Thomas Sowell Explains Some Basic Economics

Thomas Sowell asks whether discrimination can explain the high unemployment rate among French Muslims. Hint: labor market price regulations.

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 it is today 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 to be as high as, or higher than, labor force participation rates among whites. . . .

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

The first federal minimum wage law, the Davis-Bacon Act of 1931, was passed in part explicitly to prevent black construction workers 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. . . .

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 of them out of jobs. Large disparities in unemployment rates between the young and the mature, the skilled and the unskilled, and between different racial groups have been common consequences of minimum wage laws. . . .

Oil Executives ordered to appear before congress

I could only hope for one of these executives to give these politicians an economics lesson:

Top executives of three major oil companies will be asked by senators next week why some of their industry's estimated $96 billion in record profits this year shouldn't be used to help people having trouble paying their energy bills.

One wonders if these politicians know the damage that they do for future disasters because the very threat of these regulations and interventions reduce the expected profit companies will earn from fixing problems as they arise. The possibility of higher prices when disasters strike also gives oil companies an incentive to put aside more gas to cover those emergencies. Storing gas is costly, and if you want them to bear those costs, you had better compensate them. The irony is that letting the companies charge higher prices actually reduces customers total costs when you include such things as having to wait in long lines because there will be more gas available when the disaster strikes. The mere threat of price controls eliminates the possible profits oil companies can make in solving this problem and thus eliminates their incentive to store gasoline.

If you are interested, see this discussion.