Monday, May 11, 2015

Robert Reich and his faulty argument for a higher minimum wage

In a recent video Robert Reich makes the case (albeit a bad one) for a $15 minimum wage. I have addressed several of his argument's flaws in other posts (a "virtuous" cycle of demand is nonsense, the least skilled and least productive do get pushed out of the labor market, corporations already do their part) so in this post I want to highlight his misleading statement at the 1:35 mark that "many" of the workers who would be helped by a higher minimum wage are key breadwinners.


The chart above was taken from the whitehouse.gov website. This chart shows how many of each type of person would see a direct pay increase due to a higher minimum wage. Keep in mind that only 3.6 million workers, or 4.7% of the hourly paid workforce, made at or below the federal minimum wage in 2012. Because the Whitehouse's plan is to raise the wage from $7.25 to $10.10 it claims that 19 million people would be directly affected. But out of these 19 million, only 26% of the workers who would experience a direct increase have kids. 26% doesn't seem like "many" to me. 12% are in fact teenagers trying to earn pocket money, as Mr. Reich puts it, which as a group is almost as large as the married-with-kids category that Mr. Reich seems so concerned about (16%) and larger than the unmarried-with-kids group (10%). 62% of those who would be directly affected are adults over the age of 18 with no kids. So while it may be difficult to support oneself on a minimum wage job, the current situation is hardly the family-with-children crisis that Mr. Reich is making it out to be.

If we want to help working parents with children there are other, better ways to do that. One way is to increase the earned income tax credit (EITC). The EITC only applies to the working poor and does not create the same barrier to employment that the artificially high minimum wage does. It would be better if the people who wanted a job could get one at some wage and then programs like the EITC chipped in to raise their total income. Then the lowest skilled people could gain skills and move up the income ladder over time rather than being priced out of the labor market right from the start.

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