Pennsylvania and Virginia recently passed legislation to increase their minimum wage to $15 per hour, closing the gap with Oregon ($15.55 as of July 1) and California ($17.90 in some places). In all, 34 states mandate a minimum wage higher than the federal minimum wage of $7.25 per hour. The potential economic detriments of a minimum wage — namely, job losses — are well known. But the trend toward higher and higher minimum wages ought to prompt us to reconsider their purpose.
The standard assumption about progressivism is that it’s intrinsically good — after all, who would oppose progress? Progressivism in the twentieth-century, though, had a much more squirrely history. Many progressives were proponents of eugenics, opponents of classical liberalism, and advocates of scientific racism. And the origins of the federal minimum wage emerged from these attitudes.
Compared to today’s progressives, early twentieth-century progressive economists were at least honest and understood the impact of a minimum wage — they knew that it would cause job losses. But they believed the job losses caused by the minimum wage were a social benefit, not a detriment.
As the historian Thomas Leonard summarized it:
Sidney and Beatrice Webb put it plainly: ‘With regard to certain sections of the population [the ‘unemployable’], this unemployment is not a mark of social disease, but actually of social health.’
‘[O]f all ways of dealing with these unfortunate parasites,’ Sidney Webb opined in the Journal of Political Economy, ‘the most ruinous to the community is to allow them to unrestrainedly compete as wage earners.’ … A minimum wage was seen to operate eugenically through two channels: by deterring prospective immigrants and also by removing from employment the ‘unemployable,’ who, thus identified, could be, for example, segregated in rural communities or sterilized.
In other words, for progressives, race determined the standard of living and the standard of living determined the wage. Edward Ross, the American sociologist and progressive, put it more bluntly: “owing to its high Malthusian birth rate the Orient is the land of ‘cheap men,’ the coolie, though he cannot outdo the American, can underlive him.” Woodrow Wilson, echoing the same sentiment, said that Chinese immigrants could “live upon a handful of rice for a pittance.”
Women didn’t escape the implications of a minimum wage either. Many progressives held that the proper social order required women to be excluded from the workforce. A minimum wage served to push women back into the home where they belonged. For progressives, this had the added benefit of encouraging larger families among Anglo-Saxons, preventing the country from being overtaken by groups they deemed inferior.
The progressive theory of the minimum wage therefore went as follows: a minimum wage creates a barrier to entry in the labor market, which in turn freezes out the “undesirables” from the labor market who previously could compete for work by taking lower wages. To that end, a legal minimum wage, the progressives thought, would freeze out racially undesirable immigrants, the mentally and physically disabled, and women — all while handing a raise to deserving white Anglo-Saxon men.
Now, the sordid origins of the minimum wage are not, in themselves, an argument against it. A person’s moral character does not inevitably taint the policies they enact (the genetic fallacy). But the arguments twentieth-century progressives made in favor of the minimum wage give us insight into its actual impacts.
Progressives today are more inclusive and view job losses as a social cost, not a benefit. Yet they continue to support a minimum wage. They would argue their predecessors misunderstood its effects, and that modern support rests on different reasoning. They would say minimum wages benefit the least-fortunate Americans.
But that claim is worth questioning. While earlier progressives held abhorrent views on race and gender, they seem more accurately to have understood economic effects: a sufficiently high minimum wage prices low-wage workers out of the market. Today’s progressives, despite their intentions, risk producing similar outcomes.
Extensive research shows that a minimum wage not only tends to raise unemployment, but that its effects also tend to fall disproportionately on the most disadvantaged workers, including the disabled, youth, lower-skilled workers, immigrants, and ethnic minorities. Another study found that job losses from minimum wage increases were much more prevalent among black workers than among white workers.
Nobel laureate economist Milton Friedman argued that the “real tragedy of minimum wage laws is that they are supported by well-meaning groups who want to reduce poverty. But the people who are hurt most by higher minimums are the most poverty-stricken.”
While the intentions of today’s minimum wage proponents are certainly better than their historical roots, how different are they from the original progressives if the effects remain the same? Intentions certainly matter, but results matter more. In effect, the minimum wage continues to disadvantage the most marginalized in our society.
