Urban Dynamics Blog

Can city councils do better than the $15 minimum wage policy?

By Matt Johnson

The Minneapolis City Council on August 3rd heeded the legal findings of Minneapolis City Attorney Susan Segal. They voted to block the $15 minimum wage petition, in a 10 to 2 vote, proposed by local activists organizations on the grounds that the proposed petition did not meet legal standing. However, the city council proposed to move forward with an amendment to increase Minneapolis’ minimum wage in 2017.

I applaud the Minneapolis City Council for following the findings of the city attorney. However, I have concerns about the minimum wage policy in Minneapolis and other cities and states going forward. Simply put, hiking the minimum wage is a quick fix and another example of bad liberal policies that do not address the reality of the economic systems that Americans of African history deal with everyday.

Without question, certain American groups have been disenfranchised in this country since before its founding. For example, one of the earliest examples of a policy that favored one group over another was Act XII passed by the Virginia House of Burgesses in 1662.

Not only did this piece of legislation move and partition the children of African women into bondage, chattel slavery, but this policy also helped to set into motion a series of historical events that would eventually lead to the modern American experience.

Article XII provided precedent for institutionalized slavery, the “Three-Fifths” compromise, black codes, and Jim crow. Jim crow thus led to the great migration from 1920 through 1940, where Americans of African heritage fled the south from discriminatory practices to the north for industry and promise. But that’s not what happened.

As an example, when “black” Americans entered Detroit, they were immediately met by city officials and partitioned into undesired neighborhoods; that is, they were segregated immediately from white residents, housing opportunities (property rights), and competitive jobs, i.e., the promise of the American economic dream.

As Beth Tompkins Bates explained in her book The Making of Black Detroit in the Age of Henry Ford, black men were hired for service jobs, not technical jobs or jobs that required too much responsibility. Bates elucidated this point clearly, “Black men would shine shoes, turn down beds on the sleeping cars at night, change sheets and remake beds in the morning, iron clothing, and attend to any other needs of the traveling public,” specifically for those who were white. This was the norm not only in Detroit, but across the northern, industrialized cities.

In today’s modern America, we still find ourselves in a market place that greatly benefits the traditionally favored group over other traditionally disenfranchised groups. Not only can this difference in experience be illustrated through personal anecdotes, but it can be illustrated through open data.

For example, in 2013, the 55411 zip had the highest unemployment rate along with the largest population of Americans of African heritage for all wards in Minneapolis; the 55411 resides in Minneapolis’ 5th Ward on the north side of the city. In addition, this ward also included part of the 55401 zip code, which also had the lowest unemployment rate in the city and is majority white.

In addition, the 55411 zip code had the lowest percentage of residents with bachelor’s degrees and above in the city of Minneapolis, while the 55401 had the highest percentage of residents with bachelor’s degrees and above. In other words, the 55401 and 55411 were complete opposites in unemployment, education levels, and “race.”

Instead of focusing energy on a $15 minimum wage, which won’t do anything but further perpetuate the disenfranchisement of those who have been most effected by previous economic policies, I suggest city councils across the country focus on a little nation building inside their respective depressed economic systems – you know, those places that are often referred to as the “Ghetto.” For far too long Americans of African heritage and other traditionally disenfranchised groups have been left out of the American dream. And I’m not alone in this thinking.

As Patwin Lawrence, who challenged Bobby Joe Champion for the Senate District 59 DFL ticket, explained in a response to my question during an online Our Black News’ Town hall forum on August 7th, the north side of Minneapolis could use a post World War II “Marshall Plan.” (Note, Mr. Lawrence responded to my question at about 8:02.)

Myron Orfield, the Earl R. Larson Professor of Civil Rights and Civil Liberties Law and the Director, Institute on Metropolitan Opportunity, suggested in his recent paper Why Are the Twin Cities So Segregated? the democratic policies of housing and education over the previous few decades haven’t done anything to effect positive change for Americans of African heritage in Minneapolis, and Minnesota in general, for example. How then will city councils be able to move forward without repeating the mistakes of the past?

I assert capitalistic principles are the best way forward. In fact, these modern applications of economics have a proven track record. As economist Milton Friedman explained to Phil Donahue on the Phil Donahue show a few decades back,

The only cases in which the masses escaped from…poverty…are where they have had capitalism and largely free trade…The record of history is absolutely crystal clear, there is no alternative way so far discovered of improving the lot of ordinary people that can hold a candle to the productive activities that are unleashed by a free enterprise…

With that said, I challenge any reader to provide me with an instance where raising the minimum wage helped to positively change the lot of those traditionally disenfranchised groups. As Jason Riley explains in his book Please Stop Helping Us: How Liberals Make It Harder for Blacks to Succeed,

Minimum-wage mandates don’t impact all workers equally, but they are especially harmful to those who are young and those who are living on the margins, where many blacks for various reasons find themselves. What such individuals want and need are job opportunities, which minimum-wage laws reduce by pricing people out of the labor market. These laws keep the number of blacks who lack the right education and skills from being able to compete for jobs by offering to work for less money, get on-the-job experience, and ultimately increase their skills and pay.

Sure! Minimum wage laws have helped both “white” conservatives and liberals, but have those laws helped “black folks?” The minimum wage has been increased several times over the past few decades, but yet the unemployment rate of “black” Americans has remained nearly twice that of “white” Americans, according to a Pew study from 2013. And this doesn’t include education levels or wealth accumulation comparisons between the groups. But this makes sense, right? Minimum wage increases don’t address unemployment rates, entrepreneurship, and market skills. Surely there must be at least one case of minimum wage success for “black” Americans, right?

FT_13.08.202_BlackWhiteUnemploymentIt is indeed the case that Americans of African heritage and other disenfranchised groups have not had the same opportunities as Americans of European heritage. But we’ve seen how well these economic policies have worked for the traditionally favored group. We just need to open the doors to those groups who aren’t currently benefitting or competing at similar rates as “white” Americans. But how can we do this?

There is already a blue-print and it’s what worked in the past. Utilizing previous market applications, I propose three solutions: a VA loan equivalent for housing for previously disenfranchised groups, access to capital for “black” business owners, and unemployment.

All three policies would be created at the city or state level depending on the city charter and state constitution, and applied in the market place through partnerships with already existing business firms. Here are the three programs.

A VA loan equivalent for housing for “black folks”

After Word War II, the most amazing government program was implemented. It helped to create the most economically stable and vital middle class in American history. It was so successful that many Americans are still benefitting from it today. It was the VA loan program. Unfortunately, where it helped Americans of European heritage gain the American dream, it did virtually nothing for Americans of African history.

Sadly, many marines, sailors, and soldiers who helped to defend their country against the fascists ranks of Nazi Germany who partitioned other, undesired groups into “Ghettos,” themselves were also further partitioned into “Ghettos” and left out of the American economic dream. But city councils today can rectify that by working with and developing judicious loan policies with local business and community leaders and state legislators. How would a program like this look? Again, there’s a historical blue-print. But is there the will by local policy makers to do the hard work?

Access to capital for minority business owners

Our civilization is built on the foundation of industry and mathematics is its language. Science is how we understand it, engineering is how we build it and optimize it, and economics and finance are how we succeed through it and obtain utility, i.e., financial and psychological happiness. And for potential business owners, capital is how they gain access to the market place.

10-0802-race-of-founders-of-VC-backed-companies1In 2015 the SEC passed Title III Crowdfunding. In short, this should, as Black Enterprise explains, provide greater access for “black” business start-ups. But this is one policy tool local city councils can use to grease the economic engines of upward mobility in predominantly depressed areas of cities. As CB Insights found in 2010, less than 1 percent of the founders of venture capitalists are “black.” City councils can certainly do more to facilitate market upward mobility for potential and current “black” business owners. Again, there is a historic blue-print. But is there the will by local policy makers to do the hard work?

Addressing unemployment

Americans of African heritage today are still nearly unemployed at twice the rate of whites and almost two and half times the rate of Americans of Asian heritage, nationally, and this doesn’t take into account participation rates. This means the actual unemployment rate may be much higher than the data suggest. This also means people need jobs. But if there are less “black” business owners, then there are going to be less “black folks” working.

June 2016 National Unemployment Percent Per Group DWMThis is because “black” business owners are more likely to hire “black” Americans, which makes sense since American society is still largely segregated along geographical boundaries. But this still doesn’t address the issue of “black” unemployment in totality.

Something will need to be done simultaneously with respect to “black” entrepreneurship and “black” employment. In other words, these two challenges will need to be addressed together and not individually. If the data is sound, the more “black” businesses that are created, the more likely “black” residents will be hired and thus the “black” unemployment rate will begin decrease. This certainly doesn’t mean that there couldn’t be other jobs programs created in complement with integrating “black” business with “black” employment, but let’s be honest and ask the question, are “white” employers really going to go out of their way to provide an opportunity to potential “black” employees to be competitive with potential “white” employees?

In the end, how would a program like this look? Again, there’s a historical blue-print. But is there the will by local policy makers to do the hard work?

These three policy solutions won’t be able to fix this challenge over night, but I’ll take these three solutions over the $15 minimum wage any day of the week. But honesty is imperative. This a challenge that is 400 years in the making. In other words, it took generations to get here. If we can manage to turn things around in a single generation, that would be frankly astonishing. But we must realize the world is a complex and dynamical place and it’s going to take some serious self-reflection and systems analysis along with some courageous and innovative people who are willing to do the hard work to make the change that is so desperately needed.

Make no mistake, heads will roll if and when city councils take this challenge on and begin to formulate comprehensive nation building plans for their respective disenfranchised residents. This is because they will have decided they can do better than the $15 minimum wage.


Matt Johnson is an economics and science writer for The Systems Scientist. You can connect with him directly in the comments section, follow him on Twitter or on Facebook

You can also follow The Systems Scientist on Twitter or Facebook as well. 



Copyright ©2016 – The Systems Scientist



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