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Raising the Minimum Wage Won't Solve Poverty

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Raising the Minimum Wage Won't Solve Poverty

July 8, 2014

It would be wonderful if we could lift millions out of poverty by raising the federal minimum wage. While it may be well-intentioned, this proposal will not alleviate poverty in America. These three numbers below tell us why:

47 million: The number of Americans who live on incomes

below the federal poverty line

3.3 million: The number of Americans earning the minimum wage or below. Half of these earners are under 25 years old, so it is normal for their earnings to be low, and two-thirds are working part-time.  

750,000: The number of minimum wage earners living below the federal poverty line. This is only 1.6 percent of those in poverty.

 

 

When we do the math, we see that 23 percent of minimum wage earners live in poverty. If we are going to lift millions of Americans out of poverty, we are going to need much more than an increase in our federal minimum wage.

Raising the minimum wage could put out of work the very people this policy aims to help. It forces employers to pay workers more, but it does not force employers to hire those with the same skills that they formerly employed at a lower wage. They could hire higher-skill workers and use self-order kiosks in restaurants or self-scanners at supermarkets.

For these 750,000 people, raising the minimum wage might help them out of poverty, but only if they are able to keep their jobs after the wage increase. Those who are no longer employed at the higher minimum wage are not lifted out of poverty, they are in worse straits because now they are unemployed.

Applying a one-size-fits-all standard creates problems in a country as geographically and economically diverse as the United States.

Living costs vary across the country. While affluent Seattle may be able to sustain a $15 minimum wage, the same cannot be said for the local economies in rural America. Seattle's median hourly wage is $22.43, and less than 8 percent of employment is in food preparation.

In contrast, food preparation is the largest major employment group in Myrtle Beach, South Carolina, where the median hourly wage is only $11.52. The federal government should not force these two cities to have the same minimum wage. Rather, individual states should be able to set their own wages.

Real problems, such as poverty, require real solutions, such as improving the education system so people are better prepared to earn high-wage jobs. Or attracting more businesses to America by lowering our 35 percent corporate tax rate to our competitors' average of 24 percent. Raising the minimum wage is well-intentioned, but it is not a real solution to poverty.

 

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