Minimum Wage: Poverty

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Poverty (and who makes minimum wage) gets even more complex:
  • 75% of it is due to underemployment (which is more insidious than unemployment)
  • Most poverty is short term (short term unemployment that effects people in one year).
  • Most of the rest is due to under-education, immigration, fatherless families, and finally bad social program programs (which holds more people down than they helps people up).

Explain to me how raising minimum wage helps with any of those things?

I can explain how fewer teenage jobs means more teenagers doing other things, like getting pregnant. Fewer opportunities for the less educated and immigrants doesn't help them out. And so on. So target the right people, instead of offering blanket subsidies to the wrong ones. Instead of raising the minimum wage, Congress should look at other ways to aid the working poor that actually focus on providing help to those who need it.

And that' the first rule of economics: do no harm. If you can't show how you're making something better, and the other side can show how you're not, then you're wrong. Or don't knock down fences without understanding why they're there.

Who makes minimum wage?

The myth that minimum wage needs to be a sustenance income is perpetuated by those ignorant of the facts, or those who are willing to deceive the public for political rewards. In 2011 and 2012 (according to Bureau of Labor Statistics and the Census Bureau), the average family income for minimum wage workers is over $53,000 a year. This is part of the “livable wage myth”.

Some facts:

  • Most people on minimum wage aren’t living off that wage.
  • Of the 286,000 that worked full time and earned exactly the minimum wage, only 9 percent (25K people) live below the poverty line and work full time. (there are 1.9M that make below the minimum wage -- but since they're excluded from a minimum wage hike, it's irrelevant to what we’re discussing).
  • The average minimum wage contributions account for 35% of total family income. So increases to minimum wage, don’t benefit the working poor much, but they benefit teens, students and the elderly a lot.
  • 53% of minimum wage-earners are teenagers (up to age 24). Over 63% are enrolled in either high school or college.
  • A large group of minimum wage workers is retired people using minimum wage to supplement their retirement income (or save their marriages by getting out of the house); but they don't want to earn too much money or they lose their Social Security benefits. Ignoring the stupidity of punishing people for working (or the immorality of saying you pay into a system, but can only get your money back if you aren’t contributing to society), this means raising minimum wage, lowers what Seniors can choose to do.
  • Racial breakdown is mostly white (or hispanic), with Asians and Blacks under-represented
  • Over 57% of all minimum wage workers work part-time (year round), 25% work full-time year-round, while 28% work part-time for only part of the year. Full time workers (in higher paying jobs) often take a second part-time minimum wage job (short term); think teachers doing a summer job, or someone taking a job at christmas (to buy a few extra gifts). Another large group is spouses of a full time worker, working part or full time, just to augment their income or to get out of the house
  • Only one in five (20%) minimum wage-earners lives in a family that earns less than the poverty line (which is about 17% of the population) — so there's very little over-representation of poverty in the minimum wage earners. And most minimum wage earners are not sole-providers but supplementary incomes.
  • 6.1% of adult minimum wage earners are single parents working full time, as compared to 6.3% of all adult hourly workers. Single parenthood is under-represented in minimum wage jobs — so all the claims that it’ll help Single Mom’s is bullshit: raising minimum wage doesn't help that problem. Raising the minimum wage helps 10 teenagers or 19 other people before it helps one single parent trying to make ends meet on minimum wage.
  • Minimum wage is a starting salary: nearly two-thirds of minimum wage workers move above the minimum wage within one year. The median raise for those workers is >10%, and 14% for full-time minimum wage earners. Entry-level jobs are not lifelong dead-end jobs, but they allow workers to establish a work-record so they create opportunities for better paying jobs. Raising minimum wage makes that harder.

So that means a national minimum wage hike to say $15 (from current $7.25) would increase the costs to 91% of employers, to help 9% of the people (the poor). In dollars figure it’s a $4.433B hit to the economy, for a $387M gain in saved benefits/social programs. (Both are calculated by number_of_hours x hourly_rate_increase x total_fulltime_hours).

Only in a Democrats mind can that be a net win. Since Democrats see the theoretical benefits ($387M), and ignore the hidden costs ($4.4B) they think they’re getting ahead. But they’re just proving The Broken Window Fallacy, again. If you want to help those 25K people that are full time minimum wage (and poor), you could hand them each $15,500 each year (on top of their wages), and it would cost 8% of what it would cost to raise the minimum wage.


References

More

Minimum Wage

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The minimum wage and living wage warriors seem reluctant to accept the economic realities: price and wage controls almost never work. There are extremely rare cases where they can work (or do minimal damage) in one small location for short amounts of time, but there's no magic wage that's right for everywhere and everywhen at once. Thus wage controls start out bad and get worse over time.

I like to use thought experiments and the socratic method to try to get min-wage supporters to think:

  • What's a fair wage for both NYC and B.F. Idaho?
  • If $15/hr is good, why not $150/hr? (Every answer why $150 is bad also applies to $15)
  • If I raised your salary by 5%, but the cost of everything you buy by 10%, would you come out ahead?
  • If I’m willing to pay someone $10 to do something, and they’re willing to take $10 to do it, what business is it of the government or voters?
  • Who knows more what's a fair labor value for a job, in every market in the U.S.: the employer and employee involved, or a bureaucrat in D.C. or voter in Barstow? Why?

And so on. To understand minimum wage arguments, read on.

Main article: Minimum Wage

The Broken Window Fallacy

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The Broken Window Fallacy is a fundamental concept of economics (and logic) about seen advantages versus unseen costs. Henry Hazlitt summed up the art of economics as not merely looking at the immediate consequences but the longer effects of any act or policy, and tracing those consequences not merely for one group but for all groups

Chesterton's Fence

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"Don't ever take a fence down until you know the reason it was put up"
~ C.K. Chesterton
Main article: Chesterton's Fence