President Obama’s proposal to raise the minimum wage to $9 an hour has led economists to explain, yet again, how this seemingly benign measure will lead to lost jobs, especially for teenagers. But to my knowledge, nobody has challenged Obama’s core assertion — namely, that a raise is needed to lift full-time workers with children out of poverty. I have good news for the president: These workers have already been lifted out of poverty.
On Tuesday night, Mr. Obama said:
We know our economy’s stronger when we reward an honest day’s work with honest wages. But today, a full-time worker making the minimum wage earns $14,500 a year. Even with the tax relief we’ve put in place, a family with two kids that earns the minimum wage still lives below the poverty line. That’s wrong.
He’s right that $14,500 is below the poverty line for a family of three (presumably a mother and two children; a family with two full-time workers — a mom and a dad — would earn well above the poverty line). But he seems to forget one of the most significant anti-poverty measures introduced in recent years: the earned-income tax credit. This family of three would be eligible for more than $5,000 from the EITC, putting its total income at almost $20,000 — above the $18,500 poverty threshold (my thanks to anti-poverty guru Ron Haskins at the Brookings Institution, who provided these figures).
Nor does that count other non-cash benefits that such a family receives automatically (food stamps, Medicaid, and free school lunches) or for which it qualifies (housing subsidies, childcare, etc.). All told, governments at the federal, state, and local level provide more than $1 trillion a year to help low-income families like this one.
I don’t mean to be churlish; a family living on such meager means will struggle mightily to make ends meet; there’s a strong humanitarian case for helping them live better (and for encouraging the mother to continue working). But there’s a better way to do so than raising the minimum wage: Raise the value of the EITC, instead.