Economic Scholar: Don’t Hike Minimum Wage

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According to David Neumark of the Center for Economics and Public Policy at the University of California, Irvine, politicians who want to help the poor should stop trying to jack up the minimum wage.

“Setting a higher minimum wage seems like a natural way to help lift families out of poverty. However, minimum wages target individual workers with low wages, rather than families with low incomes,” he wrote in a San Francisco Fed research paper. “Other policies that directly address low family income, such as the earned income tax credit, are more effective at reducing poverty.”

Neumark’s paper comes at a time when both of the leading Democratic presidential candidates have proposed raising the federal minimum wage. Hillary Clinton wants to raise it to $12 an hour; Bernie Sanders wants to see it raised to $15 an hour. There have also been private pushes for a raise, led by unions such as Fight for $15.

According to Neumark’s paper, very few of the nation’s poverty-stricken families rely – in any way – on a minimum wage income. In 57 percent of families who fall below the poverty line, no one works at all. On the other side of the coin, approximately half of all workers earning the minimum wage are under the age of 24. As it was always intended to be, the minimum wage marks a starting point for teenagers and other unskilled and uneducated employees. It is not intended to be the last rung on the ladder.

“Mandating higher wages for low-wage workers does not necessarily do a good job of delivering benefits to poor families,” Neumark wrote. “Simple calculations suggest that a sizable share of the benefits from raising the minimum wage would not go to poor families.”

Worse, minimum wage hikes can actually shut these low-income workers out of gainful employment altogether. Small businesses – local restaurants and the like – rely on cheap labor to keep costs low. Artificially increased wages force them to either cut staff or hike prices, a choice that puts them at an even greater disadvantage with national chains that have other ways of smoothing the wrinkles.

The fight for a higher minimum wage is not a fight for America’s poor; it’s a fight for America’s teenagers – the last people on the planet who need the taxpayers to boost their income. And with the age of automation creeping up on the country, Democrats should be careful about ushering in a policy that could eliminate millions of jobs overnight.