On Tuesday, our Vice-President was in Los Angeles raising money, which seems to be the only reason worth getting out of bed in the morning for this administration. If you haven’t been following Southern California politics, you have missed out on a very vocal push by the unions to raise the minimum wage to as much as $20 depending on who you talk to.  This is an increase of over 100%.  In the midst of a lot of rambling and unintelligible points, Biden made a claim that raising the minimum wage to $10.10 would move 28 million people out of poverty. The only problem with Biden’s statement was that he was off by 3,100%, according to the Congressional Budget Office.  Obviously there is a large disconnect between the Democrat Party and the reality of the minimum wage situation.  Even if the CBO was off by 1,000%, Biden’s claim is still outrageous.  We have come to expect these kinds of wild statements from the Vice-President before, but what about all the other more rational sounding claims from the left in regard to the minimum wage? We are glad you asked.

The left makes it quite simple to debunk the myth that raising the minimum wage is imperative to save the economy.  Other successful options exist, such as an Earned Income Tax Credit over minimum wage hikes as a solution to help the poor.  Even Warren Buffett, a firm left-leaning supporter, is an explicit advocate for the EITC as a poverty alleviation policy that needs to be further explored, manipulated and addressed.  Economic policy history and an insurmountable amount of raw data support those who argue against raising the minimum wage.  We have come to find that very little research is needed to thoroughly cut through the posturing.

It is difficult to decide where to begin this discussion, but it is important to address the work of the labor unions in this minimum wage debate.  The Service Employees International Union (SEIU), one of the main proponents of the minimum wage increase, has been ravenously attempting to unionize employees in the fast food industry at an accelerating pace since 2009.  They have been spending tens of millions of dollars to bulk up their numbers in the form of honing in on the employees of the fast food industry; an industry with an estimated 200,000 restaurants nationwide.  They have organized strikes and mobilized workers around the concept of “earning a living wage”, and are attempting to redefine the value assigned by the economy to minimum wage jobs in America.  This stirring concept has been put on a pedestal by the left, and the pandemonium which has ensued absolutely ignores the firm economic facts that falsify the feasibility of this policy.  Obama in particular, has been propagating this policy as a massive way to increase his staggering approval ratings in an attempt to regain the confidence of the democratic party and skeptical voters.  Our only issue with Obama pandering to the unions and workers that so desperately are demanding a minimum wage hike, is the fact that minimum wage hikes, especially most recently, have shown to hurt workers more than helping them.  More specifically, minimum wage hikes help poor workers much less than an Earned Income Tax Credit could help.  Earned Income Tax Credits have the ability to reach 28 million families in the country, and it is estimated by the White House Council of Economic Advisors that as a policy, this type of tax credit is the most successful way to alleviate poverty.  Now ask yourself:

  1. Why is Obama circulating and backing bad policy?
  2. Why is Obama encouraging policy that has been tested before and has failed to “pull the working poor American family out of poverty”?
  3. Why would he be misleading the poor and those in minimum wage jobs to believe that a minimum wage hike, as high as 100%, is the only option that will help them?
  4. Why aren’t labor unions demanding Earned Income Tax Credits and other sorts of policies that attempt to encourage employment and workers alike, rather than create a false dichotomy that says: “minimum wage increase or continued poverty”?
  5. Why are the unions selectively educating the populations they are so aggressively lassoing in and recruiting?

We are attempting to answer some of the above-mentioned questions.

The primary argument that you will hear from the left is that a family can not survive on minimum wage. This is indeed true, and the reason for that is because a family of four was never meant to survive, even minimally, off of minimum wage.  The minimum wage was not created to provide for families or even to provide a comfortable life for single people.  It was created to prevent employers from cheating the system and paying employees egregiously low wages that were less than what their job was worth to the market.  For decades, low skilled labor was provided by high school students, the elderly, lower-income youths and single-parents, and those seeking only part-time work. However, something happened over the course of the past 50 years, (and we’re assuming this), that parents stopped explaining to their children that minimum wage jobs were not something to strive for if you are raising a family.

We are now in a situation where people are aggressively protesting and unionizing because they feel they are not getting paid enough to support their families, while ignoring the reality that employers do not pay employees what the employee needs to support their family, but rather what their job is worth to the current economy. So while someone may “need” or “want” $15 an hour, for frying french fries (for example), that job simply isn’t worth that amount to a McDonald’s franchisee that already carries very small margins.

The proposal to raise the minimum wage does not seem feasible when one considers the economic reverberations in store for both the employee and the employer.  Using McDonald’s again as an example, basic economics dictates that if McDonald’s was to pay an employee $15/hr, they would have to raise prices commensurate to their new costs incurred for employing their staff and pass that cost onto the consumer.  This is heinously counterproductive to poverty alleviation because McDonald’s disproportionately serves lower-income consumers.  Many discussions about minimum wage increases by the left have attempted to rationalize the aforementioned point by saying that the increased prices would amount to no net change at all.  Additionally, many articles by the left lean on their assumption that the price won’t be a significant increase.  However, businesses have customarily struggled to absorb the increased cost of employment every time the minimum wage has been raised throughout history, and it would be asinine to assume that the same consequences do not await us now.  Now ask yourself again:

  1. Why do the economic facts get ignored by the left?
  2. Why are those who attempt to circulate this information treated as conspiracy theorists?
  3. Why is holding a negative stance on a 100% increase in the minimum wage as a method of poverty alleviation, treated as abusive marginalization of the poor?

We believe that there are many flaws with the way the minimum wage debate is being held.  Not to repeat the opinion of many journalists before, but the narrative rewarded by left-leaning news sources are those which seem to ignore other possible solutions on the table for the goal poverty alleviation.  The minimum wage hike is the only point at the top of the only mountain and it is on the backs of voting democrats to make such policy happen.  *(All we have gathered from left-leaning media is that Obama is the shining knight that will lead us all to the top of said mountain, not-so-coincidentally toward the end of a disappointing second term, where he is now responsible for pouring all of his energy into raising money like a show-pony for the democratic party, and ensuring that the next president will be a democrat.)

There are rarely any constructive discussions held by the left about the logical correlations between minimum wage increases and the immediate or subsequent decreases in other benefits to employees, employers, and consumers.  When journalists and bloggers approach these discussions with the foreboding truths that are certain to accompany the terrible reality of excessive minimum wage hikes, such as the proposed 100% increase on the table today, they are ignored and revered by the left as nothing more than pathetic brainwashed fearmongerers with the shallow mission of disenfranchising the working poor.  The truth is that employees are quickly learning of impending changes on the horizon by their employers in the wake of the possibility of a minimum wage hike.  The truth is, those who believe that economics are bad policy, seem much more brainwashed than those who believe an Earned Income Tax Credit is more beneficial toward the goal of poverty alleviation.

We personally have come to believe from our research that employers of large retailers, such as Wal-Mart, or fast-food chains such as McDonald’s, have and will continue to react stringently to minimum wage hikes, due to the fact that their profitability has already been at risk as a result of the multiple downturns in the economy in the last decade.  In conjunction with Obama-era policies that demand more from employers in the realm of the provision of health care, the threat of the rising cost of the minimum-wage labor upon which these companies have relied upon to build their wealth, can only stand to hurt those employed by these companies.  So, as McDonald’s is already reaching to the bottom of its pockets to meet its investors expectation of continual growth, it is doing so vis-a-vis policies such as the Affordable Care Act, which requires big companies to offer coverage to employees working 30 hours or more a week or face a penalty.  In response to the ACA and the threat of minimum wage hikes, and entirely in line with how companies like Wal-Mart should be expected to react by now, they are cutting from the bottom and thoughtlessly eliminating the burden of offering benefits to the part-time minimum-wage (or above minimum wage) workers they employ.  Isn’t this detrimental to the employees that the labor unions are seeking to protect? This article would go around the block if we begun discussing the effects of immigration on this sort of policy-meets-the-people crux.  However, it is pertinent to mention Wal-Mart and companies as successful as it, shamelessly rely on the fact that the pool of workers willing to work for minimum-wage, (without any benefits at all), will perennially and very robustly exist, replenishing itself, each time more desperate to accommodate the bottom line of the hand that feeds.  It is even more pertinent to note that the communities that customarily are graced with the presence of a Wal-Mart to work in or shop at, are customarily dominated by the poor.  In addition, Wal-Mart for example, if anything, stands as a potential employer that provides Americans with over 1.5 million opportunities to acquire legitimate job experience and an average wage of $13.  It is difficult to be mad at the math when it so obviously indicates a successful symbiotic relationship between: the poor and their employers, employees and their access to markets as consumers, and America’s standing with the global market.

As an active and recent example in this minimum wage battle, in Seattle, the employees have spoken out about the very real negative effects of the minimum wage increase upon their relationship with their employer, as well as the benefits they can no longer expect to receive.  As the minimum wage jumped to $15, some employees experienced losing their 401k’s, sometimes accompanied by decreases in provisions by the employer (i.e. free meals or parking).  On the employers end, price increases in products or services offered reached as high as 10%, sometimes translating into less real income for employees (i.e. less tips for servers and less overtime offered to employees whom rely on it).  As the nation watches cities such as Seattle offer a higher minimum wage to quell the protesting labor-unions who recklessly demand them, we must remember that we are all consumers that must absorb the increasing costs that will inevitably continue to be passed on to us by employers struggling to operate at a sustained or increasing level of growth.  We must also remember that a minimum wage increase is not the only option for the poor to alleviate the difficulties of supporting their families with such low wages.

The bottom line is that a minimum wage increase will not help the working poor as much as an Earned Income Tax Credit.  In fact, studies have shown that the wage increase between 2003 and 2007 had NO effect on the poverty rates. Why? Because it was never meant to.  Minimum wage jobs by definition are jobs that are meant to be a starting point and not a career.  Statistics indicate that 62% of fast food workers are under 25 years old, and only 13% earn minimum wage.  The turnover rate for fast food restaurants is already 150%.  Why on earth does the left believe that employment in these industries will not be affected negatively by a minimum wage increase? All of the statistics nearly paint this endeavor as a hoax for the left to mobilize voters for the upcoming election.  This is a meal ticket, not for the poor, but for the Democratic Party to roll out a red carpet for a new president that will claim to help the poor, while failing to offer the poor more than one option for which to vote.  The left would have you believe that millions upon millions of families are struggling to get by on the minimum wage, and if the government could just give them some relief in the form of a minimum wage increase of over 100%, they would rise out of poverty and into the middle class.  This is untrue.  Facts can be very stubborn things and as we have begun to lay out here, the facts clearly do not corroborate smoothly for a happy ending to the minimum wage hike story being told by the left.

If it were even possible, that a minimum wage increase could pull the poor out of poverty, then the projected statistics updating the public regarding the number of those in poverty in this country at any given time, would no longer include those who were able to elevate out of “poverty” and into the “middle class”, because these newly increased incomes would now be measured as “middle-class” incomes by that same method of reporting.  This means that the data regarding the poor is easy to manipulate by the left as a way to galvanize sentiment for the poor as a road leading to more votes for the left.  Labor statistics show that the majority of people on minimum wage are young people who live at home, who are not the primary breadwinner of the family, as well as elderly people who are looking for extra income.  The same statistics also show that the estimated number of workers who earn the minimum wage is only 3.7 million people, and that represents only 2.9% of the work force. This is a very small number of workers, the majority of whom, as stated earlier, are not working to support a family, but rather earning income to supplement another stream of income.  *(Let us not ignore the fact that this class of minimum wage earning employees is continually replenished as a result of the immigration laws in this country being more lax than they have ever been since the 1800’s.)

There are plenty of ways to help the poor without hurting the economy, whose positive effects could reach millions of those in poverty, insurmountably more than raising the minimum wage would.  For example, through the Federal Income Tax Credit, a women with one child working a full-time minimum wage job can receive an extra $3,100 a year.  I’m sure if given the choice between possibly losing her job and/or her benefits through a small wage increase, and receiving an extra $3,000 to spend on groceries and the well being of her child, she would choose the latter.  We must ask ourselves why Mr. Obama or the labor unions are suggesting these sorts of solutions as policies to be offered to help the poor.  The left does not include other options in the dialogue.  They are riding this minimum wage argument out, as it is an easy bait for working poor voters.

When an employee shows up for work on their first day at McDonald’s they are not expected to work at that same position forever.  They are not expected to raise a family at that rate of pay.  They ARE expected to receive training, learn, and move up the ranks to a position where their skill level dictates a higher rate of pay.  If they are not happy with that pay rate, the free market allows them to go elsewhere and find an employer who will pay them a “fair” rate, given that the price of their job is of higher value to the market.  If that doesn’t work, there are countless opportunities for that worker to receive an education and acquire more skills that will make them more attractive to companies looking to hire.  There is a certain level of individual responsibility that is necessary to becoming successful in America.  The notion that the government can and should raise the minimum wage pay to accommodate a low-skilled employee’s varying needs, rather than the employee raising his or her own skill level to move upward, is not only antithetical to free market capitalism but contradicts the functionality of the labor market that America has been structured to foster.

Regardless of the difficulty of anyone to digest these arguments, it is our main goal to out Obama and his party as failing to identify other feasible options for poverty alleviation.  Oh, you don’t think Obama or the left are failing in this regard? So you’re admitting that they are purposely isolating the conversation about poverty alleviation to a minimum wage hike option or bust? Wow, that sure sounds condescending, limiting, and malicious.

Please ask yourself, who stands to gain from the minimum wage fight, even if it DOESN’T successfully get passed?

By: Sara Tavakoli and Andrew Mark Miller