Flashback: The Minimum Destroys Jobs and Creates Inequality

Yale Brozen reports on the minimum wage:

To illustrate this in terms of the experience of one state, let us consider some occurrences in Michigan. Wage rates in transportation equipment manufacturing in Michigan not only rose more than in other manufacturing industries in the state, but also rose, between 1950 and 1957, by 10 per cent more than in the same industry in the other four East North Central states (Wisconsin, Ohio, Indiana, and Illinois).8 Overall employment in the auto industry declined in part as a result of overly large employment cost increases. In Michigan, where the greatest increase in wage rates occurred, the decline in employment was greater than for the industry as a whole. Between 1954 and 1958, there were 85,000 more jobs lost in Michigan than in the other four East North Central states. In 1954, Michigan employed 41,000 more workers in transportation equipment manufacturing than the other four states. In 1958 it employed 44,000 fewer workers in the industry than the other states. Michigan became a depressed area, in employment terms, largely because employment costs increased so drastically in its major industry. Not only did employment in Michigan suffer; in addition, workers in other industries in Michigan suffered. Those becoming unemployed in the transportation equipment industry sought jobs in other fields. Many found jobs in other manufacturing industries. The consequence was, however, lower compensation for those in the other industries. More jobs were made available only by restricting the rise in wages which otherwise would have occurred. Hourly earnings in these “other” industries rose 6 per cent less than the rise in these same industries in the other four East North Central states. Although employment in these industries in Michigan increased more than in other states, this represents a less productive use of the labor than its employment in transportation equipment. If wage rates and other employment costs in transportation equipment had not been raised so much in Michigan, hourly earnings would have gone up more in the other manufacturing industries. High hourly earnings for auto workers came at the expense of workers in other industries.