A higher minimum wage doesn't reduce poverty, says... the federal government

We reach the end of the year with yet another tale of crazy, one percenter wingnuts trying to claim that jacking up the minimum wage won’t do much to alleviate the issues facing the poorest Americans who the Democrats are seeking to help. This time the hateful claims are coming from… a study published by the federal government.

Increasing the minimum wage is an inefficient way to reduce poverty, according to a Fed research paper that comes amid a national clamor to hike pay for workers at the low end of the salary scale.

David Neumark, visiting scholar at the San Francisco Fed, contends in the paper that raising the minimum wage has only limited benefits in the war against poverty, due in part because relatively few of those falling below the poverty line actually receive the wage.

Many of the benefits from raising the wage, a move already undertaken by multiple governments around the country as well as some big-name companies, tend to go to higher-income families, said Neumark, who also pointed to research that shows raising wages kills jobs through higher costs to employers. Neumark is a professor of economics and director of the Center for Economics and Public Policy at the University of California, Irvine.

I’m sure that Hillary Clinton and Bernie Sanders will find a way to spin this story, as well as Ben Carson for that matter. (Rick Santorum too, now that we mention it.) But the numbers here really don’t come as any surprise when you stop to think about it. This report doesn’t deal so much with the employment impacts of a higher federal minimum wage, but more with who is getting those wages.

As the study shows, 57% of families currently below the poverty line have no members in the workforce, receiving all of their income from social welfare or entitlement programs combined with charity. A higher minimum wage has no effect on these families. Of the roughly 3 million workers who do receive the minimum wage, more than half are between the ages of 16 and 24 and are generally not the primary breadwinners in their households. Further, they found that among the families below the poverty line, nearly half (46%) are making more than the proposed $10.10 per hour already and more than one third (36%) are making 12 dollars per hour or more.

With those figures in mind, only a relatively small fraction of Americans living below the poverty line would see one extra red cent in their pockets with a higher federal minimum wage. And what can not yet be predicted is how many of those who did would be offset by the number of employers who would simply terminate unskilled labor positions to avoid the increased labor costs, moving to either more streamlined services or automation. And this is coming straight from the feds. How will the Fight for Fifteen folks and their pet Democrat candidates respond to this new information aside from abject denial? Oh, wait… the denial started already.

“The mainstream view, as illustrated by meta-surveys of the whole minimum wage research field, is that the job loss effects of raising the minimum wage are very, very small,” Paul Sohn, general counsel for the National Employment Law Project, said in an email to CNBC.com.

I’m sure the phrase “very small” will come as great comfort to the guy who loses his job operating the fry machine around the holiday season. But don’t let that bother you, guys. We’re from the government and we’re here to help.


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Ed Morrissey 10:01 AM on June 02, 2023