REDUCING BLACK UNEMPLOYMENT

Although the black unemployment rate is historically low, it is still nearly double the white unemployment rate.

All too often, blacks are still denied jobs opportunities – not due to racism committed by individuals – but due to regulations that were created for the explicit purpose of preventing them from competing with white workers.

Blacks have not always experienced higher unemployment rates than whites. During the 1930s, blacks were employed at modestly higher rates. This was due to their willingness to work for lower wages and work longer hours to build better lives for their families – similar to migrant workers today.

White union workers didn’t like losing jobs to blacks, and succeeded in getting the Davis-Bacon Act passed into law in 1931 to do something about it. Davis-Bacon requires contractors to pay “prevailing wages” (union wages) for all construction projects receiving over $2,000 in federal funding. The law was specifically designed to prevent non-union black workers from competing with white union workers for jobs.

The Davis-Bacon Act is still on the books and continues to serve its original purpose.

Because minority-owned firms are often small and unable to pay union wages, they’re often precluded from participating in federal construction projects.

The Davis-Bacon Act also requires contractors to pay the prevailing wage to unskilled workers for ANY job they perform, essentially requiring them to hire skilled workers – who are predominantly white.[i]

In 1933, an early effort by the federal government to tip the scales in favor one racial group over another resulted in President Roosevelt’s National Recovery Act. Derided by black leaders at the time as the Negro Removal Act, the NRA mandated minimum wages, unionization rights and poured vast amounts of tax dollars into public-works projects – all for whites. These sweeping measures were later unanimously struck down by the U.S. Supreme Court.

But subsequent actions by Congress and President Franklin D. Roosevelt were more successful.

Just a few years later, Congress passed the Fair Labor Standards Act (FLSA), which established the federal minimum wage and required higher rates for work exceeding 40 hours per week – significantly reducing blacks’ competitive advantage.[ii]

As Project 21 Co-Chairman Horace Cooper noted in “The Untold, Racist Origins of ‘Progressive’ Labor Laws,” “under the FLSA, blacks seeking non-agrarian work who may have been willing to offer lower initial wage rates and work longer hours to get themselves in the door were forced to abide by a nationally regulated workweek and to charge their prospective employers the same minimum-hourly wage as their white counterparts – creating yet two more hurdles for the black breadwinner to overcome…”

Subsequent minimum wage hikes have further hurt black employment, especially among youth. This has had a devastating impact on the black community, as early employment is a key ingredient for long-term employment.

As economist Milton Friedman explained in a 1966 article for Newsweek: “I am convinced that the minimum wage law is the most anti-Negro law on our statute books… Before 1956, unemployment among Negro boys was around 8% to 11%, about the same as among white boys. Within two years after the legal minimum was raised from 75 cents to $1 an hour in 1956, unemployment among Negro boys shot up to 24% and among white boys to 14%. Both figures have remained roughly the same ever since…”

Friedman noted that – though well-meaning – supporters of the minimum wage confused wage rates with wage income.

“It has always been a mystery to me… why a youngster is better off unemployed at $1.60 an hour than employed at $1.25.”[iii]

The same can be said for black farmers.

In 1967, as part of the Johnson Administration’s “War on Poverty,” a $1 per hour minimum wage was established for farm workers. Almost immediately, thousands of black farm workers became unemployed. In the Mississippi Delta alone, 25,000 black farm workers lost their jobs. As the wife of one day-laborer put it, “That dollar an hour ain’t worth nothing… It would have been better if it had been 50 cents a day if you work every day.”[iv]

Compounding the negative impact of regulations on black employment opportunities have been federal government programs that are often so generous they create disincentives to work.

Blacks deserve a better deal in employment policy.

Project 21 recommends…

  • Abolishing the Jim Crow-era Davis-Bacon Act.
  • Instituting a second wave of welfare reform, starting with adding a work requirement to be eligible for the Supplemental Nutritional Assistance Program (SNAP, or “food stamps”). This requirement would be similar to the work requirement that was part of the Temporary Assistance to Needy Families (TANF) program created in 1996. In the first 10 years of TANF, the welfare case load fell by 56%. At the same time, employment increased. As the Heritage Foundation noted, “During the late 1990s, employment of never-married mothers increased by nearly 50 percent, of single mothers who are high school dropouts by 66%, and of young single mothers… by nearly 100 percent.”[v]
  • Allowing employers in special low-income zip codes to hire school age employees 22 years of age and younger without paying FICA (Federal Insurance Contributions Act – Social Security and Medicare).
  • Analyzing new federal regulations to ascertain what affects they have on hiring young, low-skilled workers. Any regulation that cannot be modified to mitigate job losses by young, low-skilled workers caused by application of the regulation should be imposed only by an affirmative vote of Congress.
  • Allowing employers in special low-income zip codes to be exempt from the federal minimum wage law or permitted to pay at a discounted 50% minimum wage rate.

More recommendations to improve black employment in the section, “Rescinding Regulations that Harm Minorities.

[i] John Frantz, “Davis-Bacon: Jim Crow’s Last Stand,” Foundation for Economic Education, Atlanta, Georgia, February 1, 1994, available at https://fee.org/articles/davis-bacon-jim-crows-last-stand/.

[ii] Chris Calton, “The Racist History of Minimum Wage Law,” Mises Wire, Mises Institute, Auburn, Alabama, April 16, 2017, available at https://mises.org/wire/racist-history-minimum-wage-laws.

[iii] Mark J. Perry, “Milton Friedman in a 1966 Newsweek Op-Ed: The Minimum Wage Law is a ‘Monument to the Power of Superficial Thinking,” AEIdeas, American Enterprise Institute, Washington, D.C., December 5, 2016, available at http://www.aei.org/publication/milton-friedman-in-a-1966-newsweek-op-ed-the-minimum-wage-law-is-a-monument-to-the-power-of-superficial-thinking/.

[iv] Calton.

[v] Christine Kim and Robert Rector, “Welfare Reform Turns Ten: Evidence Shows Reduced Dependence, Poverty,” The Heritage Foundation, Washington, D.C., August 1, 2006, available at https://www.heritage.org/welfare/report/welfare-reform-turns-ten-evidence-shows-reduced-dependence-poverty.