Earlier this year President Obama called for the federal minimum wage to be raised from $7.25 to $9 per hour.
“In the wealthiest nation on earth, no one who works full time should have to live in poverty,” he said.
Those supporting a hike in the minimum wage view it as a way to give a much-needed raise to lower-class Americans.
Contrary to what some may suggest, low wages are not the main hindrance to poor Americans’ escape from poverty. Most poor Americans do not work for the minimum wage. The real problem that poor families face is a lack of employment opportunities. Less than 10 percent of individuals in poor families work full time, while 67 percent do not work at all. A higher minimum wage might help some people, but not the poor.
A rise in the minimum wage would compound the problem for poor Americans in search of a job, but who else would it affect?
According to data from the Bureau of Labor Statistics, only 2.9 percent of U.S. employees work for the federal minimum wage, and the average household income of a minimum wage worker is around $53,000 a year.
How is it possible that the average minimum-wage worker lives in a household that makes over $50,000 per year? Wellthe overwhelming majority of workers earning the minimum wage aren’t the primary breadwinners of their households. Most are under 25-years-old, and over three-fifths of those reported are enrolled in school.
With white teen unemployment around 20 percent and black teen unemployment over 40 percent, it is clear that employers struggle to hire teens at the current minimum wage. How much less at a higher one? Is a teenager or low-skilled worker better off unemployed at $9 per hour than employed at $7.25?
The minimum wage could better be described as a “learning wage.” Entry-level jobs function as resume-building activities. Whether working the front desk of a dorm, mowing grass or bagging groceries, these jobs teach basic skills — showing up on time, working with a boss, customer service, etc. — that make workers more employable in the future.
Minimum wages saw off the bottom rung of the career ladder for young workers and those with few skills. Minimum wage undermines their ability to get their foot in the door of employment. Research by David Nuemark and William Wascher clearly indicates early work experience plays an integral role in future job opportunities and income growth.
To be sure, those who would receive a larger paycheck because of an increased minimum wage would be better off, but only at the expense of reduced employment opportunities for individuals seeking entry-level jobs.
But if a raise in the minimum wage ultimately damages, why do so many politicians embrace it? Because minimum wage is a simple way to buy votes. The positive effects are easy to highlight, and the negative effects are easy to dismiss. Unlike a tax credit or spending bill, the costs of the higher wages aren’t recorded on the government’s books; they are borne by the employers, the consumers and the unfortunate souls who are left without jobs and opportunity because of it.
A hike in the minimum wage would not only fail to alleviate poverty but actually stymie the effort of a poor individual to make a better life for him or herself. It would make it more expensive for employers to hire young and low-skill workers and, by design, it hides the true cost of the policy. For these and various other reasons too numerous to list here, a raise in minimum wage is a terrible idea.
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Is a raise in minimum wage a good idea? Against the raise
JoJo Dodd
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October 22, 2013
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