The Facts on the Minimum Wage and Families

by Patrick Brennan

Heritage’s James Sherk has an informative post over on the Corner about the president’s plan to raise the minimum wage — using realistic measures of inflation, the president is proposing to raise it to levels much higher than it’s ever been. Reihan points out that the president’s proposal would raise the federal minimum wage by almost 40 percent, when Obama’s proposal just last year was only a 24 percent increase, meaning it would supersede every state’s minimum wage — which in this slack labor market is . . . not a great idea.

But I’ll take issue with another claim of the president’s: that he’d like to raise the minimum wage because “no one who works full time should ever have to raise a family in poverty.”

As Kevin Williamson has often pointed out, most people who work full-time are not in poverty. (The fact that they don’t or can’t work full-time, of course, often isn’t their fault — but then we need more full-time jobs or stronger families, not mandates for higher wages.) Second, one person working full-time at a federal minimum-wage job supporting a family of four is barely below the poverty line in terms of cash income. They earn, after tax credits, about $18,000 a year, when the poverty line is around $19,000: 

Even just one other part-time wage-earner in the family would raise them out of poverty, and that’s before all the non-cash government benefits for which they’re eligible. 

That’s not to say people in such a situation don’t lead extremely hard lives (it is to say that the government already provides enough support that they are not technically living in poverty). If the president is most concerned about helping people like that, raising the minimum wage is far from the right way to do it. You’ve no doubt heard this before, but most minimum-wage earners are not their families’ breadwinners. Most of them are not full-time workers, either, though that doesn’t mean they’re not breadwinners (and the problem for those breadwinners is a lack of jobs, not low wages). In any case, this makes it rather evident that a higher minimum wage isn’t a well-targeted way to help poor workers support families.

A better one: increasing the Earned Income Tax Credit, which especially benefits families (as the above chart shows), or expanding the child tax credit, as Senator Mike Lee wants to do. President Obama actually missed on this front, too, expressing interest in Senator Marco Rubio’s proposal to replace the EITC with a wage subsidy that is more generous to single workers. Rubio’s strategy has some real merit: It would make sense to replace the EITC, which arrives at the end of the year, with a wage subsidy included in every paycheck. But it wouldn’t do much, if anything, more for poor families. If that’s what the president considers the most problematic situation among working Americans, it was an odd proposal to suggest. Not nearly as odd, though, as claiming that a higher minimum wage is the right way to ensure families don’t live in poverty.

The Agenda

NRO’s domestic-policy blog, by Reihan Salam.