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Raise the minimum wage, limit economic potential

Raise the minimum wage, limit economic potential

Idaho Freedom Foundation staff
October 27, 2015

By Dr. John Livingston | for Idaho Freedom Foundation

Some mistakenly paint conservatives and limited government types as heartless for arguing against allowing government to mandate wages.

That notion couldn’t be further from the truth.

We know dating back to 1931 when the first federal minimum wage laws were enacted that those hurt most by minimum wage legislation are the ones its proponents thought they were going to help. According to Bureau of Labor Statistics -- data prior to 1931 is extrapolated from employment statistics and not generated by the new department of labor -- black youth unemployment was lower than white youth unemployment in the lowest quintile of wage earners for the 10 years leading up to the Great Depression. It was not until the first federal minimum wage law was enacted in 1931 that black unemployment skyrocketed -- today being twice as high as the national average in the 18-25 age group.

Labor Department data, empiric observation and economic theory all argue against a minimum wage and argue for an apprentice or starting wage. The idea that a minimum wage should be working or subsistence wage is also fallacious.

I cite the Department of Labor, Congressional Budget Office, and Heritage Foundation and American Enterprise statistics when I try to hone down on who earns the minimum wage.

Our latest data come from 2011-2012 statistics. In those years, 3.7 million people worked for a minimum wage of $7.25. These numbers include people who earn tips and off-the-books income, like people working in food services, agriculture workers and small businesses like professional offices.

Recent articles in The New York Times and Wall Street Journal point out when these minimum wages are reconciled with tip income, the workers actually make more than when the minimum wage is increased and tips are excluded. In Seattle, waiters and bussers are petitioning for lowering the new mandatory increase in minimum wages because their tip income and thus their gross income has decreased.

Some screen actors in Los Angeles have made a similar request of city fathers for a waiver of the minimum wage because either their income has lessened or their jobs are being cut.

Younger wage earners less than 25 years old make up 62 percent of minimum wage earners. Their average family income is $62,900 annually, and only 22 percent live at or below the federal poverty level. More than half work part-time jobs, more than 60 percent are women and only 5 percent are married. Over 60 percent are in school or job training programs.

Older workers -- those above 35 years -- tell a different story. They are less likely to live in dual income homes, their average income is $42,000 annually, 25 percent live below the poverty level and more than 40 percent are married.

Minimum wage earners for the most part are young part time workers who don’t have families and are not the sole wage earners in their homes. Their average family income is 3-4 times the federal poverty level.

A rise in minimum wage raises pay for mostly suburban teenagers, not the working poor. The corollary to this is that increasing the minimum wage will have very little impact on helping single-income parents rise out of poverty. Only 4 percent of minimum wage workers are single parents working full time, very close to the 5.6 percent number for all workers.

Low wages are not the cause of poverty because the vast majority of those living in poverty don’t work for a minimum wage.

By placing a floor price on wages, we exclude entry level workers from the opportunity for an apprentice wage and thus an opportunity for upward mobility.

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