- The Washington Times - Sunday, December 17, 2006

When television and newspapers give us a portrait of a typical minimum-wage worker, they are almost always wrong. They usually portray a mother or a father with at least two children, who are unable to make ends meet on the $10,300 provided by the minimum wage (the poverty line for one person is $9,827, for a parent and child $13,200, and for a family of four $19,806). In fact, the great majority of “minimum wagers” are much different.

The total number of people on the federal minimum wage of $5.15 per hour is many fewer than most people imagine: as of 2005, under 1.9 million workers. Sixty percent work only part-time, and a majority (53 percent) are under the age of 25 — most of them students or weekend workers. Within this disproportionately large pool of youth “minimum wagers,” two-thirds come from families with at least one other family member earning income. Four-fifths belong to families above the poverty line. In fact, the average income of the family of a young individual earning minimum wage is just over $64,000.

Who, then, are the losers from higher minimum wages, and who will actually gain? According to Harry Holzer, Professor of Public Policy at Georgetown University, “Very few workers in poor households actually work at the minimum wage.” Only 12.7 percent of the benefits from a federal minimum-wage increase would go to poor families, while 63 percent would go to families earning more than twice the poverty line and 42 percent to those three times above the poverty line. The reason: the majority of minimum wagers are youths, most of whom come from well-off families.Meanwhile, a hike in the minimum wage will hurt low-skilled workers most because those jobs will be increasingly difficult to find. In 2003, the median hours worked by the highest earner of a poor household was 1,720 — significantly less than full time: 2,000 hours per year. “These individuals would receive significantly more benefit from programs that promote increased work effort than they ever would from a minimum wage increase,” according to the Employment Policies Institute (EPI).

While the minimum wage is often promoted today as a policy designed to help the poor, minorities and single mothers, a study completed by EPI, in August 2005, reveals that “only 3.7 percent of the benefits from a $7.25 an hour federal minimum wage would go to poor African-American families. Only 3.8 percent would go to poor single-mother households.” Despite the fractional benefit received by these demographic groups from increases in the minimum wage, history has shown that under such regulations African-Americans have faced severe detrimental effects: unemployment.

Over the years, one of the most vulnerable sectors of the American labor force — black teenage males — has suffered dramatically from raises in the minimum wage. In 1954, before minimum-wage laws were expanded, joblessness for black youths was nearly even with that of whites, at 14 percent. Over the next few decades, the minimum wage rose sharply (from 75 cents to $3.35 per hour). In this same period, the unemployment rate for black teens soared to 40 percent, while the unemployment rate for white youth went largely unaffected. By contrast, Ronald Reagan refused to raise the minimum wage in his two terms as president (1981-1989). Accordingly, unemployment among young black males declined from 38 percent to 32 percent — the lowest rate since 1973. The correlation continued in the early 1990s. Following two hikes in the minimum wage in 1990 and 1991, black teen unemployment shot back up to 42 percent in 1992. In recent years, black teen unemployment has declined, wavering around 30 percent. These black teens await the falling axe when another minimum-wage hike takes effect.

In commenting on minimum-wage laws, Milton Friedman asserted, “These laws are defended as a way to help low-income people,” when “in fact, they hurt low-income people… The minimum wage law requires employers to discriminate against persons with low skills.” Many programs Congress proposes do not actually help the people they are intended to help. This Law of Unintended Consequences is vividly in evidence in minimum-wage legislation. Only a tiny slice of the new proposed minimum-wage benefit will actually reach the poor. Meanwhile,unfortunate consequences loom for low-skilled workers looking for additional working hours, and if history is repeated yet again, for black youths as well.

Perhaps the proposed legislation for the upcoming 110th Congress should be called the “2007 Minority Youth Unemployment Act,” or the “2007 Bonus for Middle-ClassSuburban Teenagers Act.” If the 110th Congress wishes to lend a hand to struggling single mothers, minorities and the poor, it should do something other than increasing the minimum wage.

Bryan Prior is an intern at the American Enterprise Institute. Michael Novak is AEI’s Jewett Scholar.

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