August 23 2011
Minimum Wage Laws Fail to Target the Poor
Over the weekend, New Hampshire Republicans voted to repeal the state's minimum wage law. Some lawmakers likened the rule to another job-killing regulation, while others argued that it was unnecessary, since teens would be the primary beneficiaries of any bump to the state's minimum wage. (It should be noted that the repeal won't have a huge effect, as the minimum wage in New Hampshire is the same as the federal minimum wage, $7.25/hour).
Unsurprisingly, one of the young blogger-pups at Think Progress cried foul, claiming the repeal is a "slap to the face" to young people who can't simply fall back on "the inherited wealth of their parents' income." But that statement - despite just dripping with class-conflict sentiment - ignores the problem with minimum wage laws as a form of welfare: they're a terrible targeting mechanism for providing more income for people who are actually needy.
As I wrote a couple of weeks ago, many low-wage workers are simply young workers who have no experience or skills yet. Almost all young people enter the labor market on the low end of the wage scale. While many of these workers are poor, unskilled, and juggling multiple jobs to make ends meet, many are high school and college students who work at part-time summer jobs for extra spending money. While I would have welcomed a pay bump back when I was a 15-year-old kid taking orders at the McDonald's drive-thru window, I couldn't have argued that I needed the money.
I'm sure some of my old co-workers could have used more money, but that's not the point. Raising the minimum wage doesn't discriminate between those who are truly needy and those whom are still on their parents' health insurance plans. Passing a law that increases an employer's marginal labor cost by 24% overnight (raising the hourly minimum wage from $7.25 to $9) is surely going to have consequences.
I'm no anti-welfare hawk, nor am I unaware that a lot of people don't have the kind of privileges I had growing up. I like the idea of a modest social safety net. I just want one that's actually targeted towards people who are in need.
*Correction: When I said "marginal labor cost" in the fourth paragraph, I didn't mean "marginal" in the econospeak sense. I meant the total cost of an employer's low-skilled ("marginal") workers, or those earning the minimum wage.