Statistics, Statistics, and More Statistics¹
Statistics like these are an attempt to play on an emotional response. Notice that these statements don’t draw any conclusions. The expectation is that the reader will start making simple assumptions based on these and decide the minimum wage is a good idea. Let’s get a better understanding of these.
A minimum wage increase of $2.10 by 2008 would raise the wages of 14.9 million workers.
Assuming there was no loss of jobs, this may be true. But this statement just pretends there are no consequences (good or bad). It doesn’t conclude that these workers will be better or worse off for the hike.
The inflation-adjusted value of the minimum wage is 30% lower in 2006 than it was in 1979.
Again, this statement has little meaning. It’s used to get the reader to conclude that the minimum wage has effectively fallen 30% over the years. However,an increase in the standard of living can negate the long-term effects of inflation in terms of real wage value. That is to say, while the purchasing power of those dollars may have decreased, technology and innovation may have made lower cost alternatives available. The astute reader should instead ask, “What’s the cost-of-living adjusted value of the minimum wage?”
Comparing the wages of minimum wage workers to average hourly wages, we find that the wages of minimum wage workers have not kept up with the wages of other workers
There are (at least) two problems with this statement. A) Average hourly wages? So we’re comparing minimum wage earners to Donald Trump? At worst we should be looking at median and not average. B) If the number of people earning the minimum wage as a percentage of population decreases, this would be the expected result. Of course, that means people are making more money, so that means this is a good thing, not a bad thing.
A full-time worker (working 2,080 hours a year) earning $5.15 an hour would earn $10,712 a year, well below the 2005 federal poverty line of $15,735 for a family of three
The reader must ask, are there that many people earning minimum wage supporting a family of three? This assumes that the minimum wage earner is the only earner in the family. In fact, the median wage for the highest earner in a poor household (those below the federal poverty line) was much higher than the proposed federal minimum wage—$9.25 for poor households and $9.60 for poor and near-poor households (those below twice the federal poverty line). Only 8% of low wage earners even maintain families, far less as the sole wage earner.4
What the writer doesn’t tell you is that most folks earning the minimum wage aren’t poor. By 2003, only 12.7 percent of low-wage employees were living in poor or near-poor households. This means that of the $18.26 billion in benefits given, only $2.3 billion go to the poor or near-poor.²
If the intent here is to help the poor, there is a much more directed way to do so. It’s called the Earned Income Tax Credit (EITC). In this way, funds can be distributed based on proximity to poverty. Otherwise, we’re attempting to mend the ills of society in surgery using a chainsaw rather than a scalpel (and the results are just that messy).
There was little effect on either employment or labor supply in states with a higher minimum wage.
See my analysis above for Hawaii. Again, those states with a higher cost of living will see little or no effect from the minimum wage, so this statement is a red herring.
It’s nothing short of immoral that while shamelessly blocking attempts to raise the federal minimum wage for low-wage workers, the Republican Congress gave itself nine pay raises since 1997—a total $35,000 more than in 1997.³
I must admit I was a bit surprised at how frequently this argument appeared. This is an obvious play on emotions, and doesn’t even require economics to see past it. The logic here seems a bit flawed. There’s no connection made here at all between low-wage and high-wage earners. Even if there was, one would have to ask: Congress did something unconscionable for itself, so we should therefore do the same unconscionable thing for everyone else?
The economy of the United States is a market economy. As such, the laws of market economics, including “Supply and Demand”, apply. Increasing the minimum wage effectively increases the price floor for labor, thus decreasing demand and increasing supply, resulting in higher unemployment.
Counterclaims of existing higher minimum wages in some states not affecting unemployment fail to account for the effect of high cost-of-living areas. Other counterclaims regarding the benefit to the impoverished fail to understand that very little of the increase will go to those in poverty, and that existing methods such as the EITC can move funds directly to those who need them most.
The economy will be adversely affected by an increase in the minimum wage. In the end, those in the most impoverished areas with the fewest skills and earning the least will be hurt the most.