Some Reasons Why Libertarians Oppose the Minimum Wage
In general, those who are on the left of the political spectrum are in favor of raising the federal minimum wage, while those on the right are usually in favor of lowering the minimum wage or abolishing it altogether. Libertarians are against the imposition of price controls in all forms, including minimum wage laws. This is not due to a lack of empathy for the poor on the part of Libertarians. They do not support the minimum wage because they believe it hurts the low-skilled and marginalized people it claims to benefit. They believe that the free-market (individuals making voluntary economic transactions) should determine wage rates, and imposing a minimum wage violates individual liberty by making these voluntary transactions illegal. It does not help that such laws must be enforced by the threat of violence from the State. Evaluators should consider diverse perspectives when evaluating policy or attempting to explain the origin of economic disparities, and the Libertarian or "laissez-faire economic" perspective may offer insights often overlooked in a field dominated by the John Rawls perspective of social justice. The purpose of this article is to highlight arguments against the minimum wage made by the economist Walter E. Williams.
In his book "The State Against Blacks" (1982), Williams makes a compelling case for the Libertarian perspective that minimum wage laws result in greater unemployment among low-skilled laborers who over the course of United States history have been disproportionately black and young. He makes the simple observation that if employers are forced to pay an employee more than they believe their labor is worth, they will terminate that employee or replace him or her with automated labor.
Everybody today knows that the unemployment rate among Black Americans is significantly higher than that of White Americans, and experimental studies showing Blacks are turned down for jobs at significantly higher rates than Whites suggest that the high unemployment rate is mostly explained by the implicit bias or overt racism of employers. Williams points out that the unemployment rate for Black Americans were similar and sometimes even lower than the White American unemployment rate up until the 1960s. (I find it unusual that up until I had read this book and other books by Thomas Sowell in my late twenties/early thirties I had never heard these statistics). He states:
"In 1948 black youth unemployment was roughly the same was white youth
unemployment...(until the mid-60s), black youths generally were either just as
active in the labor force or more so than white youths. Since the sixties, both the
labor force participation rate and the employment rate of black youths have fallen
to what it is today. For black youths sixteen to seventeen years old, the labor force
participation rate is now only 60 percent of that of white youths while earlier their
labor force participation rate was higher than that of white youths" (p. 36)
Williams notes that racial discrimination or lack of skills/education cannot explain the dramatic rise of Black youth unemployment in the 1960s because both racism and poor education were much worse in previous eras. He argues that a significant contributing factor to the increased unemployment among Blacks was the expansion of minimum wage laws which priced low-skilled labor out of the market.
It is very popular today for evaluators to argue that any racial disparities in measured outcomes are evidence of systemic racism. It is also a common strategy among those who seek to abolish certain American institutions to point out that such institutions were used to serve the purposes of racists. If that is the case then those who wish to abolish systemic racism should consider starting with abolishing the minimum wage laws. Williams points out in his article "Minimum Wage and Discrimination" (2017) that racist labor unions in the United States and apartheid South Africa argued in favor of equal pay for equal work laws or minimum wage laws because it reduced the incentive of businesses to hire Black workers. Even though Blacks were living in a racist society, they were able to compete against White union laborers because they were willing to work for less money. White business owners, who were likely just as racist as anyone else in society, were willing to employ Black workers because it affected their bottom line. Racist labor unions wanted to price their competition out of the market through equal pay for equal work laws. Williams states "These [White South African] laborers knew that if employers were forced to pay black workers the same wages as white workers, there'd be reduced incentive to hire blacks." Similar arguments were made by White labor unions during the passage of the Davis-Bacon Act in 1931. The fact that Blacks had to work for lower wages to compete against Whites may be called "exploitation" by some, but it does not negate the fact that it was an effective strategy in angering White labor union members who were facing unemployment. These are just some of the reasons why a Libertarian would not support minimum wage laws.
For further reading, see: Minimum Wage and Discrimination – Walter E. Williams
Williams, W. E. (1982). The state against blacks. McGraw-Hill Book Company.
Williams, W. E. (2017). Minimum wage and discrimination. Retrieved from: walterewilliams.com/minimum-wage-and-discrimination/