Better Ways to Help Those Earning Little
Author: Craig Garthwaite
Publication Date: September 2004
Newspaper: Atlanta Journal-Constitution
Topics: Minimum Wage
The annual Labor Day lament that minimum wage employees have gone too long without a pay hike misses a crucial reality: low-wage earners don’t need federal legislation to get a raise. Through hard work, improving their skills and demonstrating their value to employers, the majority of minimum wage employees quickly earn their own pay increases.
Nearly two-thirds of minimum wage earners who remain in the work force receive a raise within one month to a year of starting their jobs. In fact, the annual wage growth for minimum wage employees is almost six times higher than other workers.
This kind of upward mobility is truly something to celebrate on Labor Day. And it stands as a stark contrast to the classist view of union leaders and their political allies that entry-level American employees can’t earn a pay raise on their own.
No one starts their working lives with a set of fully developed skills. We need a place to begin and opportunities to advance. But as Federal Reserve Chairman Alan Greenspan told Congress this summer, the minimum wage “prevents people who are at the early stages of their careers … from getting a foothold in the ladder of promotions.”
That’s especially true for former welfare recipients. A University of Wisconsin study revealed that welfare mothers in states that hiked their minimum wages remained on public assistance 44 percent longer.
In general, those with the lowest skills are hit hardest by the unintended consequences of raising the minimum wage. The reason is simple — and rooted in hard, economic reality. Many businesses simply cannot afford to pay more to someone who doesn’t know how to read or make change.
Professors at Cornell University came to the startling conclusion that high school dropouts would suffer four times more job loss as a result of a minimum wage hike than everyone else.
These low-skilled individuals are often replaced by high school students, attracted by the higher wage. Duke University professors have found that this new competition for better-paid minimum wage jobs comes primarily from teenagers in higher-income families.
Rather than raising the minimum wage, we can do more for those with the most need by modifying and enhancing the earned income tax credit. The EITC rewards work by putting extra money into the pockets of low-income employees, particularly those with dependent children.
The EITC helps lift these Americans above the poverty line without the built-in job-destroying effects of the minimum wage. This smarter approach will allow employers to continue hiring and training low-skilled individuals to the greatest possible extent. These employees deserve a stronger EITC benefit, not an unemployment check.
Shrinking the pool of available jobs for low-skilled Americans by raising the minimum wage is no way to honor the contributions they have made to the strength, prosperity and well-being of our country. On Labor Day, we should resolve to make entry-level work rewarding, not scarce.