The problem is that the $7.6B "savings" is 3.8% of the $200B the federal goverment spends annually to provide social support services. That's hardly the kind of cut in welfare payments the proponents of the hike in the minimum wage want people to believe.
"But, it's a move in the right direction, isn't it, as it would save taxpayers' $$$s. So, why not raise the minimum wage?" they ask.
The American Action Forum responds that most of those who work for the minimum wage don't live in poverty. The inconvenient facts:
- 20% of those earning the minimum wage live in poverty. In plain English, 80% of those earning the minimum wage don't live in poverty.
- 36.6% of those earning the minimum wage live with their parents in households that average $100k/year. In plain English, 7.32% of those earning the minimum wage live in solid, middle class homes.
"Well, what about the other 92.68% of those 20% who don't?" proponents ask.
Again, the data indicate that many of those individuals whose earnings would increase as a result of a hike in the federal minimum wage wouldn't be less likely to seek and need welfare benefits. Why? They don't need those benefits in the first place.
Moreover, raising the federal minimum wage appears to increase unemployment:
- One study indicates that a 10% increase in the minimum wage correlates with a 0.5% (that's one-half percent) point drop in the job growth rate.
- Raising the federal minimum wage to $10.10/hour, the nation would lose 2.2M new jobs.
- That's a $19.8B in lost earnings/year. Compare that amount of $$$s to the alleged "savings" touted by proponents of the increase in the federal minimum wage.
The people who need those jobs, low-paying jobs as they are, won't have those jobs if the federal minimum wage is increased to $10.10/hour. In contrast to what proponents would want people to believe, any sober analysis of the data suggests that increases to the federal minimum wage will not lead to a significant reduction in welfare spending. Proponents also ignore the negative consequences for the labor market. Yes, welfare spending decreases, but only marginally; jobs aren't created, but disappear. What a great social policy!
As with most liberal social policy ideas, the idea sounds compassionate and seems to increase justice. But, once again, the idea carries with it unintended negative economic consequences.
When it comes to good governance, good intentions just aren't good enough.
Let the discussion begin...
To read the American Action Forum report, click of the following link:
"Minimum Wage: Budgetary Savings vs. Labor Market Conditions."