by Mitch Kokai
Senior Political Analyst, John Locke Foundation
Nearly all Americans who work full time do not have to live in poverty; the Census Bureau says less than 3% of people who have full-time work for a whole year live under the poverty line. Unemployment, not the absence of $1.75 an hour, is the greatest of the problems creating poverty—and it should be clear that a minimum wage does not raise the income of an unemployed person or improve his chances of getting a job. It’s also important to know that poverty statistics ignore the cash value of such antipoverty benefits as the Earned Income Tax Credit, food stamps and housing subsidies.
The clearest predictors of a person’s future life in poverty include inattention and poor attendance at school, dropping out of school without a high-school diploma (or finishing school with a worthless piece of paper instead of a high-school education) and having children before establishing a two-earner household with another adult. Working for minimum wage is more likely to indicate that a person has a chance of working his way up to higher wages and out of poverty.
The president’s goal of raising the incomes of millions of families though a a minimum-wage increase is possible, though the claim requires at least two footnotes. It would be necessary to count the teenage workers whose added income would bring more money to their middle- and upper-class families. And to get an accurate number for the net change in family income, it would be necessary to subtract lost income for some number of families whose members working for the minimum wage were laid off, ordered to work fewer hours, deprived of fringe benefits or taken off the books entirely. To repeat, unemployment is the greatest of the problems creating poverty.
Although some businesses might happily greet the arrival of customers with more money in their pockets from a higher minimum wage, the president should recognize there will be other businesses with less money in their checking accounts after paying the higher wage and the higher associated taxes.
These would not necessarily be the same businesses, but it would be the same money recycled, and it would be money not available to pay someone else. To repeat, unemployment is the greatest of the problems creating poverty.