Reply to "The Mythology of Minimum Wage"

The defenders of the "American way of life" over at the Weekly Standard are at it again:

The Mythology of Minimum Wage
Any increase is likely to hurt the very people who need the most help.
by Whitney Blake

Ms.(?) Blake writes a critique of current propaganda surrounding the effort to increase minumum wage.

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.

Evidently Ms.(?) Blake needs to do her(?) math. $10,700 won't cover real basic necessities. While we can grant that many of the poor are also attracted to consumer luxuries (and who can blame them after all, since the economy is geared towards producing unnecessary desires for unnecessary things in the citizenry through advertising and such), her comment about luxuries that the poor may buy is nothing but a smokescreen and a way of putting them in a bad light--"look, it's their own fault if they waste money on luxuries"--and so what if it is? Does that mean the claim that $10,700 is not a living wage is false? Not at all. Nice fallacious argument.

Should we say it is an example of "poisoning the well"? Or a "red herring"? After all, we are not defining a living wage as that which supplies for both the basic needs of a family and whatever luxuries it may desire.

She then shoots herself in the foot pointing to those who are forced to supplement their income by taking on additional jobs, without addressing the morality of having a segment of the population working more than 40 hours per week. What is the impact of having such a burden imposed on the adults in a family on the children?

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 . . .

Over the age of 25? Nice number, but where are the rest of the statistics? Let's see, for 2004, 1.5 million reported being paid under the minimum wage. Is this true for 2005? How many were making about the minimum wage of $5.15/hr but below $10.00/hr? What is the distribution of wages relative to age and experience? For those in service sector especially, what was the rate of increase for hourly wages over time? And what are the typical caps to such increases? Where does additional income from, and does it require both parents to be working? By focusing on a specific part of the population, one can manipulate appearances and make it seem like things are not so bad. Can failure to cite the source of one's statistics that is available to the casual reader of the article be a sign of something on the part of the writer? Ultimately I am not so concerned with the question of whether a minimum wage should be legislated and how much as with how many are not making a living wage.

Finally, as for the assertion that most of those who are making the minimum of $5.15 are PTers or between the ages of 16-19, how many of those PTers already have income to supplement it? For how many is this PT job unnecessary income? And are those between the age of 16-19 sub-citizens, not deserving equality with those who are above 19? Now, one can argue that they are dependents and don't need as much money as real adults. But how many of those teenagers are independents? How many are trying to save up money for college, which is arguably a necessity in certain areas of this country for economic security and mobility (if wages in most parts the service sector do not meet the living wage standard and jobs in production and trades continue to diminish)? Saying parents should pay for college would be akin to a second tax burden; saying students can and should take upon the financial burden for college without starting them on the road to having the means of doing so (and a promise of future employment and income is a shaky one, at this point) seems rather callous.

The page at the Department of Labor provides this foonote:

It should be noted that the presence of a sizable number of workers with reported wages below the minimum does not necessarily indicate violations of the Fair Labor Standards Act, as there are exemptions to the minimum wage provisions of the law. Indeed, the relatively large number of workers with reported wages below the minimum in 2004 includes about 350,000 hourly-paid workers reported as earning exactly $5.00 per hour; to some extent, this may reflect rounding in the responses of survey participants. The estimates of the numbers of minimum and subminimum wage workers presented in the accompanying tables pertain to workers paid at hourly rates; salaried and other non-hourly workers are excluded. As such, the actual number of workers with earnings at or below the prevailing minimum is undoubtedly understated. Research has shown that a relatively smaller number and share of salaried workers and others not paid by the hour have earnings that, when translated into hourly rates, are at or below the minimum wage.

Back to the article:

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.

For one, increasing the minimum wage forces businesses to pass the higher costs along to the consumer and/or hire fewer people over time. They might not fire anyone immediately, but they might be less inclined to add more workers or replace those who leave.

Accepting for now that the correlation reflects a true causality, what does this tell us except that what the popes told us about a system being unjust when individual business are forced to adopt unjust practices when doing otherwise would lead them to go out of business? Let us rephrase what is Ms. Blake saying: "Things are so bad that even if businesses were to approach a just living wage, the number of jobs available would go down."

Raising the minimum wage also makes it harder for those with few skills to find a job. If someone has skills worth $5 per hour, an employer is unlikely to hire him for $7.

Worth $5 per hour, according to him? The Free Market? And what does justice say?

Myth No. 3: If Congress doesn't increase the minimum wage, the "working poor" will continue to work for slave wages and be oppressed by greedy corporations. To the contrary, business owners do not need a federal mandate to ensure that an employee is paid according to the worth of his work.

Service sector companies such as Marriott have found that the high turnover rates common in unskilled positions are inefficient and costly. To reduce the turnover rate, they provide competitive salaries, and benefits such as health insurance, day care, and education opportunities, with the hopes of encouraging their employees to stay longer.

Ugh, competitive salaries? Competitive with whom? The competitors in the market? And are they paying more or less? Or is it just a question of offering similar benefits? And how do these salaries translate into hourly rates?

Wal-Mart just announced this week an increase in wages at more than 1,200 stores by about 6 percent (along with higher wage caps for each position). The average full-time hourly wage for Wal-Mart associates--at $10.11--is almost twice the current minimum wage. Wal-Mart also provides benefits including health care, 401(k) plans, and profit-sharing.

And why did Wal-Mart decide to do this? Out of a recognition of justice? Or because of growing controversy and public dissatisfaction with their practices? Now is $21028.80 sufficient for the husband to support his family of 2 or 3 with the wife at home to take care of the children? or not? Another sleight-of-hand with numbers. Numbers by themselves do not mean anything, if there are no [moral] standards by which they can be evaluated. Just because Wal-Mart of some other corporation is paying 2x the minimum wage (which we already knew wasn't sufficient to be a living wage in itself), does that mean that what they pay is sufficient to be a living wage?

While the recent bill fizzled in Congress, we probably have not heard the last of these misinformed cries for a government-mandated wage floor. It's time these minimum wage myths were retired permanently, as they do much more harm than good in attempting to better the quality of life for those that need it the most.

A rather shameless piece in support of the current system, ignoring the injustices that exist. "Let's blame legislation," rather than those who create the unjust conditions which prevent this sort of legislation from having beneficial consequences and improving those lives for which it is written.

Small wonder why I think more and more The Weekly Standard is trash, even though it may have some good pieces from Wesley Smith once in a while dealing with bioethics.

Edit: Found the Department of Labor's Characteristics of Minimum Wage Workers: 2005.