Saturday, February 10, 2007

Why the minimum wage increase hurts the lower class

The excellent Glen Whitman:
The minimum wage is obviously symbolic for its advocates, especially the politicians who back minimum wage hikes. It’s a relatively cheap way for them to say, “I’m on the side of the poor and downtrodden.” But informed advocates almost certainly know that the minimum wage is a lousy way to help the poor even if the disemployment effect is small or nonexistent. It’s simply not well targeted to help who it’s supposed to help. Many of the beneficiaries are teenagers, sometimes from reasonably well-to-do households, not single moms trying to support families. It doesn’t distinguish between sole wage earners and members of multi-income households. If you really wanted a policy that helps those who need it, you’d create a means-tested transfer program or expand the EITC, not go mucking around with market wages. But the minimum wage is appealing politically because it’s easy to understand (let’s pay people more!), and to the public at large – which doesn’t see or understand the trade-offs – it sounds like either a pure free lunch or a simple transfer from rich firms to poor employees.

Price for Minimum Wage Increase at

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