The right minimum wage

Democrats in the US consider the minimum-wage increase a signature issue. But the minimum wage should be the same everywhere: $0. Labour is a commodity; governments make messes when they decree commodities' prices. Washington, which has its hands full delivering the mail and defending the shores, should let the market do well what Washington does poorly, says columnist George Will.

Consider:

Most of the working poor earn more than the minimum wage, and most of the 0.6 per cent (479,000 in 2005) of America's wage workers earning the minimum wage are not poor.

Only one in five workers earning the federal minimum lives in a family with earnings below the poverty line.

Sixty per cent work part time, and their average household income is well over $40,000; the average and median household incomes are $63,344 and $46,326, respectively.

Forty per cent of American workers are salaried:

Of the 75.6 million paid by the hour, 1.9 million earn the federal minimum or less, and of these, more than half are under 25 and more than a quarter are between ages 16 and 19; many are students or other part-time workers.

Sixty per cent of those earning the federal minimum or less work in restaurants and bars and earn tips – often untaxed, perhaps – in addition to wages.

Two-thirds of those earning the federal minimum today will, a year from now, have been promoted and be earning 10 per cent more.

Raising the minimum wage predictably makes work more attractive relative to school for some teenagers and raises the dropout rate, says Will. Two scholars report that in states that allow people to leave school before 18, a 10 per cent increase in the state minimum wage caused teenage school enrolment to drop 2 per cent.

Source: George F. Will, The Right Minimum Wage, Washington Post, January 4, 2007.

For text (subscription required): http://www.washingtonpost.com/wp-dyn/content/article/2007/01/03/AR2007010301619.html

For more on Economic Issues: http://www.ncpa.org/sub/dpd/index.php?Article_Category=17

FMF Policy Bulletin/ 09 January 2007