The US Federal Minimum Wage Should Be Raised to $11/hr

CON Many economists argue that raising the minimum wage won't alleviate poverty and would shake an already fragile economy. We can raise the minimum wage to $11 but if no one chooses to hire people or hires fewer people then we have effectively raised unemployment. Alan Reynolds is a senior fellow with the Cato Institute and an expert on wage policy. He says that employers would likely chose to scale back jobs. Increasing the minimum wage could result in a lot of people who have been earning the minimum wage earning less than the minimum wage. How is that possible? Mall employers, farmers, lots of occupations are exempt from the minimum wage. So the last time we raised the minimum wage, lo and behold, the percentage earning less than the minimum wage rose to 4.2 percent of the wage and salary workers - three million. You basically have more people trying to compete for grape-picking jobs, or working in selling hot dogs in the street or day laborer or babysitting and that sort of thing. Fast food restaurants typically pay more than the minimum wage. When you talk minimum wage, it's really entry-level, and it's usually young people trying to get that first job. And if they do pretty well, three months, six months down the road, they get a little raise. That would effectively end if employers are starting people at $11. Actually there really aren't very many people who are working full time who are poor according to Reynolds. Maybe one percent. People are poor very often because they can't work for one reason or another. Disability, unemployment, so on and so forth. Obviously, doing something that will raise unemployment isn't going to help poverty. People who can't get work at 7.25 an hour aren't going to find work at 11.00 an hour. By such a dramatic jump they know there'd be a big hike in youth unemployment. The youth wouldn't get the experience they need to get the second job, which is a better job. And it's just basically a bad idea all the way around. To push the minimum wage to $11.00 at a time when the economy is facing high energy prices and rising inflation seems outrageous to me. I think it's probably a very bad idea to try to help the poor by raising prices. Liberal arguments for increasing the minimum wage have a fundamental flaw: They restrict the set of policy choices to either a minimum wage increase or doing nothing. That means they overlook the single most important federal policy for the poor: the Earned Income Tax Credit. The EITC is a measure in the federal tax code to support the living standards of the poor without creating a "welfare trap" by diminishing the incentive to work. Economists widely consider the credit a success for reducing poverty while increasing employment. Created in 1975, the credit has been successively expanded in five times since. It is now the nation's largest anti-poverty transfer program. In its latest iteration, for families with two or more children, the credit is 40 percent of the first $10,750 of earned income. After earned income exceeds $15,040, the credit is phased out at a rate of 21.06 cents per marginal dollar, and it goes away fully at the point when earned income reaches $35,458. (The EITC code is similar for smaller families, childless married couples and singles.) 1) Cato institute 2) Bloomberg.com 3) NPR.org