The Misconception of Minimum Wage

Posted: February 3, 2007 by April Watkins in Current Events, Issues, Politics, Small Towns
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As the politicians debate the pros and cons of raising the mandated federal minimum wage, I find myself a bit dazed.  My first thought is “What do these folks know about minimum wage?”  I dare say, very few of the good people on Capitol Hill deal with minimum wage issues in their lives or those of their family.  Even fewer deal with businesses as owners who are struggling with this issue from a different angle.  Either way it comes back to my question, “What do they know?”   I have read reams of reports issued by both sides of the aisle, the pros and cons.  Most of the findings are mindless statistics that can be manipulated to read either way you like.  Some of the findings, however, touched on a concept that may be the Rosetta stone of this issue.  And believe it or not, it is not helping the working poor.  Let’s look at the arguments.

On the Pro side, we have the obvious – more money in the pockets of American workers.  We all like that idea.  Studies from The Economic Policy Institute report that women would be the largest group of beneficiaries from an increase in minimum wages, with African-Americans and Hispanics taking a larger, disproportionate share as there were more minimum wage workers from those ethnicities.  It further clarifies that an increase helps the working households at the lowest rung of the economic scale; however these households are only producing 5% of the national income.  An increase in the wage would help provide a real “living wage” for these workers to combat inflation costs.

On the Con side, researchers at Michigan State University along with the Federal Reserve confirm that raising the minimum wage has historically adversely affected the school drop-out rates.  Studies from The Heritage Foundation cite statistics that show the majority of the minimum wage workers (53%) are between the ages of 16 and 24.  As kids earn more money, they are less likely to look at their long-term prospects and instead opt for short-term gratifications, such as cars, clothes and spending money.

From the business perspective there is yet another view stating that companies have limits to their budgets and if forced with higher wages for unskilled labor, they will be forced to cut hours or cut labor.    In looking at the various arguments for and against, several realizations popped off the page at me.

Let’s start with the business view.  Lately, a lot of media coverage has been given to the perceived “slave labor” state for many workers at such places as WalMart, which pays at or just above the minimum wage, with little or no benefits.  One point to remember is that most of these jobs are considered “unskilled labor” positions, meaning the job requires little to no training for a worker to adequately perform the task.

Secondly, we live in a free market economy – people are not forced to work at any particular place for any particular wage.  While the employment compensation and benefit policies of large corporations such as WalMart may leave much to be desired, they are at least providing jobs in America.  As we have all seen, many companies have chosen to outsource their jobs to other countries.

Now let’s focus on the social aspect.  This is where my eyes were opened.  Many of the studies both for and against the hike in minimum wage mentioned its relation to welfare.  There are reports stating how raising the minimum wage will assist in shrinking the welfare rolls.  By raising the minimum wage to a “living wage,” it allows welfare recipients to find a job that will provide them with about the same benefits as their welfare income.  AHA!  The truth of this matter is beginning to dawn.   The real case for the hike in minimum wage has nothing much to do with helping the working poor.

All of the studies show that the poorer, uneducated classes will continue to live in a state of poverty without a change in their education and, thus skilled labor options.  Sadly, a few dollars more per hour will not bring these folks out of poverty.  The true incentive for raising the minimum wage is an attempt to help decrease the welfare rolls by providing a means of income that is at least equal to the benefits currently received by their welfare status;  thus, effectively shifting this burden onto businesses, while leaving more tax dollars for other spending.

In 1999, I came upon this same quandary after attending a Chamber of Commerce day seminar on the health benefits in my home county.  After some research and number crunching, I was stunned to discover that folks who were receiving all welfare benefits [food stamps, Medicaid (or TennCare), etc.] received the equivalent of  around $7.20/hour; while folks working for minimum wage only received $5.15/hour and usually with no medical benefits.  I thought to myself, “Why would anyone want to find a minimum wage job when you were paid more to stay on welfare?”  That just didn’t and still doesn’t make sense to me.  Setting a standard for a minimum living wage is a noble cause; likewise, helping the poor is a noble cause.  But…we help no one when we don’t speak in real terms.

The message that our politicians need to send to our American workforce may be blunt, but is very simple… “As a people we are vastly under-educated compared to most developed countries.  Our skills are outdated in this new computer technological world in which we now reside. We live in a global marketplace and salaries are based on worth to the business and value to the customer.  If we want better pay…then we must better ourselves, educate ourselves, and learn new marketable skills.”

Instead, our politicians spout those same old lines of “I’ll fix it for you” to get the votes.  Unfortunately, the promise of better pay is short lived for an unskilled labor force.   Let’s not rely on the politicians to make our lives better.  Instead, let’s follow the example of our forefathers who carved their way across this uncharted land with no help from crown or government and secure our futures by bettering ourselves and setting examples for our children.  And that is…Why It Matters.

  1. Fic says:

    hmmmm…very interesting!
    Thanks google

  2. […] Also, check out my article “The Misconception of Minimum Wage” from 2007 on my blog. The article was republished in 2009 by Gale Publishing in a book entitled: “Introducing Issues with Opposing Viewpoints: Welfare”. Read the full article at […]

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