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A Further Perspective
At Minimum, a Big Loser
Progressives should be wary of a minimum wage increase.
President Obama brought the minimum wage debate back into the news in a big way in his State of the Union address, when he proposed raising it from $7.25 to $9.00 an hour. The president’s proposal is bound to face the usual conservative opposition, but his progressive allies should also think twice about trying to raise the minimum wage.
The goal of the minimum wage is to make the poor better off. And raising the minimum wage to $9.00 would certainly make some workers better off—which is precisely why minimum wage hikes are popular. It is a rare poll that finds less than a two-thirds majority in favor of minimum wage increases. The trouble is that millions of people can be wrong, and often are. This is one of those cases.
The raises that some workers would get come with a tradeoff: Other workers would make less. Some workers would have their hours cut, at least partially canceling out their hourly raise. Some workers will be shown the door, cutting their hourly pay to literally nothing. Other workers will never be hired in the first place.
This tradeoff causes a regressive income redistribution—precisely opposite its intended effect. Instead of taking from the rich to give to the poor, minimum wage laws take money away from the absolutely poor who lose their jobs, and give it to the somewhat less poor who still have theirs, plus a raise. This is not the way to lift a society out of poverty.
In fact, the population groups that minimum wage hikes hurt the most are precisely the ones that progressives most want to help: the young, the elderly, and the working poor.
Young people tend not to earn a lot because they haven’t had time to gain experience and skills. They’re not productive enough at this stage in their lives to make it worthwhile for an employer to pay them high wages. The higher the minimum wage goes, the more young people are priced out of after-school or summer jobs. When they finish school, they enter the workforce with less experience — if any. High minimum wages remove the lowest rungs from the economic ladder — and for some people, the lowest remaining rung is too high to reach.
Experience is not a problem for the elderly. But for some of them, an increased minimum wage would be. For some people, Social Security and retirement savings aren’t enough to get by on. Taking on a part-time job in retail or food service can be more than just something to do. It’s a way to help pay the bills. As age and ailments take their toll on productivity, older workers might not be able to command wages as high as in their mid-career days. A minimum wage hike could very well hurt such people instead of help them.
For the working poor, the effects, as noted, make up more of a mixed bag. But progressives want to help all of the working poor, not just some of them, and a higher minimum wage doesn’t meet that standard. They should look to other policies that don’t distort labor markets and raise unemployment, such as a more generous Earned Income Tax Credit.
Then there is the matter that high minimum wages help big businesses at the expense of smaller competitors. When states are considering hiking their minimum wages, big companies like Walmart routinely lobby in favor of the increases. They know that while they can afford the extra payroll, the mom-and-pop store down the road might not be able to. Advantage: Walmart.
Just because a progressive proposes a policy doesn’t mean that the policy is, in fact, progressive. A high minimum wage causes regressive income redistribution. It keeps young and elderly people out of gainful employment. It helps only some of the working poor, and it actually hurts others. It favors big businesses over small businesses. These are all reasons why progressives should reconsider their support of what is fundamentally a regressive policy.
About the Author
Ryan Young is Fellow in Regulatory Studies at the Competitive Enterprise Institute.
Letter to the Editor View all comments (32) | Leave a comment
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Moe Blotz| 2.28.13 @ 8:13AM
If Skeets gets his way and the minimum wage rises to $9.00 per hour, will I have to give myself a raise? When I factor in all the time I spend driving and maintaining my vehicle, then adding the time for doing paperwork, my hourly wage is $4.50.
JD| 2.28.13 @ 12:39PM
Money will magically appear out of thin air for you to do this.
Moe Blotz| 2.28.13 @ 12:47PM
Can I get some at the magic money machine on the front wall of my bank?
JD| 2.28.13 @ 3:01PM
Haven't you heard? That machine kills jobs!
Al Adab| 2.28.13 @ 8:24AM
We fight and lose this battle every few years. Whenever the Dems need a popularity boost they push for a higher minimum wage. No matter that it costs young people jobs, no matter that it makes it difficult for small businesses involved to hire and staff, no matter that it raises the price of goods and services, all is done in the name of a living wage. How many minimum wage earners are heads of families? How many are seeking their first job as teens? It is and long has been a bad idea. But here we go again with those nasty Republicans just looking ut for the wealthy and not caring about the poor. We lose again. Sadly the nation loses too as this is little more than ameasure of the devalued dollar and inflation.
c. j. acworth| 2.28.13 @ 8:47AM
Al;
I believe I read recently (perhaps the Wall St. J?) that something over 40% of min. wage earners are listed as dependents on someone elses' 1040 form. In other words, they're kids. ( Sorry I can't give a real reference.)
Al Adab| 2.28.13 @ 11:16AM
That is likely close to the actual number. I have an 18 year old, hard working great kid and in doing his taxes this year I noted a penalty, an addition to his income, required adjustment upward to his gross because he is a dependent on my filing. Sad thing to do to our kids since most of us want them to learn the value of work and to get ahead. Penalize them for becoming productive citizens.
NObama2012Please| 2.28.13 @ 12:47PM
Al Adab, here is a suggestion for you...something my father did, in fact, since the time I started my first job. Have your son do his own tax return (a draft in pencil) and you can check it for him. At that age he'll use the EZ form and can do the more complicated ones as the needs arises, once he has the experience. In my opinion this really helps kids understand that elections have consequences. Even if you are an accountant (you didn't say whether you are), I would still make him do this the old-fashioned way, or eventually on a software program. This will also help him understand deductions, credits, etc. down the road and not be afraid of doing taxes. Just my 2 cents.
Al Adab| 2.28.13 @ 12:58PM
I do sit down with him and go over the form with him. He learns a lot. My favorite anecdote is the day he brought home his first paycheck, mad as a wet hen and asked, "What is FICA and why does it get my money?" A lesson well learned.
I'm no accountant and we did do a hard copy in pencil. Your suggestions are well taken and many would do well to heed them. Thanks a lot.
PolishKnight| 2.28.13 @ 2:44PM
Al Adab, I posted my opinions on this matter about a week ago which scoped out to about 500 replies. I shant bother to repeat them because you've heard it and I won't bore you.
But sure, it's rather hard for the Republicans to be perceived as voteworthy when the only time they care is when tax breaks for the rich are threatened or keeping rape victims on 24x7 watch so they don't get abortions.
The working and lower class have become ideal Republican constituencies since the Left tossed them under the bus during the Archie Bunker era. They are now the party of fascist cronies, welfare recipients, government workers, and race and gender entitlements. I don't believe their gripes about "outsourcing" for a moment since they no doubt get kickbacks from favorable trade policies.
But the working and middle class poor can buy these sugary tales because the right's position is to make sure the rich get theirs, first, and then you'll get around to fixing welfare and making the holy constitution fix everything. It's too anemic an offering to get those voters out of bed.
Come now, for a few extra bucks an hour you could get a lot of votes and the world won't come to an end. Really. But hey, keep on losing elections. It's all about the principles!
Al Adab| 2.28.13 @ 4:15PM
If the sum total were about winning solely then you might be right. The J. R. Ewing school of politics would have it so. "Once you give up integrity, all the rest is easy." Sadly I and many Conservatives have a conscience and know we ultimately must live with ourselves. Can we sell our birthright for simple political gain? "Forbid it Almighty God." Like Cato it is better to be true to ones values than to live under tyranny.
PolishKnight| 2.28.13 @ 9:10PM
CATO's position is that illegal immigrants should be granted amnesty and "free markets" to come across the border and then, maybe, get around to abolishing welfare for them. Yeah, good luck with that. This sounds less like principles than foolishness.
It's amusing that conservatives who can "get" that the principles of the 2nd amendment means that there will tragedies such as school shootings or that in war, it's necessary for troops to sometimes make mistakes and do bad things think that then they should toss their constituency overboard in the name of "principles" and fret about politics.
Keep in mind that the Holy Constitution was a horrid compromise to begin with legitimizing slavery that gave us a legacy of federalism from Lincoln (Republican) and later then the so-called civil rights movement which is now a racist vote getter for the left. Politics is messy, get used to it or join the Shaker cult.
Al Adab| 2.28.13 @ 10:04PM
Wrong Cato PK. Roman statesman and Senator. Look him up.
PolishKnight| 3.1.13 @ 8:00AM
I'm aware of the statesman CATO. Understandable (and honest) mistake on my part.
Even so, it appears that, to paraphrase Franklin, clinging to outdated or at least currently impractical principles will result in living under tyranny and that's what's happening. So what's the use of them then?
If you want to look at this philosophically, if a "principle" isn't practical at a political or practical level, then it ceases to be a principle and more like a work of fantasy fiction. As I said, the same people who are principled and refuse to dirty their hands with politics then turn around and praise the military which gets its hands dirty on a daily basis. So even then, the principle doesn't make sense.
Roscoe| 2.28.13 @ 8:49AM
Easy to propose increase in the minimum wage when you don't have to sign the front of paychecks every week or two.
Pecos Pete| 2.28.13 @ 9:24AM
The Minimum Wage is Marxism at work. Raise that sucker to $500 an hour and we'll all be equal. Ya know, to each, from each. Eat your spinach, it's good for you.
Bob Grant| 2.28.13 @ 9:32AM
The minimum wage is exactly like Universal Healthcare: It looks good on paper but good luck applying it in the real World.
Russel| 2.28.13 @ 9:48AM
" fundamentally a regressive policy." . I can't help but ponder that that is exactly the goal . Now we can agree Pelosi may very well be so stoopid as to really think unemployment actually adds more to the federal coffers than a job , but not everyone in the socialist camp could be so dense . No , they're using every single tactic at their disposal to cripple the economy beyong repair . Notice that no one is even talking jobs now . Unemployment has fallen off the radar , right on schedule . Get them used to a ' new ' low and then make it the norm . Ditto the national debt and spending . It all adds up to government dependency .
squalis| 2.28.13 @ 10:14AM
The obvious question is if the libs really wanted to help the working poor, why don't they raise the minimum wage to $100 / hr?
Al Adab| 2.28.13 @ 1:00PM
Or they could adopt policies which lower the costs to employers so the businesses could increase staff and create jobs. Oh, wait, that's the GOP theory of helping the rich. Better to leave the poor unemployed and dependent.
JD| 2.28.13 @ 12:41PM
CNNMoney posted this today:
http://money.cnn.com/2013/02/2.....e_business
It describes how the cost of employing a worker is significantly higher to his employer than just the employee's salary.
You'd think this would be common knowledge, but we're talking about a CNN audience, here. Not only do the comments overwhelmingly demonstrate that people DIDN'T know this, but also, most comments are berating CNN for posting these facts, calling the the article "extreme right-wing propaganda".
It's amazing how often the unvarnished truth is called "extreme right-wing propaganda."
Pecos Pete| 2.28.13 @ 2:11PM
JD: Thanks for the link. Went there, read the comments until becoming disgusted. There are lots of dumb people ... the education system has totally failed.
Drunken Sailor| 2.28.13 @ 3:56PM
No, the (public) education system seems to be working just as the liberals planned it.
mike 3/505| 2.28.13 @ 6:09PM
Pesco,
Same here....I damned near barfed all over my keyboard...No wonder liberals keep winning elections.
PolishKnight| 3.1.13 @ 8:04AM
As Hitler learned after his failed beer hall putsch, simply declaring a revolution based upon "principle" doesn't work. He had to seize the political system, the schools, the radio station, and the newspapers. Then only an external military force could defeat him.
Since the left _IS_ the dominant worldwide force, they needn't worry about external threats and they have already largely won internally via the media, schools, and government.
Unless the right is calling for a revolution, they can only win politically or economically which won't happen in the leftist economic fascist system we have now where GE pays a billion in lawyers to write regulations so they don't pay taxes or politically when the right seems to care little about retaining a significant electorate.
Pray to the Constitution (or parts of it that don't legalize slavery!) It's our only hope!
Tafuna| 2.28.13 @ 2:57PM
Democrats politicians know all this, that the minimum wage hurts the poor (perhaps not all as some Democrats like Pelosi are imbeciles). They push for increases in the minimum wage not to help the poor which they know will be hurt but purely to maneuver for political advantage with the low information voters who are ignorant enough to think raising the minimum is a good idea.
Jimmyjames66| 3.2.13 @ 2:02PM
Tafuna.
I would love to see the evidence to back your baseless assertions.
After all, You only just parroted some other dissemblers nonsense.
Critical thinking and debate?
I wish i could find some here.
BShep| 2.28.13 @ 3:13PM
NO, no, no, no, no. This is not, never has been and never will be a matter of economics. Because the conservatives always try to make this argument they always lose the exact people that are trying to convince.
This is a matter of FREEDOM. What business is it of ANY government what two free men freely agree is a fair trade for an hour’s worth of labor? If I decide my labor is worth $1 or $1000 per hour and I can convince someone that I am correct then I MUST be free to sell my labor for amount. Anything else is slavery!
When you argue the matter as one of freedom everyone will understand. When you argue it as an economic issue everyone’s eyes glaze over and they stop paying attention.
JD| 2.28.13 @ 3:56PM
If you argue it purely as a "freedom" issue, then too many Americans will choose "prosperity" over freedom, invoking "common sense" as their rationale and condemning the "freedom to oppress."
The fact is that freedom and prosperity go hand-in-hand. A proper understanding of economics exposes this. As for struggles in convincing people that the minimum wage is bad for us economically, they stem from the very thing the Left gets wrong - the belief that a single man, or a few bright men, can know better than society does collectively. This is the essence of collectivism.
PolishKnight| 2.28.13 @ 9:20PM
Throughout the cold war, the military regularly practiced involuntary servitude (draft and selective service) and don't mind the compromises of war. Yet, political compromises that make sense elude them.
Yes, ideally, conservatives should hold for a magic candidate who will simultaneously ban the welfare state, make abortion illegal for victims of rape and incest, keep tax rates low for the wealthy to stimulate growth, and import a billion Asians and Hispanics whom will buy into conservative religion and free enterprise rather than race entitlements.
But for some reason, conservatives are losing across the board not only 50/50 now with presidential candidates (Bill Clinton, then GW, then Obama) but even Senatorial races that should reflect "red stater" advantages in the electoral college are now close.
Under present economic realities, the minimum wage provides an incentive for the lower and working class to work rather than go on welfare. But hey, F' em. Bunch of losers and who needs their votes anyway? You have the Constitution and principles and tax rates for the wealthy! Nobody can lose with that!
Really, I should change my name to Leroy Proudfoot and claim to be half Native American and Black and become a Democrat. You guys have so lost.
Jimmyjames66| 3.2.13 @ 1:45PM
Bravo, Sir Knight!
ISOaPBR| 3.3.13 @ 6:21PM
Who lifted Obama in 2008? Kids and minorities. Who makes minimum wage?
Coincidence?