Our new Democratic overlords are in full swing on bunch of utterly irrational ideas, with the supine press happily carrying water. Today the NY Times parrots the quasi-religious talking points on the minimum wage without an ounce of reason. Starting here:
House Democrats are expected to vote today to increase the minimum wage for the first time in a decade, to $7.25 an hour, in a move that economists say will raise pay for 13 million workers.
Which economists are those? They neglected to say, because only economists on the fringe would support such an idea. And note that they don’t mention any of those who will lose their jobs due to a 40% increase in the price of labor.
But the larger problem is the unempirical assumption that minimum wage earners are poor:
“Minimum-wage workers desperately need a raise,” said Representative George Miller, Democrat of California and chairman of the House Education and Labor Committee. “It is a moral outrage that millions of Americans who work full time still live in poverty.”
The good congressman fails to mention that over 80% of people who earn the minimum wage are not in poverty, according to the Congressional Budget Office:
...about 18 percent of the 12 million workers who were paid an hourly wage rate between the federal minimum wage of $5.15 and $7.24 were in families that had a total cash income below the federal poverty threshold in 2004. Had all of the workers in that wage range, instead, received $7.25 per hour, they would have gotten about $11 billion in additional wages in that year. About 15 percent of those additional wages ($1.6 billion) would have been received by workers in poor families.
How can this be? The short answer is that most people earning minimum wage fall into a few major categories:
- Suburban, middle-class teenagers and other young people just entering the workforce
- Foodservice workers who earn tips which take them well above minimum wage
- Part-timers who don’t depend on the job for a living
I earned minimum wage for a while in my teens and early twenties. I showed up in those statistics, yet I was never poor or deserving of gov’t help. I had a college degree was willing to live cheap, gain experience and have some fun.
Furthermore, earning minimum wage is a temporary condition for those who earn it. As George Will points out:
Two-thirds of those earning the federal minimum today will, a year from now, have been promoted and be earning 10 percent more.
Seems to me that if we want to improve the situation for poor people in this country, we should be passing laws that actually have something to do with poverty.
What is most onerous about a high minimum wage is that it effectively removes the bottom rung from the ladder, for those trying to work their way up. A $5/hour job becomes illegal. It defies reason to think that an employer will retain the same number of jobs if those jobs cost 40% more.
The primary beneficiaries of minimum wage laws are our Democratic politicians, who are beholden to their union constituencies. The only other beneficiary is the privileged liberal who needs to feel like a better person.
Sadly, both of these groups are smart enough to know the pros and cons of the minimum wage, but continue to believe in its virtue in the same way that others believe in the healing power of crystals. It is a selfish fantasy.
If they really wanted to make improvement for the lowest-paid workers, they'd reduce payroll taxes.
What's really ironic here is that minimum wage increases give advantages to large companies that are already paying above minumum wage, against mom-and-pop shops. I.e., it helps Wal-Mart--yet it's the same crowd that hates Wal-Mart that favors increasing the minimum wage.
Posted by: Jim Lippard | 11 January 2007 at 08:43 AM
The previous was supposed to include this link:
http://catallarchy.net/blog/archives/2006/12/07/card-and-kruegers-minimum-wage-paper/
Posted by: Jim Lippard | 11 January 2007 at 08:44 AM
Yes, I've begun to see the pattern where an industry will oppose new regulation, rightly, but lose to the untrammeled power of the state. Subsequently, they realize that the regulations form a barrier to new entrants, and use it to their advantage.
We've seen it in the capital markets due to Sarbanes-Oxley, we've seen it in public utilities, and we may yet see it with net neutrality.
(PS, Jim, sorry your link didn't come up hot. Here it is.)
Posted by: Matt S | 11 January 2007 at 09:54 AM