The Right Minimum Wage: $0.00
The
Federal minimum wage has been frozen at $3.35 an hour for six years. In
some states, it now compares unfavorably even with welfare benefits
available without working. It's no wonder then that Edward Kennedy, the
new chairman of the Senate Labor Committee, is being pressed by
organized labor to battle for an increase.
No
wonder, but still a mistake. Anyone working in America surely deserves a
better living standard than can be managed on $3.35 an hour. But
there's a virtual consensus among economists that the minimum wage is an
idea whose time has passed. Raising the minimum wage by a substantial
amount would price working poor people out of the job market. A far
better way to help them would be to subsidize their wages or - better
yet - help them acquire the skills needed to earn more on their own.
An
increase in the minimum wage to, say, $4.35 would restore the
purchasing power of bottom-tier wages. It would also permit a
minimum-wage breadwinner to earn almost enough to keep a family of three
above the official poverty line. There are catches, however. It would
increase employers' incentives to evade the law, expanding the
underground economy. More important, it would increase unemployment:
Raise the legal minimum price of labor above the productivity of the
least skilled workers and fewer will be hired.
If
a higher minimum means fewer jobs, why does it remain on the agenda of
some liberals? A higher minimum would undoubtedly raise the living
standard of the majority of low-wage workers who could keep their jobs.
That gain, it is argued, would justify the sacrifice of the minority who
became unemployable. The argument isn't convincing. Those at greatest
risk from a higher minimum would be young, poor workers, who already
face formidable barriers to getting and keeping jobs. Indeed, President
Reagan has proposed a lower minimum wage just to improve their chances
of finding work.
Perhaps
the mistake here is to accept the limited terms of the debate. The
working poor obviously deserve a better shake. But it should not surpass
our ingenuity or generosity to help some of them without hurting
others. Here are two means toward that end: Wage supplements. Government
might subsidize low wages with cash or payments for medical insurance,
pensions or Social Security taxes. Alternatively, Washington could
enlarge the existing earned income tax credit, a ''negative'' income tax
paying up to $800 a year to working poor families. This would permit
better targeting, since minimum-wage workers in affluent families would
not be eligible. Training and education. The alternative to
supplementing income for the least skilled workers is to raise their
earning power in a free labor market. In the last two decades, dozens of
programs to do that have produced mixed results at a very high cost.
But the concept isn't necessarily at fault; nurturing the potential of
individuals raised in poverty is very difficult. A humane society would
learn from its mistakes and keep trying.
The
idea of using a minimum wage to overcome poverty is old, honorable -
and fundamentally flawed. It's time to put this hoary debate behind us,
and find a better way to improve the lives of people who work very hard
for very little.
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