THE RECENTLY DEFEATED minimum wage hike proposal in Congress has resulted in a regurgitation of economic misinformation. Here's a sampling of the propaganda:
Myth No. 1: Millions of "working poor" are trying to feed a family of four on a single income of $5.15 an hour. It's simply not fair or ethical for someone in modern America to work 40 hours a week and not earn enough money to afford the basic necessities (which, by the way, includes color TVs, appliances, cars, the latest designer sneakers, etc.).
We've all heard rhetoric similar to this ad nauseam. A recent Reuters article stated that the minimum wage "equat[ed] to $10,700 a year for full-time work, well below the roughly $20,000 needed to keep a family of four above the federal poverty level." The article then cited Labor Department statistics that there are now 1.9 million workers earning an hourly wage at or below $5.15, "with most of those people working in service-oriented jobs." Conflating these two statistics leads one to believe that almost 2 million people in the United States are trying to keep families financially afloat, when, in reality, the vast majority of minimum wage earners contribute second and third incomes to a household. On average, a family with a minimum-wage worker has a total income of $43,000, according to the U.S. Census Bureau.
According to the Bureau of Labor Statistics, in 2005, only about 2.5 percent of all hourly-paid workers earned $5.15 or less. More than a quarter of these workers are
between the ages of 16 and 19. About 60 percent are part-time workers. Only 1.5 percent of hourly-paid workers over the age of 25 made minimum wage. A minimum wage hike, then, would not be pulling families above the poverty line, but putting a few extra dollars into the pockets of teenagers and college students working in retail or at fast food joints. Historically, most beneficiaries of minimum wage hikes have been white and middle or upper-middle class, which brings us to . . .
Myth No. 2: Increasing the minimum wage will help poor people and minorities. In fact, scores of economic studies have shown that minimum wage increases do not help the very class they are supposedly designed to assist--poor, underprivileged, uneducated minorities. In fact, such legislation may actually harm this group.
David R. Henderson of the National Center for Policy Analysis (NCPA) noted in a brief analysis released in May that an increase in the minimum wage "entices some teenage students to drop out," leads to cuts in benefits such as health insurance, and increases poverty. He cited a 1997 National Bureau of Economic Research study, which concluded that the higher minimum wage rates passed by Congress in 1996 and 1997 increased the number of poor families by 4.5 percent.
The Mackinac Center for Public Policy points to Labor Department statistics of 20,000 jobs lost after the legislation passed, and unemployment rates increasing from 37 to 41 percent for African-American male teenagers.
Similarly, the NCPA found that the poverty rate went from 12.8 percent to 14.5 percent following wage hikes in 1990 and 1992. Even Chicago mayor Richard Daley opposed the city council's decision to boost the city's minimum wage from $6.25 to $9.25, labeling the move as one that is "basically going to hurt the minority community," as large retailers consider relocating proposed stores to the suburbs.
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