The “exploitation” explanation of low wages tends to emphasize the intentional morality of the employer (“unconscionable”) rather than the systemic effects of competition. Nothing is more common in economics than the attraction of new competitors whenever and wherever there is a profit above the ordinary. If hiring low paid workers presented such an opportunity — that is, if “exploitation” had some substantive economic meaning — the competition attracted would bid their wages up and keep them more fully employed than others. In fact, however, their marginal desirability to employers is indicated by their precarious and intermittent employment patterns, and by their generally higher rates of unemployment. In short, for workers as for business, knowledge transmitted by low prices (wages) is generally accurate knowledge, and forbidding its transmission costs both the economy and the intended beneficiary of such price fixing. Were the facts themselves to be changed — by improving the job qualifications of low paid workers, for example — the effects of that would be quite different from merely forbidding or distorting the transmission of knowledge of existing facts. In a purely informational sense, the employer still knows low productivity or high-risk categories of workers, but that only insures that the lack of
There is no inherent reason why low-skill or high-risk employees are any less employable than high-skill, low-risk employees. Someone who is five times as valuable to an employer is no more or less employable than someone else who is one-fifth as valuable, when the pay differences reflect their differences in benefits to the employer. This is more than a theoretical point. Historically, lower skill levels did not prevent black males from having labor force participation rates higher than that of white males for every U.S. Census from 1890 through 1930.10 Since then, the general growth of wage fixing arrangements — minimum wage laws, labor unions, civil service pay scales, etc. — has reversed that and made more and more blacks “unemployable,” despite their rising levels of education and skill, absolutely and relative to whites. In short, no one is employable or unemployable absolutely, but only relative to a given pay scale. Increasingly, blacks have been priced out of the market. This is particularly apparent among the least experienced blacks — that is, black teenagers, who have astronomical unemployment rates.
The alternative explanation of high black teenage unemployment by “racism” collides with two very hard facts: (1) black teenage unemployment in the 1940s and early 1950s was only a fraction of what it was in the 1960s and 1970s (and was no different from