Perhaps one of the most disastrous policies President Obama called for in his Tuesday night address was a hike in the minimum wage. Raising this government mandate from $7.25 to $9 an hour by 2015 is the surest way to ensure Americans who are down on their luck have no chance to escape the unemployment lines.
Mr. Obama sold this misguided policy as one of compassion. “A full-time worker making the minimum wage earns $14,500 a year,” he said. “Even with the tax relief we’ve put in place, a family with two kids that earns the minimum wage still lives below the poverty line. That’s wrong.”
The picture the president painted, however, is at odds with the findings of a 2010 study by American University’s Joseph Sabia and Cornell’s Richard Burkhauser. In their examination of the impact raising the minimum wage has on poverty, the economists found most wouldn’t see any benefit. As far back as 2008, more than 80 percent of those employed already earned more than $9 per hour.
Just under a quarter of those earning minimum wage live in households that are either below or slightly above the poverty line. More than 40 percent live in households with total income in excess of $61,000. This makes sense because many of these minimum-wage earners are teenagers living with parents. The study also found almost all employees who start at minimum wage receive a raise within 12 months of starting employment.
So from the outset, hiking the minimum wage will do little to help the working poor. This is in part because so many earners in this category already make more than the minimum wage and partly because a large number of minimum-wage earners belong to non-poor households.
Yet there is still a major downside to forcing an increase in the minimum wage. The least-skilled workers — usually people just entering the labor market — are the ones who are paid the minimum wage. Making these potential employees far more expensive to hire will price them out of the job market if employers figure that the wages they have to pay are greater than the value of their contribution.
Hiking the minimum wage will increase the costs of doing business and deter employers from increasing investment and hiring. That hurts the least skilled the most, and these are the individuals who are suffering most under the current conditions of high unemployment.
Liberals may think they can eradicate human suffering with a wave of their hand, but their decades’ long war on poverty has only made it worse. Here, too, raising the wage will shut the most vulnerable Americans out of gainful employment and deny them the chance to acquire skills and on-the-job experience essential to climbing up the income ladder. The states that have raised the minimum wage above the federal rate have failed to lower the poverty rate. Replicating the policy at the federal level will simply replicate the same failure.
The Washington Times
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