Saturday, June 27, 2009

Minimum wage myths

From Practical Economics

Minimum wage laws are pushed on the political agenda by calling minimum wages a "living wage" and conjuring up images of people dying if they earn any less. Sadly, obesity, heart disease, and diabetes are a bigger problem than starvation among the poorest in America.

The problem with the living wage euphemism for socialist government is the fact that even at the current minimum wage rate of $6.40 hour, a worker who works 40 hours a week and 52 weeks a year will gross $13,312. This is well above the official 2006 poverty line, set by the government, which is just under $10,000 for an individual.

These numbers do not apply to places like Oregon, Vermont and Washington where the minimum wage is $7.50, $7.25 and $7.63 respectively, according to the U.S. Bureau of Labor Statistics. In San Francisco, the minimum wage is $8.50 hour, or $17,680 a year, guaranteed if you are willing to work at any job.

Even if minimum wage workers were barely scratching out an existence as many would have you believe, Walter Williams has detailed that only 18% of minimum wage workers have dependents and only 5.3% live below the poverty line. Thomas Sowell has shown that those who are at the minimum wage do not stay there for very long. In fact, Sowell shows that an absolute majority of workers in the bottom 20% of wage earners (many making the minimum wage) move to the top 20% within a time span of approximately 17 years. Even if a minimum wage was as some suggest too low, it is obvious that people do not stay at the minimum for very long.

Lastly, if you add marriage to the equation, the minimum wage debate is moot. Married couples who both have minimum wage jobs earn a gross income of $26,624 which is above the government poverty level of $20,000 for a family of four. Minimum wage couples live with luxuries that their parents could not have even dreamed of. In fact, marriage is the best indicator of economic self-sufficiency.


  1. Look, this isent communist Russia. We preffer a classier standard of living.

  2. Henry Hazlitt details precisely why the argument for a minimum wage is destructive. Whether the price floor is too high or low, it's existence is irrelevant.