Monday, November 17, 2014

Why raising the Minimum Wage could hurt the working poor

There’s been much talk lately around raising the minimum wage to $15 an hour. It seems to me there is a very simple, fairly obvious reason why raising the minimum wage to $15 will absolutely not help the working poor as it is designed to do. That reason is competition.  

There are plenty of people who would not get off the couch for $7.25 an hour, but jobs that pay $15 an hour will grab their attention. Along with the low-skilled workers who usually apply for jobs pouring coffee, mopping floors and bagging groceries, we would also see far greater numbers of educated and professional people applying for those same jobs. The high school dropout could find themselves competing directly against the recent college graduate for that customer service job at the local supermarket.

Well-meaning folks who advocate for the $15 minimum wage imagine a transfer of wealth from the greedy corporations to the working poor, but what will actually happen is a transfer of wealth to the middle class. Many of the working poor will become the unemployed poor as higher caliber candidates grow ever more willing to take over their current jobs.

Compound this by the fact that many employers will predictably respond to a significant minimum wage increase by cutting workforce. Also a factor, low-income workers will lose supplemental means-tested federal benefits if their income increases, leading to a net gain of zero.

It is right and just that we should all wish for the working poor to live with dignity.  Nevertheless, exponentially increasing the willing talent pool for the jobs they currently hold by doubling the rate of pay can’t possibly be the best solution. The last thing those at the lowest rung of the economic ladder need is increased competition, but that's what they'll get. We simply cannot mandate that every job pay a family-supporting wage and not expect economic and sociological forces to promptly correct for it. 

So, what is the solution? Acquiring job skills that command more rewards in the marketplace is the only reliable way to put distance between yourself and poverty. Any solution to lift workers out of poverty that does not include an education component cannot succeed.

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