Ignoring economics

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Many people blame the riots in France on the high unemployment among young Muslim men in the ghettoes around Paris and elsewhere. Some blame both the unemployment and the ghettoization on discrimination.

Plausible as these explanations may sound, they ignore economics, among other things.

Let us go back a few generations in the United States. We need not speculate about racial discrimination because it was openly spelled out in laws in the Southern states, where most blacks lived and was not unknown in the North.

Yet in the late 1940s, the unemployment rate among young black men was not only far lower than now but was not very different from unemployment rates among young whites the same ages. Every census from 1890 through 1930 showed labor force participation rates for blacks as high as, or higher than, labor force participation rates among whites.

Why are things so different today in the United States -- and so different among Muslim young men in France? That is where economics comes in.

People who are less in demand -- whether due to inexperience, lower skills, or race -- are just as employable at lower pay rates as people in high demand are at higher pay rates. That is why blacks were just as able to find jobs as whites, prior to the 1930s and why a serious gap in unemployment between black and white teenagers opened only after 1950.

Prior to the 1930s, the wages of inexperienced and unskilled labor were determined by supply and demand. There was no federal minimum wage law and labor unions did not usually organize inexperienced and unskilled workers. Therefore, such workers could find jobs, just like everyone else, even when these were black workers in an era of open discrimination.

The first federal minimum wage law, the Davis-Bacon Act of 1931, was passed in part explicitly to prevent blacks from "taking jobs" from white construction workers by working for lower wages. It was not meant to protect black workers from "exploitation" but to protect white workers from competition.

Even aside from a racial context, minimum wage laws in countries around the world protect higher-paid workers from the competition of lower paid workers.

Often the higher-paid workers are older, more experienced, more skilled or more unionized. But many goods and services can be produced either with many lower-skilled workers or fewer higher-skilled workers, as well as more capital and less labor or vice-versa. Employer choices ride on relative costs.

The net economic effect of minimum wage laws is to make less skilled, less experienced, or otherwise less desired workers more expensive -- thereby pricing many out of jobs. Large disparities in unemployment rates between the young and the mature, the skilled and the unskilled, and different racial groups have commonly resulted from minimum wage laws.

That is their effect whether the particular minimum wage law applies to one economic sector like the Davis-Bacon Act, to the whole economy like the Fair Labor Standards Act of 1938 or to particular localities like today's "living wage" laws and policies.

The full effect of the Fair Labor Standards Act of 1938 was postponed by the wartime inflation of the 1940s, which raised wages above the level in the Act. Amendments to raise the minimum wage began in 1950 -- and so did the widening racial differential in unemployment, especially for young black men.

Where minimum wages are higher and accompanied by other worker benefits mandated by government, as in France, unemployment rates are higher and differences in unemployment rates increase between the young and the mature, or between different racial or ethnic groups.

France's unemployment rate is roughly double that of the United States and the unemployed stay so much longer in France. Unemployment among young Frenchmen is about 20 percent. Among young Muslim men it is about 40 percent.

There is no free lunch, least of all for the disadvantaged.

Thomas Sowell is a nationally syndicated columnist.