Writing for the Wall Street Journal, economics professor David Neumark of the University of California, Irvine, lays out the data that clearly shows that hiking the minimum wage is not an effective way to lift people out of poverty.
One might think that low-wage workers and low-income families are the same. But data from the U.S. Census Bureau show that there is only a weak relationship between being a low-wage worker and being poor, for three reasons. First, many low-wage workers are in higher-income families—workers who are not the primary breadwinners and often contribute a small share of their family’s income. Second, some workers in poor families earn higher wages but don’t work enough hours. And third, about half of poor families have no workers, in which case a higher minimum wage does no good. This is simple descriptive evidence and is not disputed by economists.
Earlier this year, I wrote about the folly of using the minimum wage as a poverty-fighting tool. I argued for a clear look at the data in order to chart a policy course that will offer economic opportunity to all.
We ultimately hurt the poor when the cost of delivering a product or service goes up with no corresponding increase in worker productivity or value. Nor do we help the poor by ignoring research that shows which economic policies positively influence economic growth and which don’t. If we expect businesses to create opportunities for entry-level workers to step up to more responsibility and higher pay, we must foster economic growth. Last fall, John Locke Foundation President John Hood presented the results of his survey into two decades of scholarly work on state-level economic growth. As he explained, the results are extremely unfriendly to the Left’s view, but “the results were very friendly to the Right’s theory of economic growth — negative effects of overall taxes in 63 percent of studies, 67 percent for corporate or business taxes, 69 percent for marginal income tax rates, 62 percent for sales taxes, 68 percent for regulation in some form or the other.” Still, economic policy alone can’t alleviate poverty. Let’s speak boldly but compassionately about the negative economic and social impact of having children out of wedlock and of failing to earn a high school diploma. Getting these life decisions right greatly reduces the chances of living in poverty. We must also pour private resources into helping the vulnerable, including people with addictions. Those of us who champion a limited role for government must lead the efforts of private groups, charities, and churches.