Dollars an hour, that is. There is a continuing push in Saint Louis and other cities throughout the country to improve the pay of low-wage workers. That is a noble sentiment and I, for one, hope that wages do go up. In fact, I want wages to go up for everybody. However, increasing the minimum wage is the wrong way to go about it.
If proponents are successful in raising the minimum wage to $15 an hour, there will be a lot of pain. First, such an increase will cause job losses. A Congressional Budget Office (CBO) report estimated that if the minimum wage went up to $9 an hour, 100,000 jobs would be lost. If the wage went up to $10.10 an hour, the number of jobs lost would increase to 500,000. If the CBO is correct about job losses, one shudders to think about how many jobs would be lost if the minimum wage went up to $15.
Is the loss of so many jobs worth the increase in wages for those workers who manage to keep their jobs? That’s a question for proponents to consider. They also should consider the fact that many people who work for minimum wage are not poor. Why mandate raises for them while risking job losses for the same people wage-hike proponents are trying to help?
There is a better way to help poor families. Both the CBO report and Professor David Neumark’s 2012 study on the minimum wage find that the Earned Income Tax Credit (EITC) is a better alternative for helping poor families than increasing the minimum wage.
The EITC is a refundable tax credit that provides direct cash assistance to low-income families. The tax credit is more effective at helping poor families because it is specifically targeted toward them. The minimum wage is not. For example, a teenager working a minimum-wage job whose father is a corporate attorney and whose mother is a surgeon would receive the same monetary benefit as a single mother of two working at McDonalds. That would not be the case with the EITC. If Missouri and other states really wanted to help poor families, expanding the EITC would be a more effective tool than increasing the minimum wage.