Mythology Of The Minimum Wage

WS: Any Increase Likely To Hurt People Who Need The Most Help

(Weekly Standard)  This column was written by Whitney Blake.

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The recently defeated minimum wage hike proposal in Congress has resulted in a regurgitation of economic misinformation. Here's a sampling of the propaganda:

Myth No. 1: Millions of "working poor" are trying to feed a family of four on a single income of $5.15 an hour. It's simply not fair or ethical for someone in modern America to work 40 hours a week and not earn enough money to afford the basic necessities (which, by the way, includes color TVs, appliances, cars, the latest designer sneakers, etc.).

We've all heard rhetoric similar to this ad nauseam. A recent Reuters article stated that the minimum wage "equat[ed] to $10,700 a year for full-time work, well below the roughly $20,000 needed to keep a family of four above the federal poverty level." The article then cited Labor Department statistics that there are now 1.9 million workers earning an hourly wage at or below $5.15, "with most of those people working in service-oriented jobs." Conflating these two statistics leads one to believe that almost 2 million people in the United States are trying to keep families financially afloat, when, in reality, the vast majority of minimum wage earners contribute second and third incomes to a household. On average, a family with a minimum-wage worker has a total income of $43,000, according to the U.S. Census Bureau.

According to the Bureau of Labor Statistics, in 2005, only about 2.5 percent of all hourly-paid workers earned $5.15 or less. More than a quarter of these workers are between the ages of 16 and 19. About 60 percent are part-time workers. Only 1.5 percent of hourly-paid workers over the age of 25 made minimum wage. A minimum wage hike, then, would not be pulling families above the poverty line, but putting a few extra dollars into the pockets of teenagers and college students working in retail or at fast-food joints. Historically, most beneficiaries of minimum wage hikes have been white and middle or upper-middle class, which brings us to . . .

Myth No. 2: Increasing the minimum wage will help poor people and minorities. In fact, scores of economic studies have shown that minimum wage increases do not help the very class they are supposedly designed to assist — poor, underprivileged, uneducated minorities. In fact, such legislation may actually harm this group.

David R. Henderson of the National Center for Policy Analysis (NCPA) noted in a brief analysis released in May that an increase in the minimum wage "entices some teenage students to drop out," leads to cuts in benefits such as health insurance, and increases poverty. He cited a 1997 National Bureau of Economic Research study, which concluded that the higher minimum wage rates passed by Congress in 1996 and 1997 increased the number of poor families by 4.5 percent.

The Mackinac Center for Public Policy points to Labor Department statistics of 20,000 jobs lost after the legislation passed, and unemployment rates increasing from 37 to 41 percent for African-American male teenagers.

Similarly, the NCPA found that the poverty rate went from 12.8 percent to 14.5 percent following wage hikes in 1990 and 1992. Even Chicago mayor Richard Daley opposed the city council's decision to boost the city's minimum wage from $6.25 to $9.25, labeling the move as one that is "basically going to hurt the minority community," as large retailers consider relocating proposed stores to the suburbs.

For one, increasing the minimum wage forces businesses to pass the higher costs along to the consumer and/or hire fewer people over time. They might not fire anyone immediately, but they might be less inclined to add more workers or replace those who leave. Raising the minimum wage also makes it harder for those with few skills to find a job. If someone has skills worth $5 per hour, an employer is unlikely to hire him for $7.

Myth No. 3: If Congress doesn't increase the minimum wage, the "working poor" will continue to work for slave wages and be oppressed by greedy corporations. To the contrary, business owners do not need a federal mandate to ensure that an employee is paid according to the worth of his work.

Service sector companies such as Marriott have found that the high turnover rates common in unskilled positions are inefficient and costly. To reduce the turnover rate, they provide competitive salaries and benefits such as health insurance, day care, and education opportunities, with the hopes of encouraging their employees to stay longer.

Wal-Mart just announced this week an increase in wages at more than 1,200 stores by about 6 percent (along with higher wage caps for each position). The average full-time hourly wage for Wal-Mart associates — at $10.11 — is almost twice the current minimum wage. Wal-Mart also provides benefits including health care, 401(k) plans, and profit-sharing.

While the recent bill fizzled in Congress, we probably have not heard the last of these misinformed cries for a government-mandated wage floor. It's time these minimum wage myths were retired permanently, as they do much more harm than good in attempting to better the quality of life for those that need it the most.


Whitney Blake is an editorial assistant at The Weekly Standard.

[rbfain]

If any one belives this, they need to learn not to read bull. I have never, never read anything as sick as this.

[ronniehm]

It's simple economics. If you want to raise your wage, raise your value. Don't lower mine.

[clarkalex]

What a bunch of bunk. The article totally dismisses the fact that most people trying to survive on minimum wage earnings are only able to do so because they hold down two or more jobs and are not the only bread winner in the house. To get to the nice cozy sounding $40+K family income that's mentioned typically requires EVERY adult in the house to be working and since they are typically working at MORE than one PART-TIME job they do NOT qualify for benefits.
To quote rosey figures for Wal-Mart is also misleading. The writer cites the picture of the "full time" Wal-Mart worker and yet totally fails to point out that most employees of Wal-Mart are in fact part-timers and will NEVER be offered a full-time position due to Wal-Mart's policies. In fact, as soon as they would qualify for a full-time offer and or even the minimal part time benefits, they are frequently let go so the company can avoid paying them. And let's be truly honest - Wal-Mart isn't the only company that does it. Heck, I work for a company that employs this practice and they are up-front proud about their labor practices and how it saves them a dime.
This is a propaganda article, plain and simple, to justify no raises to minimum wage that doesn't even come close to passing the "smell" test. Anyone who believes the "facts" in this article needs a reality check.

[bfroggy-2009]

What do you expect, its the Weekly Standard. This is typical analysis/rhetoric: start calling things myths, give some hearsay and conjecture about how it may backfire - like increased dropout rates - and those who are easily convinced will just go along with it. Theres a reason for the minimum wage, theres a reason for social security, and these programs need to scale with inflation then the problem will be fixed once and for all. How about a bill to fix Minimum wage to 1992 levels (in 1992 dollars) with anual adjustments to inflation so this problem can be shelved forever?


The Froggy Pad - Political analysis @ www.bfroggy.com

[barnes561]

This guy has no idea of what minimum wage pay buys or doesn't buy! What planet did he come from? Most minimum wage jobs pay nothing in benefits and if they do have any they aren't worth the paper they are written on. Besides, a lot of jobs have been outsourced to foreign countries in order to escape even paying the $5.15 minimum wage. With the cost of everything shy-high now it takes more than one income to live at least moderately. I am willing to bet if Mr. Blake had to live on $5.15 per hour with no benefits, he'd be the first to scream and yell.

[Carwy]

This guy is a jurk who works for a big company and all he cares about is telling lies so his master will up his daily income so he can screw someone else. This guy is a moron.

[kelmedia]

There is always a simple hypocrisy that I see in every one of these anti-minimum wage arguments. The same hypocrisy is presented here.

One on hand, the author states that the majority of people working for minimum wage are teens or people contributing extra money to the household, so they are not feeding a family off minimum wage.

On the other hand, the author makes the argument that a hike in the minimum wage will hurt those who need it most, the people who are trying to support a family on minimum wage.

Make up your mind.

I agree that employers will simply pass on the cost of the hike in its products/services. However, haven't we been told ad nauseum by this adminstration that putting more money in people's pockets (expressed mainly via the tax cut argument) will stimulate the economy and create more, higher paying jobs? You can't have it both ways and only use the "putting more money in people's pocket" argument when it works to assist your policies.

[jshudson2]

The Weekly Standard is a shill for business interests. The author isn't arguing the merits or demerits of the minimum wage - he is arguing he wants more and others can do with less. It's as simple as that. Why does CBS News even print such dishonest garbage?

We as a society (and an extremely rich one at that) have decided a minimum wage is required to help ensure working people can enjoy a fair wage for a fair days work. Perhaps Mr. Blake should work a little more and get paid a little less to understand the value of labor. He clearly hasn't done an honest day's work in his life.

[jeff776]

Whitney Blake missed an important point that the cost of labor will also raise the cost of goods and services.

None the less this is a one sided opinion evading the fact it is impossible to live off of $5.15/ hour 40 hours a week, which equates to $150 to $170 a week after taxes. So 1 1/2 pairs of the style of Nike Basketball shoes. heh did Whitney take the time to figure the average rent for the country? Because no one earning minimum wage is going to be able to pay a mortage in this inflated economy. (Can you feel that? It's compressed air of a bottom line falling.)

There is a happy medium and the minimum is far from the mean wage of an average American worker. What is more disgusting than this opinionist's article, is the pork added to the bill to increase the minimum wage.

What does estate taxes and minimum wages have in common?

Trick question.

The rich get richer and the poor, well they get whats left over after increased profit margins and record high fiscal terms.

Don't get me wrong making a profit is good but at what expense is that profit made? happy workers equals increased productivity. Starving miserable workers creates a revolving door. Health care! Pfft welfare has better options.

It's ok I don't expect compassion from the corperate world unless it has major television network coverage...puke.

[d1hawk]

This article is just plain common sense. (Probably the least common commodity based on many of the responses posted here...)

I feel perfectly comfortable challenging anyone who disbelieves this article to survey thier local businesses and find out just how many of them actually pay minimum wage for any skilled jobs, (those jobs that require more skill than being able to see lightning and hear thunder).

Rant a rave all you want but if a set of facts like this upset you maybe you need to do a reality check. (to deny reality is not generally a sign of being a well adjusted personality...)

[hyderpotter]

$5.15 is about #2 in UK money.

In the UK its (about) #5.05/$$9 per hour for workers aged 22 years and older.

A development rate of #4.25/$8 per hour for
workers aged 18 - 21 years inclusive
workers aged 22 years and above, starting a new job with a new employer and doing accredited training*

[workforce5]

Just got off the phone with a black woman who wanted to know the minimum wage. She told me she works for Marriot through a subcontractor as a cleaner in a hospital. They work her 37.5 hours a week and give her no benefits. "Even if they did offer medical," she said, "I couldn't afford it on minimum wage." At 37.5 hours, she is considered a part-timer. One wonders how many of the reported 60 percent minimum wage earners who are "part-time" are also employed slightly below the 40 hour a week full-time schedule. Personally, I would prefer an employer to pay their workers a decent honest wage, instead of putting the burden on our shoulders as taxpayers to supplement their employees attempts to have a decent honest life.

[mjv2944]

It always made me madder than hell to have someone making $75000+ a year tell me that I was making too much money or that someone working for minimum wasn't worth any more than that. What a bunch of b--ls--t. This article is nothing but Republicanism at it best. Keep the working class screwed down. They have out smarted themselves, by exporting all the middle class, good paying jobs. I wonder why GM and the other manufacturers can't sell their product. Can YOU buy a new GM, feed, cloth and house your family on $10. Stop the exporting of the middle class.

[winemaster54]

Brilliant article. Anyone who even thinks they should be able to raise a family of four with a minimum wage job is silly or an idiot. If you get a minimum wage job and proceed to try and raise a family, don't come crying to me that you're "underpaid." The minimum wage job was always intended as a training or introductory wage. It was never intended to be enough to raise a family on. Get real, people. Develop skills, get an education and THEN proceed to get a better job and raise a family...when you can afford to!

[coloradoz06]

It's amazing that anyone could believe this garbage. I guess some folks will sleep easier tonight knowing that we are helping the poor by paying them less. This kind of crafty rhetoric is shameful.

[Coolcal5420032001]

As long as congress vote on their $50,000.00 raise a year all is fine with the American public who like to work three jobs at a time. Notice how the price of gas goes up and everything with it except your pay checks? Slavery is not dead as some may believe, just look at how many people working two to three jobs, how is raising the children? This is way the hiring of Illegals/Cheap Labors is so common and the lobbyist go to your congressman/woman and sale the idae that it is good for "America". I want that job but I want one job that will pay the bills,"Slavery is Out, America is In".

[decristo50]

Whitney Blake makes literally NO case for keeping the minimum wage where it is currently. Beyond all the statistics, and beyond all the rationals, there is still the moral value attached to paying a person a wage that is neither insulting nor demeaning. The argument that raising the minimum wage encourages students to "drop out" is ludicrous. Chances are those students would have done so anyway. And whether or not people in the "service industries" who earn a minimum wage also have other jobs as well, (or have family members who have other jobs) is beyond the point. Blake is say that we shouldn't raise the minumum wage because someone's wife or child works too. Well, maybe that wife would be able to stay home more and look after her children if the wage her husband earned (or the other way around) was a better one. These arguments fall flat and make me angry. Michael in Los Angeles

[decristo50]

Whitney Blake makes literally NO case for keeping the minimum wage where it is currently. Beyond all the statistics, and beyond all the rationals, there is still the moral value attached to paying a person a wage that is neither insulting nor demeaning. The argument that raising the minimum wage encourages students to "drop out" is ludicrous. Chances are those students would have done so anyway. And whether or not people in the "service industries" who earn a minimum wage also have other jobs as well, (or have family members who have other jobs) is beyond the point. Blake is say that we shouldn't raise the minumum wage because someone's wife or child works too. Well, maybe that wife would be able to stay home more and look after her children if the wage her husband earned (or the other way around) was a better one. These arguments fall flat and make me angry. Michael in Los Angeles

[random_radar]

The underlying axiom of the minimum wage argument that is invariably invoked is that you can't support a family on minimum wage. I agree, but since when is it anyone's birthright to earn enough to support a family? Having a family is a personal choice, and it is your problem, not your employer's. If you can't support a family, don't have a family. Is that harsh? No, that is basic social responsibility.

Whose conscience should be bothered by starving children? How about the parents who brought them into the world without the means to support them? That sounds better to me than blaming the parent's employer. If anyone is feeling guilty about the poor, they are welcome to use their own money, time, and talents to improve the situation. It is pathetic to coerce someone else to do it (as in force employers to pay).

It all comes down to forcing other people to do what we want. That is the essence of tyranny and oppression. The supporters of minimum wage laws should own up to being tyrants and oppressors, not the benevolent altruists they masquerade as.

[kaffers-2009]

The moral value attached to paying a person a wage that is neither insulting nor demeaning? Oh, please. We are not a Marxist society. If you feel your wage is insulting, use your skills to find a higher-paying job. Most minimum wage jobs require minimum skills - people with good skills are paid more. People should be paid based on the skills their jobs require, not based on whatever salary will make them feel good about themselves. Read "Atlas Shrugged" if you think Marxism sounds so great. And as a few others mentioned, don't have children unless you can afford to support them. I was too poor to support children at one point in my life, so I waited until I gained more skills and could qualify (note - QUALIFY, not get for moral reasons) for a higher paying job. And my boss makes more than I do, because he was the one with the vision to start the company - why should his wealth as an "equity holder" be transferred to people who didn't take the risks and have the vision that he did?

By the way, I haven't made minimum wage since I was 17 because I learned and worked hard to get promoted - there is something wrong with an adult who can't find a job paying more than minimum wage. Even my local Sheetz pays its cashiers $8.50 - although you do have to have decent English skills, which many people lack.

[kronocide]

I don't understand why anyone works at minimum wage, it's so boring to be poor. Why don't they get a higher-paying job? (Or eat cake.)

[kaffers-2009]

Uh oh, Kronocide, off with your head!

[kronocide]

Kaffers, the problem with your argument is that it ignores that wages are a function of both skill and competition for employment. Ask yourself what would happen if the "least skilled" section of the workforce _all_ raised their skill level significantly. Would it mean that no one would work at minimum wage anymore? Of course not. Salary does not have a 1:1 correlation to skill. If some section of the work force must have the lowest possible salaries, then it's insincere to claim that everyone could increase their income by "trying harder." If everyone tried harder, some people would still be at the bottom, and receive minimum wage.

[kaffers-2009]

You have a good point, Kronocide. But I would expect that if the least-skilled people in the work force increased their skills, their salaries would increase while newcomers to the work force would take over their minimum wage jobs. I realize that's overly simplistic and it does not always work that way, especially in a bad economy, but often it does.

I was partly just reacting to the "insulting and demeaning" comment, I must admit :)

[sanria]

Apparently Whitney Blake has had no experince in the world of the minimum wage earner. The statement "the vast majority of minimum wage earners contribute second and third incomes to a household." shows this quite clearly. In most cases the minimum wage earner has more than minimum wage job. One may be full time, but most are part-time jobs. It is not unusual that both parents in low income familes have two, three jobs to provide for their children. Next time Whitney Blake needs to get a clue before he writes to expose his stupidity.

[random_radar]

SanRia I think you are wrong. Do you have any facts to back up your claims? Care to cite some studies or verifiable statistics that we can look at for ourselves? No? You are still entitled to say anything you want, but I won't take it seriously.

Whitney Blake, on the other hand, quotes from surveys and studies that you can read for yourself. The purpose of the article was to introduce you to information that contradicts the popular myths. I still may not agree with her interpretation, but I put a lot more credence in her position when it it backed by facts.

I prefer knowing the truth even if I don't like it. It just seems foolish to believe in fantasies. I don't want to be an emperor wearing no clothes.

[random_radar]

Kronocide, if everyone improved their skills and became twice as productive, then they would be worth twice as much. More productive employees command higher wages and obtain greater wealth. It is not a zero-sum game. The poor of today have a longer life expectancy and enjoy greater comforts and standard of living than the Pharoahs.

Any employer who refuses to pay for a good employee will lose that person to an employer willing to pay more. Competition among those greedy employers guarantees that over time, the wages of the best employees rise to their true market value.

On the other hand, employees who are less valuable (whether due to ineptitude, lack of motivation, dishonesty, or lack of talent) tend to decline to the bottom of the economy. In the end, they become a prey to the shrewd employers who can figure out a way to make use of them.

Of course, anyone who feels strongly about an issue can use their purchasing power to reward or punish businesses. This has been done successfully with boycotts on issues of racism, pornography, and environmentalism. Everyone is free to patronize businesses that pay higher wages. I choose to pay more to shop at a union grocery store instead of Walmart because my neighbor works there and I like the ambience.

[mtsprink]

The whole premise of his argument is so off base and ridiculously stupid, it does not warrant a response beyond this.

[kronocide]

Random_radar, you're right in that it's not a zero-sum game. But it doesn't have to be one for my argument to hold. All it takes is that there are more workers than places of employment. Competition guarantees that the bottom layer (skill-wise) of the workforce will be payed minimum wage _regardless_ of what skills they possess. (That they benefit from technological and scientific progress and live longer than the Pharaohs has nothing whatever to do with it.) If salary/wealth was related to skill in the way you suggest, I would be more wealthy than the English noblemen of the middle ages, because I'm literate (and know some other stuff). But I'm not. To put it succinctly, skill only has relative worth on the marketplace, but minimum wage is an absolute number. That's why an increase in minimum wage improves salaries (and hence living conditions) for the bottom layer of the workforce, something libertarian encouragements of "try harder" can't do.

[kronocide]

This article is funny. On the one hand, an increase in minimum wage hurts the poor because it makes companies relocate and hire less people. On the other hand, it doesn't help the poor because companies aren't really paying minimum wages anyway. Incremental, mutually exclusive arguments is a sure sign of desperation. Then there is the suggestion that "if someone has skills worth $5 per hour, an employer is unlikely to hire him for $7." Newsflash, if someone has skills worth $5 per hour, an employer is unlikely to hire him for $5. Then there would be no profit at all. Skills don't have a fixed economic worth, it's a matter of supply and demand, just as with everything else in our market economy.

[bon1ie]

". . .slave wages . . ." that is not possible. Since when do slaves receive wages? Slaves were 'taken care of' as far as food, clothing and shelter 'and they should appreciate it instead of trying to be "free"'. So if the house slaves received 'wages', were the other slaves given 'wages'?
Tell you what, why don't you head to the nearest library, go to the area where the microfilm of your local newspapers are kept and view the papers during the last date of minimum wage change - check the grocery and dept store ad months before and then after. That will tell you the true story of minimum wage.
If I was an active gambler (life makes you an inactive gambler) I would bet that the prices of all goods increased in proportion to the increase in the minimum wage.

[sharncedar]

I think we should let the market take care of things like wages. We should just allow employers and employees to decide for themselves how much they are worth. I think that a free society, full of free people, all making free choices, is like a kind of magic. With no rules, with no plans, with no structure, everything will happen magically. We don't need to think about our society, or try to improve it, or do anything really, the free market is like a tremendous kind of magic that makes everything happen so that everyone will be happy, or at least everyone who matters.

[rbird8728]

I am retired and in my 70's. As far back as I can remember, every time increasing minimum wage was brought up, there was the doom and gloom bunch that predicted that business would fail, burgers would go unflipped and tires would not be changed. Well, it's all untrue. Whatever the self-styled economic reasons, people and businesses survive if they have what it takes; that means dedication, capital, etc. People at the top of the monetary ladder never see a necessity for others to survive. It makes the plutocrats feel vunerable if the waiter or trash collector makes a buck more per hour. With all that extra income why, they might even want to move into our neighborhood.

[magnolia33]

My concern on this issue is what it says to the 16-19 year olds trying to find a place to make their start in the work world. They want to become responsible debt free adults but the credit card companies hit them up as soon as they are 18, enticing them to spend what they don't have...the housing market for the most part is closed to this segment of workers...and minimum wage is what it it and gas, for example, is what it is. What are we saying to these young people who are the future. How are we as their collective leaders, motivating them by our actions and moral support? I have also seen, though I can't cite these articles right at this moment, much that has been written about how young people are leaving home later in life...around 25-27. This is putting so much stress on American families and part of the reason for that is wages and the job market. We have some serious issues surrounding our young people at this time. We see them involved in so much risky behavior that wouldn't finding jobs and keeping them busy and involved possibly keep them away from some of these riskier activities?