Protesters were out in some 150 cities yesterday calling for a higher minimum wage for workers at fast food restaurants. The Service Employees International Union and other labor organizations were behind the “Fight for $15” campaign.
Fifteen dollars an hour, they say, would help poor people in traditionally low paying jobs who are trying to raise a family. It’s an effective emotional appeal. Who wouldn’t shudder at the thought of paying all the family’s bills with a $7.25 an hour, $15,000 a year income?
But the economics and logic are deeply flawed.
The minimum wage is a floor for entry level positions. It was never intended to be the sole source of income for a family. If that’s the goal, change the law to a “guaranteed family income” and force employers to pay according to the family’s needs.
But even economically challenged leftists may cringe at embracing true Marxist philosophy.
There are many other arguments against compulsory pay raises for entry level jobs—higher unemployment among low skilled workers, more financial strain on small businesses—but if we believe the working poor should get more, there’s a better way.
David Neumark, economics professor and director of the Center for Economics and Public Policy at the University of California, Irvine, has researched the minimum wage argument extensively. He says most economists agree that raising the minimum wage is an inefficient method of getting more money in the hands of poor workers.
Because there’s no means test for pay, a higher minimum wage would benefit many people who do not fall into the category of working poor families; working children of middle or higher income families, for example. Numark’s research suggests that if the minimum wage is raised to $10.10, as President Obama suggests, “29 percent would go to families with incomes three times the poverty level.”
Instead, Neumark suggests increasing the Earned Income Tax Credit for lower income families and individuals. “My research with William Washer, using Census Bureau data, shows that a higher EITC boosts incomes of poor families, and even—by encouraging work—leads to more low-income families earning their way out of poverty.”
The EITC is a form of wealth redistribution, and that opens it up for debate on its merits, but at least it’s a more efficient way for society to help the working poor than depending on a scattershot minimum wage increase.
But tax forms are dull and complicated. The minimum wage debate has a sexier ring to it. It’s easier for union leaders to recruit new members while protesting outside of a McDonalds than while filling out their tax returns.