In his State of the Union address, President Obama issued a challenge: “Tonight, let’s declare that in the wealthiest nation on earth, no one who works full-time should have to live in poverty, and raise the federal minimum wage to $9 an hour.” On this he finds support from Governor Cuomo, who proposes increasing the New York State minimum wage because, among other things, it “reduces poverty.”
Conservatives, of course, reject these proposed increases. Raising the minimum wage, they insist, will kill jobs, especially low-wage jobs. Commentator David Brooks made this claim on PBS immediately following the State of the Union address.
And House Speaker John Boehner quickly tried to puncture the president’s proposal: “When you raise the price of employment, guess what happens? You get less of it. At a time when American people are asking, ‘Where are the jobs?’ why would we want to make it harder for small employers to hire people?” Brooks and Boehner are pushing familiar talking points: minimum-wage legislation has negative consequences and there are better ways to address poverty.
As is frequently the case, our politicians and media analysts are roundly mistaken. Consider the conservative reaction. Economists have great difficulty establishing any significant negative relation between modest increases in the minimum wage and declines in employment levels.
Moreover, the common claim that low-wage workers are typically teenagers or are working part time – and so not “really” poor – is misleading. Projections conducted by the Economic Policy Institute regarding the impact of a higher federal minimum wage suggest a vast majority of those affected would be over 20. A majority would be women. Most would be working full time. And nearly 30 percent of those affected would be parents.
Finally, conservatives often insist that targeted programs like the Earned Income Tax Credit are a better way to alleviate poverty than minimum wage legislation. This too is debatable. On the one hand, such tax policies largely represent a hidden subsidy to employers who are spared the burden of paying reasonable wages. On the other hand, they might actually dampen wages because employers assume, often erroneously, that their workers will be eligible for a tax break. For that reason tax credits are better understood as complementing rather than replacing minimum wage legislation.
If conservative skepticism seems merely to mask basic resistance to government intervention, the Democratic case is overly optimistic. The federal poverty level for a family of four was $23,050 for 2012. Imagine, as President Obama suggests, we increase the federal minimum wage from $7.25 to $9 an hour. That means a full-time minimum wage worker would earn a gross annual income of $18,720. If she lives on her own, this would sustain her above the federal poverty level for individuals. But if the worker has a family, it obviously falls well short.
Our point is not that the president and governor are wrong to recommend raising the minimum wage. Doing so, even to the levels being proposed, can make many people better off. But doing so is quite unlikely to propel many households out of poverty.
This hardly is an abstract complaint. It is directly relevant to Rochester where, in 2011, the overall poverty rate stood at over 29 percent and where just over 43 percent of all children lived in poverty. Raising the minimum wage can go some way to mitigating economic hardship in the city. But it would be only a start. It is the least we can do.
Susan Orr is assistant professor of political science at SUNY College at Brockport. James Johnson is professor of political science at the University of Rochester. They live in Hamlin.
Mary Anna Towler is wrestling with a cold. Her Urban Journal returns next week.
“Raising the minimum wage can make many people better off. But it’s unlikely to propel many households out of poverty.”
This article appears in Feb 27 – Mar 5, 2013.
Trillions of dollars have been expended on the ‘war on poverty’ since the 1960s and there seems to be more people living in poverty than ever. Can we agree that it isn’t working?
Not true. Johnson spent over $200 billion on the Vietnam War. Reagan spent hundreds of billions on “ending the Cold War. We have redistributed wealth upwards for four decades. There are more people living in poverty because the vast majority of economic gains have been in the top 1% of the population, who aren’t the “Job Creators” but greedy. They are SITTING on trillions in unused capital right now that they could be using to create jobs. We have also sent millions of jobs overseas for decades, because people in China and India don’t need health care or retirement plans (That’s sarcasm by the way). We’ve spent very little fighting the war on poverty and a great deal expanding it.
Exactly, Seth; in fact, at the height of the Vietman War under LBJ, we were spending in three weeks on Vietnam what we were spending on one year on all of the Great Society programs combined. And under Reagan, aid to cities fell 59%, but the wealthiest 1% got 55% of Reagan’s tax cuts; the overall share of the pie for that lucky 1% doubled in eight years; the only commodity to fall in price in the 80s was cocaine . . . and before Reagan our country was the world’s No. 1 creditor nation, but after Reagan our country was the world’s No. 1 debtor nation. So don’t you just love it when Republicans prattle about “fiscal responsibility” or “shared sacrifice”? And that notion of “trillions” spent on the War on Poverty is deranged.
The point is the the federal government has been giving trillions of dollars to ‘the poor’ for decades and we still have more poor people that ever – what’s wrong with this? What else should we do?
One of the biggest problems in this debate is the validity of both sides’ arguments.
The system as is is not working to raise anybody out of poverty. AND Raising the minimum wage isn’t going to lift more than a few people out of poverty, and then not for very long.
Continuing the fight a failed “War on Poverty” with the same weapons we’ve been using will result in more failed battles.
Who are the impoverished, for the most part? Those without a college education, and frequently without a high school diploma, as well.
What jobs are being created here in America under the current “recovery”? High tech and service industry. Service industry isn’t growing fast enough or pay well enough to keep up with the “demand” for employment. High tech will continue to be out of reach of the undereducated.
We need more jobs that pay a living wage that are also open to the undereducated. Whether this means we step back from some technologies and build products that can be repaired by people instead of being disposable, or we end incentivizing off-shoring of jobs, or some other method, until we can employ ALL the employable, we will not solve this problem using either Democratic or Republican methods.
Also, if/when we ever get those jobs back, we need to return to the days of significant unionization of the work-force. I have no idea why conservatives hate unions… they are voluntary assemblages of people working on behalf of their own self-interest. I know no one who works in a union “shop” who wishes it were otherwise, and know plenty who would appreciate the benefits of having their entire company’s workforce behind them.
Given the likelihood of either recommendation ever coming to fruition, I’m quite certain that the arguers over this issue will continue to argue over and past each other, solving nothing. Only big business and bankers benefit… as they always do when the people are getting screwed over.
@Bart: We can start by being honest. We have hardly spent “trillions” on the poor.
Why don’t we look at the policies from 1945 – 1973, you know, when we had a growing, robust middle-class. There is no chance of improving the lot of the poor until the government and business priorities are to continue to screw the middle class. (Hint: it did not involve extracting from the bottom 99% and giving to the top1 %.)
Of course a modest increase in the minimum wage will not raise the poor up to the middle class. (And, really, what serious policy person has even remotely suggested that? Can we do away with that straw man?) Can we at least keep up with, for example, the 1970 Consumer Price Index equivalent? We can’t afford that? Really
It’s not like we’ve entered an era of enlightened management, so, yeah, unions are a good thing. Management that whines about this truth might be reminded it was them – modern American management – who broke the half-century covenant with labor, for which we’ve been paying a heavy price for the past third of a century.