Tuesday, December 10, 2013

Why I Oppose Making the Minimum Wage a Living Wage

I get flack for opposing living wage schemes and minimum wage hikes... but I'm proud to oppose both. And I oppose them because I believe in a simple philosophy, "from each according to ability, and to each according to need." Neither the living wage nor a higher minimum wage live up to that belief - in fact, they undermine it. A column today from David Neumark perfectly captures my beliefs on the matter - so I quote from it heavily in the paragraphs below.

"Proponents of raising the minimum wage often point out that the real minimum wage is lower now than it was decades ago.  But the federal policy aimed at low-wage work and low-income families has shifted — wisely — away from reliance on the minimum wage and toward a generous earned-income tax credit, which is better focused on poor families.  There is nothing wrong with reducing our reliance on a less effective policy when we have adopted a more effective one.  In fact, we should hope that research on public policy leads to exactly this kind of outcome."

Minimum wages and living wages are indiscriminate and incredibly inefficient policy tools. I don't care if an 17 year old living at home earns $7.50 an hour to put a basket of frozen fries into a vat of oil. I would care if that kid suddenly made $15 for doing the same skilless task. However, I do care if a mother or father is working a full time or even several part time jobs and is still unable to meet the basic needs of their family. As a policy person, and as someone who believes in "to each according to need," the question must be - "how can we best support that family?" The answer is not some misguided one size fits all minimum wage that treats the 17 year old and the parent as if they are the same.

The Earned Income Tax Credit allows us, as a society, to support working families by targeting income to those who need it most. "So suggesting that federal policy addressing low-wage work and low-income families has somehow failed because the minimum wage has not kept pace with inflation ignores the fact that we have moved away from a focus on the minimum wage — a policy with many flaws — and toward the earned-income tax credit."

"Nonetheless, there are important differences between the earned-income tax credit and the minimum wage. The fundamental difference is that the earned-income tax credit aims benefits at low-income families with children, rather than simply low-wage workers. This is in large part its virtue, and it makes a lot more sense than the minimum wage’s focus on low-wage workers."

The earned income tax credit is targeted to working families, it enjoys bipartisan support, it's indexed to inflation, and it does not negatively impact the employment of teens and unskilled workers. It is in every way superior to a living wage or a higher minimum wage. And people and policymakers who want to help working families really need to shift their focus away from those inefficient and inappropriate policy options.