Wednesday, February 20, 2013

Is raising the minimum wage the panacea for what ails the poor? Or is family breakdown more of the problem?

There's a push for an increase in the minimum wage by both President Obama and DFLers in the Minnesota legislature.

Will it truly help the poor or actually hurt the poor?

Here's an interesting analysis by an economist on the topic.  He points to the economic reality that raising the minimum wage will actually lose jobs for the youth and unskilled, entry level workers.  He also points to the problems resulting from family breakdown, single parent households.  That's the critical issue.
President Obama's state of the Union Address  was to me, an interesting peek into the Administration's thinking, and a revealing piece of political rhetoric (I mean that in the good sense of "rhetoric," i.e. "what arguments we use to persuade people"), a full-time worker making the minimum wage earns $14,500 a year. Even with the tax relief we’ve put in place, a family with two kids that earns the minimum wage still lives below the poverty line. That’s wrong....

Tonight, let’s declare that in the wealthiest nation on Earth, no one who works full-time should have to live in poverty, and raise the federal minimum wage to $9.00 an hour. This single step would raise the incomes of millions of working families. It could mean the difference between groceries or the food bank; rent or eviction; scraping by or finally getting ahead. For businesses across the country, it would mean customers with more money in their pockets....
What caught my eye is the "family with two kids,"  "...millions of working families." It paints a grim picture: mom, dad, two kids, trying to survive one wage earner's full-time minimum-wage job.

My thought: What planet do the president's advisers live on? Come take a look, say, at the south side of Chicago, where I grew up and live, and where President Obama spent many formative years as a community organizer and so knows it even better. Is the first-order problem of these neighborhoods that its residents live in intact families with two kids, one full-time wage earner, trying to live on the wages from a full-time minimum wage job, but  having a tough time making ends meet? Is there anyone like this?

The tragedy of the neighborhoods around where I live, and President Obama used to live, is the vast number of people with no job at all.  How does raising the minimum wage for the few who have a minimum-wage job help the vast majority who have no job at all?

Minimum wages are about teenagers and young adults, most still living at home. It's about the "dating" phase of work-force attachment, where people learn the skills and habits, and make connections by which they can move up to better jobs when they are ready to have families.

"Families" is an interesting word as well. Marriage among lower-income Americans is rare, as President Obama made clear when he came back to talk to students at Hyde Park High school and made some controversial remarks about the absence of fathers.

For example in zip code 60619, just south of the University, there are "4,967 married couples with children, and 12,745 single-parent households (2,655 men, 10,090 women)." Here's the marital status chart.

What "family" means in this speech is, by and large, a single woman with children. I'm not starting a Murphy Brown argument, but it is an interesting use of the word. I wonder how many of the Republican ears in the audience listened to "working families" and heard "single women with children and no father in sight?" More worthy of our sympathy, indeed, but a very different picture of what kind of policies might actually work.

And even then, the modern Scrooge ("are there no workhouses?") might ask, "Is there no earned-income tax credit? Is there no home heating subsidy? Are there no food stamps? Is there no schip or medicaid? Have they not applied for social security disability? Are there no section 8 housing vouchers?"

The point is not to be heartless -- government programs or not, life on the lower end of America's economic and social spectrum is pretty awful.  The point is, if we seriously want to address the problems of the "working poor," if we want policies that actually work rather than spew a lot of TV time and make us feel good, let us paint a vaguely realistic picture of what their life is like. Absolutely nobody (except perhaps illegal aliens) is trying to support a family on $14,500 from a full time minimum wage job, period.  The actual economic life of the "working poor" is a welter of government programs, transitory employment, and a lot of illegal activity

And, one huge problem facing  people who do work full time and earn minimum wage is the astounding marginal tax rates that our various social programs imply.  In fact, much of the raise from $7.25 to $9.00 will be taken away. Even more of a raise to $20 an hour will be taken away. The structure of our programs that are supposed to help people are instead trapping them. (Previous posts here and here.)

Yes indeed, let us help families to "finally get ahead!" Let us talk about lousy schools, incentive-destroying social programs, horrendous violence, life-destroying incarceration, and the war on drugs run amok. The minimum wage may slightly help the few who can get such jobs, and put such entry-level jobs slightly more out of reach for many others. But it's just irrelevant to the real, first-order problems such families face.
To truly address the needs of the poor, one can't avoid family breakdown.  Failure to do so means more systemic poverty and calls for government social programs to do more and more.

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