Magazine | February 8, 2010, Issue

Keeping Blacks Poor

(Darren Gygi)
How the Democratic party stands between its most loyal constituents and the jobs they need

‘May I have your undivided attention please!” Small guy, big mouth: He’s maybe 15, black, skinny kid, but his voice fills up the noisy New York City subway car and then some. “I am selling candy! I got Snickers! I got Peanut M&Ms! I am trying to make some money! This isn’t for school, this isn’t for a basketball team, this is for me! So I can get more candy and make more money!” The straphangers appreciate his no-malarkey sales pitch and his entrepreneurial spirit. He does a bit of business, and a few people just give him a buck and skip the candy. His name is Will, and he is not turning down a dollar. But it’s a tough hustle: Accounting for the cost of his product and his subway pass, it takes him about three hours to earn $20 free and clear, an implied wage of $6.67 an hour — well under minimum wage. On the other hand, it’s tax-free, and he sets his own hours. Will wants to go to college — and then what? “Be an independent businessman.” He’s already that, and, if persistence really does pay, he’s going to do fine for himself.

There’s a whole weird little economy on the subway, from candy hustlers like Will to the Chinese ladies who sell pirated DVDs of movies that have just opened in the cinemas. There are acrobats and mariachi bands, good old-fashioned panhandlers, poets, preachers, and percussionists. It’s all part of the famous entrepreneurial bustle of New York. But stay on that No. 4 train a few more stops, north of Harlem and into the Bronx, and that entrepreneurial energy evaporates. Not far from the Kingsbridge Road stop is the Eighth Regiment Armory, a fantastically out-of-place 575,000-square-foot brick castle. It’s been a lot of different things over the years — barracks, homeless shelter, boat-show venue, a pre-creepified set for Will Smith’s I Am Legend — but it currently is vacant, as are a lot of buildings in the Bronx. Passing by, late on a weekday morning, is a local who calls himself “C,” a black man as sturdily built as the armory itself. C very much wants a cigarette. This is a problem, because he is not currently in funds, in no small part because he does not have a job. In fact, at 35 years old, C has never held a job. His friends, acquaintances, known associates (C is a little foggy on whether he’s on probation or parole, but he’s got some known associates): no jobs, never really had them. His father? Do not ask C about his father. In fact, the only people C can think of who have jobs are women: His mother worked, the mother of his children works. He did know a woman who was dating a taxi driver once. C says he would like to work but is more of an independent businessman. He describes the informal work he has done as “this and that,” and says he would like to “have his own place,” a bar or a nightclub. But don’t expect to see him selling candy on the No. 4 train anytime soon.

Asked about the recently defeated plan to convert the gigantic fortress that looms over his neighborhood into a shopping mall, C says he hasn’t heard about it. If the plan had gone through, Manhattan-based developer Related Companies would have received about $50 million in tax subsidies for a project that would have created as many as a thousand retail jobs and, during its construction, employed a thousand or more highly paid union hardhats. But the city council killed the project. The Bronx delegation demanded that Related enforce upon its leaseholders a requirement that all of the jobs in the mall pay at least $10 an hour, plus benefits, much more than the prevailing wage in the Forever21-and-food-court racket, to say nothing of the $7.25 minimum wage. So a $300 million project, and a couple of thousand new jobs in a neighborhood that needs them, never happened. Bronx borough president Ruben Diaz Jr. infamously declared: “The notion that any job is better than no job no longer applies.” The New York Post pithily pointed out that when it comes to real jobs, Diaz has never had one — not in the private sector, anyway — and neither has any other member of the Bronx’s city-council delegation: All are lifelong politicians, many of them having held elected offices or political appointments since their early 20s. Diaz himself has been an officeholder since he was 23 years old. It’s good work, if you can get it.

#page#But there’s not much other work to be had in the Bronx, where unemployment is currently at about 13.1 percent. Much of the Bronx is young and black or young and Hispanic. Nationally, the unemployment rate among blacks rose to 16.2 percent in the year-end numbers, while the rate for whites fell to 9.0 percent. For black youths, the numbers are startling: 50 percent for 16–19-year-olds, 26 percent for 20–24-year-olds. A study from the Community Service Society of New York puts actual work-force participation among black men 16–65 years of age in New York City at about 50 percent, and the number for young black men nationwide is just 40 percent.

Never mind the jobless recovery: For a great many black Americans, it’s been a jobless eternity, in good times and in bad. Why?

The first answer many economists will give to that question is: the minimum wage. Milton Friedman, a Nobel laureate who spent much of his career showing how government programs reliably end up hurting those they are intended to help, was scathing on the subject, calling the minimum wage “one of the most, if not the most, anti-black laws on the statute books.” And he’s not alone: A congressional survey of economic research on the subject, “50 Years of Research on the Minimum Wage,” has a string of conclusion lines that read like an indictment, the first three counts being: “The minimum wage reduces employment. The minimum wage reduces employment more among teenagers than adults. The minimum wage reduces em­ployment most among black teenage males.” Other items on the bill: “The minimum wage hurts small businesses generally. The minimum wage causes employers to cut back on training. The minimum wage has long-term effects on skills and lifetime earnings. The minimum wage hurts the poor generally. The minimum wage helps upper-income families. The minimum wage helps unions.” Helping the affluent and high-wage union workers at the expense of the young, the poor, the unskilled, and small businesses: That amounts to a lot of different kinds of injustice, and it also amounts to a wealth transfer from blacks to whites.

This is a disparity with its roots in history, but the roots don’t go back to Reconstruction or the heyday of the Ku Klux Klan. They go back only to the 1960s. In 1954, young black men were in fact more likely to be employed than were their white counterparts, according to the economists Nabeel al-Salam, Aline Quester, and Finis Welch. The Fair Labor Standards Act, which established the minimum wage, had been passed in 1938, but wartime economic regimentation had postponed its full impact. “Marginal but employed blacks were the first ones to be laid off,” says Prof. Paul D. Moreno of Hillsdale College, a labor historian. Originally modest in its scope, the act was repeatedly revised, both raising the minimum wage and expanding the range of businesses required to pay it. The act originally was restricted to interstate enterprises, but by 1961 the meaning of “interstate commerce” had been so greatly stretched that ordering a box of paper clips from an out-of-state supplier was enough to get a business covered by the minimum wage. As the application of the act grew, so did the disparity in black and white employment rates. Blacks, who had been employed mostly in smaller enterprises, often family-owned, found themselves competing on a straight dollar-per-hour basis with white entry-level workers who were on the whole better educated, better connected — and white. The racial realities of the time meant that the sorts of jobs affected by minimum-wage laws were the ones that were most open to blacks.

And it’s not just that the minimum wage prices some low-productivity workers out of the labor market: It’s that it prevents entry into the labor market in the first place for the most marginal would-be workers. If Will the candy hustler’s real economic output is worth $6.67 an hour, his implied wage on the subway, he’s unemployable with a $7.25 minimum wage. He can sell candy on the subway, but he can’t sell candy for Big Candy Corp., make connections, learn what it’s like to go to an office every day and have a boss, get references, get promoted, and sign up for the tuition-reimbursement program. And that, not the paltry lost income of a minimum-wage job, is the price he pays. Very few American workers actually earn the minimum wage — about 1 percent, in fact — but the minimum-wage job is a gateway into the labor force for many young workers. The value of your first job isn’t the money you earn from it: It’s your second job, and your third. With the right experience and network, a candyman like Will can do well for himself. But without that first job, he has a much higher chance of becoming a statistical blip on the long-term unemployment charts than a middle manager at Hershey or a salesman at Cadbury.

#page#That’s why economists call barriers like the minimum wage “cutting the bottom rung off the ladder.” What’s less often appreciated, though, is the network effect: A guy who’s never gotten on the ladder himself cannot give you a hand up. Job-hunting is almost always an exercise in social networking: A friend of your dad helps you get a summer job, an old colleague recommends you for a position with his new firm. C up in the Bronx does not have a network like that: His friends and family are not in a position to tip him off about a job because they do not have jobs themselves, and, in some cases, never have. He doesn’t have any former coworkers to recommend him for a new and better job. All he has is economically insulated politicians telling him that no job is better than a job that doesn’t meet their political requirements.

The damage done by the minimum wage is real, but it’s not the only impediment to black employment, and maybe not even the most serious one when it comes to the big cities. Black workers in Philadelphia, for example, have long complained about being excluded from the overwhelmingly white building-trades unions, the carpenters’ and electrical-workers’ guilds that are run by a largely Irish-American coterie headed by Pat Gillespie at the Building Trades Council and John J. Dougherty Jr. (“Johnny Doc”) at the IBEW Local 98. Their unions are 80 percent white and 99 percent male, and the numbers are similar in other cities. Irritatingly for the Philadelphia politicians who are beholden to them, 70 percent of the building-trades unions’ members live out in the suburbs rather than in the city. Wilson Goode Jr., a member of the Philadelphia city council, has made black workers’ exclusion from the unions a key­note issue. He’s a deep-dipped liberal, an affirmative-action supporter and a conventional urban Democrat in almost every respect, but he has noticed the strange fact that progressive programs sold as tools to help the city’s largely black working class mostly end up putting money in the pockets of well-off white people in the suburbs. Philadelphia is a city with real black political power, but in a contest between a black city councilman working to secure good jobs for his constituents and the white union chieftains who have been running Philadelphia as a personal fiefdom since time immemorial, Wilson Goode Jr. found out who the boss is, and it’s not him.

When the unions were salivating over the prospect of an expansive new project at the Pennsylvania Convention Center, Councilman Goode asked them for information about the racial composition of their work forces, and for a commitment to meet certain diversity goals. They more or less laughed at him — and got the work, anyway. “The issue of lack of diversity within the building trades came up during the convention-center project. There was no plan for opportunity in terms of diversity,” Goode says. “We made a request from the building trades that they submit their demographics to city council, and actually set goals for expanding diversity within their unions. Interesting enough, the carpenters’ union and electrical-workers’ union, which did not comply, went on to work on the project, anyway. The goals that were set within those building-trade unions were not taken seriously.” In fact, Goode says, the only times when black workers have gotten a fair shake on big projects have been those few occasions when the work is not held hostage by the labor mafia — for instance, a couple of open-shop weatherization projects conducted under the authority of the Philadelphia Housing Development Corporation. Goode pressed to make the convention-center project open-shop, a proposal that was immediately crushed. “Going open-shop did not seem politically feasible,” Goode says, with understatement. “The other option is the creation of new unions that have more people of color, more women, and more Philadelphia residents. And that’s probably even less politically feasible.”

The problem in the labor unions isn’t really old-fashioned racism of the white-sheets and Jim Crow variety: Philadelphia is a city with plenty of poisonous racial politics, but it’s not remarkable for them — worse than Atlanta, probably, but not as bad as Boston. What’s really happening in the unions is a kind of expansive ethnic nepotism. Unions tend to find good positions and lots of work for people who are friends and family of current union members. Indeed, many in the building trades start on the path to union membership early in life. If those unions are dominated by Irish Americans, it’s no surprise that a lot of the plums are going to the Kellys and Murphys, and not the Jack­sons and Washingtons or the Garcias and Colóns. As The Economist puts it, “Blacks are also at a disadvantage when it comes to relying on friends and family connections to find jobs; there is not the same network of family businesses that whites and Latinos have. Some studies have found that this factor may explain as much as 70% of the difference in black and white unemployment rates, and may also explain the difference be­tween black and Latino jobless rates. Among young men, for instance, the near-20% Hispanic unemployment rate is much closer to that for whites (17%) than blacks (30%).” The problem, of course, is self-perpetuating: The more blacks are out of work, and the longer they’re out of work, the less of a network black job-seekers are going to have. And they can’t count on the unions to help them out.

#page# “The building trades were the most notorious for their discrimination,” says Professor Moreno of Hillsdale, “along with the railroad brotherhoods, which were in a class by themselves in terms of how exclusive they were. If you look at the data, especially in the building trades, and compare them to the steelworkers or the autoworkers, the worst discrimination is in the building trades. In unions that have a lot of black membership, black workers got into those industries before the unions did. Henry Ford was hiring blacks before the UAW organized them. Steelmakers, same thing. Even in the UAW and the steel­workers, they have the problem of discrimination within the unions when it comes to training for skilled work, promotions, and issues of seniority.” And it’s been that way for generations: In fact, Moreno estimates that if the National Labor Relations Board had properly enforced anti-discrimination rules against the unions starting back in the 1930s — when they were first required to do so — then there would have been no demand for affirmative action later. Instead, the NLRB became a classic captured bureaucracy, seeing its role only as empowering the labor unions while turning a blind eye to the ugly racial discrim­ination in their ranks.

Democrats will defend everything from partial-birth abortion to distributing gay porn in the classroom, but some subjects are too hot for them to touch: The effect of their minimum-wage enthusiasm on black unemployment is one, and racial discrimination by their organized-labor constituents is another. You’d think that the Democrats would put jobs for blacks at the top of their list — after all, black voters pull the “D” lever about 90 percent of the time. But political calculations are perverse things: Black voters are a cheap date for Democrats, who know that they can sell out the interests of their most loyal constituency with impunity. One of Barack Obama’s first actions in office was to gut a hugely popular school-choice program in Washington, D.C., that benefited black students almost exclusively, and he did so at the behest of the one of the most destructive unions in the country, one that has done more to undermine the future of black Americans than any other and whose members have inflicted more damage on black Americans than Bull Connor and George Wallace ever dreamed of. But the teachers’ unions represent one in ten delegates to the Dem­ocratic National Convention, so they have job security — something many, if not most, of the young black men in their classes will never have.

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