Should the US increase the minimum wage?

2013-03-18T00:00:00Z Should the US increase the minimum wage?Kevin A. Hassett and Michael R. Strain Arizona Daily Star
March 18, 2013 12:00 am  • 

In announcing his wrongheaded proposal to increase the minimum wage to $9 an hour, President Obama spoke in lofty terms: "In the wealthiest nation on earth," he said in his State of the Union address last month, "no one who works full time should have to live in poverty."

If the debate proceeds as it has in the past, then most Democrats will embrace the message, while most Republicans will oppose it.

But we shouldn't rely on political opinions in this debate. Facts clearly demonstrate that raising the minimum wage is a bad idea.

A higher wage makes it more expensive for firms to hire workers. How big is the effect on the job market? Economists debate this. But no one argues that increasing the minimum wage increases the number of unemployed workers who find jobs.

Increasing the minimum wage would not accomplish the president's goal of alleviating poverty.

Research published in 2010 by economists Joseph Sabia and Richard Burkhauser concluded that if the federal minimum wage were increased to $9.50 an hour, only 11.3 percent of those benefitting from the increase belong to poor households.

Why? Many people who live in poverty do not work and workers who earn the minimum wage are generally not the primary breadwinners in their households.

Data from the Bureau of Labor Statistics show that while workers under age 25 make up only about 20 percent of those who earn hourly wages, they constitute about half of all workers earning the minimum wage or less. Raising the minimum wage is therefore an ineffective anti-poverty proposal.

The case for a higher minimum wage grows even weaker when you stop to consider that there are vastly superior alternatives for steering money to low-income households. For example, the nonpartisan Congressional Budget Office has found that expanding the earned income tax credit is a much more efficient way to fight poverty than increasing the minimum wage.

Why have we so often embraced a less effective tool? A tax credit is less politically palatable because it takes money directly out of federal coffers, while the minimum wage can be raised without it showing up directly on the government's books. The cost of a higher wage is borne by employers and consumers - and by the unfortunate people who end up not working because of it.

One reason public officials continue to embrace such a bad idea is that it's popular. It was President George W. Bush who signed the last minimum-wage increase into law. The fact that even a Republican president did so shows just how tempting this policy is to politicians.

Increasing the minimum wage will make it more expensive for businesses to hire young and low-skill workers at a time of crisis-level unemployment. It will not alleviate poverty. There are much better alternatives to help poor families, and the minimum wage is a dishonest approach that hides the true cost of the policy.

No: Limits hiring low-wage workers

Editor's note

Every Monday we offer pro/con pieces from the McClatchy-Tribune News Service to give readers a broad view of issues.

In Arizona

Arizona's rate of $7.80 per hour make it one of 19 states and the District of Columbia with minimum wages above the current federal rate of $7.25.

Kevin A. Hassett is director of economic policy studies at the American Enterprise Institute, where Michael R. Strain is a research fellow.

Copyright 2014 Arizona Daily Star. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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