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GUEST COMMENTARY: Raising the minimum wage is no kindness to low-income workers

Friday, February 21, 2014 | 6:00 a.m. CST

The Road to Washington may be paved with good intentions, but good intentions don’t always translate into good policy.

Just ask the millions of Americans who liked their health insurance plans, were told they could keep them under the Affordable Care Act, but recently found out they’ll be losing them.

Ronald Reagan once said that “the nine most terrifying words in the English language” are “I'm from the government and I'm here to help.” Those words are as true today as they have ever been.

Our government’s tendency toward crushing kindness is a big reason why Americans should resist the push to raise the minimum wage. We’re often told our collective compassion compels us to increase it, and on the surface, the idea sort of sounds good.

No one gets rich with a minimum-wage job, and we all want to help one another. But increases to the minimum wage do not help the poor as some might think.

First, most minimum-wage earners don’t actually live in poverty. Two-thirds of minimum wage earners come from households making at or above 150 percent of the poverty line — in other words, they’re not technically considered poor — and just more than half of minimum-wage earners are 25 years of age or younger. More than 60 percent of those young people are still in school.

Second, the number of people paid the minimum is not especially high. Today, less than 5 percent of hourly workers are paid the minimum wage. Among all U.S. workers, minimum-wage employees constitute just 3 percent of the American workforce.

Moreover, the general consensus among economists is that minimum-wage hikes are ineffective at fighting poverty.

Christina Romer, who led President Barack Obama’s Council of Economic Advisers, openly conceded in The New York Times last year that there were questions about “whether a higher minimum wage will achieve better outcomes for the economy and reduce poverty.” Romer even panned the idea that a hike in the minimum wage would be a sort of economic “stimulus.”

That consensus was reaffirmed this month by the nonpartisan Congressional Budget Office, which looked into what would happen if the wage was bumped to $10.10 per hour.

The result? The CBO found that not only would the economic boost from a wage hike be essentially negligible, but up to a million people could lose their jobs because the minimum wage was raised.

One million people.

The problems don’t end there. Consider that even the most stalwart minimum wage advocates aren’t trying to raise the wage to $150 per hour, or $100, or $75.

Why? Because proponents know that as they force the cost of labor up increment by increment, the cash that businesses have to pay for labor will remain about the same — forcing employers to raise prices for consumers, cut back on the number of people the company employs and the hours they work, or some combination of the two.

The awful truth embedded in this fight, which is rarely mentioned, is that there will be collateral damage among the low-skilled and the poor as a consequence of these wrong-headed policies.

How many jobs are boosters willing to destroy in their quest to increase the minimum wage? What level of government-imposed suffering is acceptable to them?

Human compassion compels us to promote policies that support job creation, not policies that undercut it. The problem of poverty in this country would be best addressed by making jobs more available — not making jobs more scarce.

And I could compare today’s $7.25 per hour federal minimum wage to past levels — I could remind proponents that the first federal minimum wage instituted in 1938 was the equivalent of $4.07 today, and that the inflation-adjusted average since is actually below the current wage — but that’s not even close to the best argument against their plans.

A minimum-wage hike is a bad idea because it hurts the very people we should be helping. Isn’t that reason enough to oppose it?

Patrick Ishmael is a policy analyst at the Show-Me Institute, which promotes market solutions for Missouri public policy.


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Comments

Mark Foecking February 21, 2014 | 2:44 p.m.

Um, the actual number in the report was 500,000 people unemployed. It stated a million people would be lifted out of poverty. (think less EBT, Medicaid, etc.)

Minimum wage earners are a small part of the labor force. Increasing the minimum wage would have minimal effect on prices. It would have a large effect on these employees. Perhaps it's something we should do. Australia's minimum wage is $14/hr and it's not killing them.

DK

(Report Comment)
Michael Williams February 21, 2014 | 5:22 p.m.

MarkF: "Minimum wage earners are a small part of the labor force."
________________

Situation: I have 5 new employees at $7.50/hour, 2x6-month employees at $9.00/hour, 4x2-year employees at $10.50/hour, 6x3-year employees at $13.00/hour, and 4x5-year employees at $16.00/hour.

So, I raise the salary of 7 employees (5+2) to $10.50/hour.

Now....what do I do with everyone else? I need a plan, and you're it. It's your call.

PS: Right now I'm paying $498,160 per year in salaries to this group. With the plan you are about to come up with, what would be the new total annual salaries I would pay?

(Report Comment)

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