A higher minimum wage does not prevent poverty. In fact, it can lead to higher dropout rates among poor youth, perpetuating poverty.
Poor youth are the most sensitive to the desire to increase family earnings through working, and higher wages make unskilled jobs more lucrative. The result is incentivizing more people to drop out of school, hurting their long-term earning potential.
If your goal is to make sure everyone who wants a job can get one, you should oppose any minimum wage.
In 1987, The New York Times editorial board declared that “the right minimum wage [is] $0.0,” citing “a virtual consensus” among economists that “[r]aising the minimum wage by a substantial amount would price working poor people out of the job market.”
Does the minimum wage prevent poverty? Not at all. The government imposing a fixed minimum wage increases unemployment.
The large majority of data-driven economic studies demonstrate that increases in the minimum wage also increase unemployment. When wages increase, people are often willing to work even though employers can’t afford to hire them, leading to a demand-side inequality causing higher unemployment.
We don’t like to see anyone living in poverty, but making employers pay their employees a higher minimum wage of more than $10 an hour really won’t solve the poverty problem.
That’s because most people who earn minimum wage don’t live in poverty in the first place. They actually live in homes where at least one or two other people work… like a teenager whose parents have jobs.
Or they are retirees who have savings accounts and Social Security as their main income. In fact, only about 1 in 10 minimum wage workers lives in a household that the government would consider poor.
Does it make sense to try to solve the right problem the wrong way?
A well informed public is the best defense against bad public policy.
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