03/05/2006
Why raising the minimum wage causes maximum harm to the poor
by Charles Owens, NFIB/Michigan State Director
Why shouldn't teenagers living at home with their well-to-do parents get a raise? Why shouldn't highly paid union employees get a bump in pay? Why shouldn't workers making $15 to $20 an hour get more money? So what if poor people end up with no jobs, reduced hours and higher prices on basic goods and services? Who cares as long as the rich keep getting richer and the poor get poorer? Could you get behind this? Could you support this effort? No?
Well, if you have bought into the big myth being peddled by those pushing the ballot initiative to increase Michigan's minimum wage, you already have. At first blush, the idea of putting more money into the pockets of the working poor seems like a good one. But raising the minimum wage isn't the same as delivering more income to people with low-skill, low-paid jobs.
Supporters of increasing the minimum wage would like you to believe that the typical minimum-wage worker is struggling to raise a family on a single income. While this tugs at the heart strings, it simply is not true. Most of the benefits of a minimum-wage hike go to non-poor families. The average family income of Michigan workers who would benefit from a minimum wage hike: $ 51,034.
According to U.S. Census Bureau data, fully 86 percent of employees in Michigan whose wages would be increased by a minimum-wage hike either live with their parents or another relative, live alone, or have a working spouse. Only 14 percent are sole earners in families with children, and each of these sole earners has access to supplemental income through the Earned Income Tax Credit, a much better way to target help to those who need it. Furthermore, of that 14 percent, the majority do not work full time, and nearly a quarter work fewer than 20 hours per week -- a big problem when you consider that many small employers respond to minimum-wage hikes by cutting hours or jobs. So much for helping the working poor.
But these people haven't had a raise since 1997! Minimum-wage earners that really want to do better and improve themselves by learning job skills do not stay at minimum wage for very long. Adjusted for inflation, the annual median wage growth for minimum-wage workers is nearly six times higher than for workers earning above the minimum wage.
Well, then, what about those poor workers in the restaurant industry that actually get paid less than minimum wage? Sorry, another big lie put out by minimum-wage hike supporters. The fact is no one in the foodservice industry gets paid less than the minimum wage. The tip credit is one of the most misunderstood concepts about Michigan's minimum wage. Michigan workers who earn minimum wage and also receive tips from customers often earn far more than the current $5.15 per hour. It's not unusual for Michigan minimum-wage workers who also collect tips to earn $15, $20 or $25 or more per hour. Under the state's minimum-wage law, employers can credit up to $2.50 per hour of an employee's tips toward their obligation to pay the minimum wage. But if the employee's tips do not cover the $5.15 minimum wage, then they always get at least the minimum.
So if all this is true, then why would anyone want to put a minimum-wage hike on the ballot instead of supporting initiatives that would actually send help where it's most needed? The sad fact is that the supporters of this ballot initiative have no shame about throwing the working poor under a bus if it serves a greater political purpose. In this case, that purpose is to generate a higher voter turnout in November to help their candidates do better at the polls, and labor unions have no problem using the working poor as a front to put inflationary pressure on the entire wage structure, a situation that benefits their bottom line. That's the real reason unions are pushing this issue.
Wages are more than just money; they are a unit of measure. Jobs and careers are valued by the wages they pay. They guide workers to where they should work if they want to do better for themselves and their families. They measure and reward the value of reliability, education and skill. To send a message to the working poor that the only way they are going to get a raise is if the government and politicians see fit to give them one is the greatest disservice done by those who purport to help them.
