and it changed the world. It meant a dramatic increase in population among all groups. The great unwashed masses were living longer and reproducing faster.
It was during this period and for this reason that we saw the first trial runs of the minimum wage in Massachusetts in 1912. The new law pertained only to women and children as a measure to disemploy them and other “social dependents” from the labor force. Even though the measure was small and not well-enforced, it did indeed reduce employment among the targeted groups.
Mr. Leonard documents an alarming series of academic articles and books appearing between the 1890s and the 1920s that were remarkably explicit about a variety of legislative attempts to squeeze people out of the workforce. These articles were not written by marginal figures or radicals but by the leaders of the profession, the authors of the great textbooks, and the opinion leaders who shaped public policy.
“Progressive economists, like their neoclassical critics,” Mr. Leonard explains, “believed that binding minimum wages would cause job losses. However, the progressive economists also believed that the job loss induced by minimum wages was a social benefit, as it performed the eugenic service of ridding the labor force of the ‘unemployable.’”
At least the eugenicists, for all their pseudo-scientific blathering, were not naïve about the effects of wage floors. They knew that the minimum wage excludes workers—and they favored it precisely because such wage floors drive people out of the job market. People without jobs cannot prosper and are thereby discouraged from reproducing. Minimum wages were designed specifically to purify the demographic landscape of racial inferiors and to keep women at the margins of society.
And it gets worse. Webb wrote:
“What would be the result of a Legal Minimum Wage on the employer’s persistent desire to use boy labor, girl labor, married women’s labor, the labor of old men, of the feeble-minded, of the decrepit and broken-down invalids and all the other alternatives to the engagement of competent male adult workers at a full Standard Rate? ... To put it shortly, all such labor is parasitic on other classes of the community, and is at present employed in this way only because it is parasitic.”
Further, Webb avers: “The unemployable, to put it bluntly, do not and cannot under any circumstances earn their keep. What we have to do with them is to see that as few as possible of them are produced.”
Though Webb was writing about the experience in the United Kingdom, and his focus was on keeping the lower classes from flourishing, his views weren’t unusual. The same thinking was alive in the U.S. context, but race, not class, became the decisive factor.
Further, he wrote, “If we are to maintain a race that is to be made up of capable, efficient and independent individuals and family groups we must courageously cut off lines of heredity that have been proved to be undesirable by isolation or sterilization.”
Isolation and sterilization of less desirable population groups are a form of slow-motion extermination. The minimum wage was part of that agenda. That was its purpose and intent.
The opinion makers of 100 years ago weren’t shy about saying so. The policy was an important piece of weaponry in their eugenic war against non-elite population groups.
One hundred years ago, legislating a price floor on wages was a policy deliberately conceived to impoverish the lower classes and the undesirables, and thereby to disincentivize their reproduction. A polite gulag.
As time went on, the blood lust of the eugenics movement died down, but the persistence of its minimum wage policies did not. A national minimum wage passed in 1931 with the Davis-Bacon Act. It required that firms receiving federal contracts pay prevailing wages, which meant union wages, a principle that later became a national minimum wage.
Speeches in support of the law were explicit about the fear that black workers were undercutting the demands of white-only unions. The minimum wage was a fix: It made it impossible to work for less. The sordid history of the minimum wage law is harrowing in its intent but, at least, realistic about what wage floors actually do. They stop upward mobility.
Whatever the intentions, the effects are still the same. It doesn’t raise wages for the poor. It excludes them from the job market. It takes away from marginal populations their most important power in the job market: the power to work for less. It cartelizes the labor market by allowing higher-wage groups access while excluding lower-wage groups.
It was no different a century ago from how it is today. At least they were honest about it. A higher minimum wage entrenches a problem that has long existed: the exclusion of marginal workers from the workforce. That benefits existing workers by artificially raising their wages due to supply restriction. Favor that if you want to, but don’t pretend it’s good for the poor.
