What causes poverty? It goes without saying that a lack of money is the root cause of the problem – but how much of that can be solved by raising wages?
A common argument for raising the minimum wage is one you’ll hear echoed by Bernie Sanders – that “nobody who works full time should have to live in poverty.” It’s a phrase I like to quote because it does more to make the case against a higher minimum wage. After all, a person working forty hours a week, fifty weeks a year, at the federal minimum wage of $7.25 an hour would earn $14,500, pre-tax. This is enough to put a single earner over the poverty line, while still being eligible for various benefits like Medicaid and the earned income tax credit (EITC). It’s only when they have a larger family that they fall below the poverty line (for instance, the poverty line for a two person household, such as one with a single parent and child, is $18,090).
The EITC alone raises the effective minimum wage of a single mother with two kids to $10.44 an hour (or to $20,880 a year), according to the Heartland Institute, so even she wouldn’t be far from the poverty line.
Regardless, my point here should be clarified: People who work full time almost never live in poverty. Of course some are – but the statistics show that only 2.7 percent of full time workers live in poverty, compared to a national average poverty rate of about fifteen percent. It’s not low wages that cause poverty – it’s lack of work.
Many proponents believe a living wage is the key to reducing poverty in America because they wrongly assume the major cause of poverty is low wages. It’s not. Poverty in America is largely the result of people not working, not people working for too little. According to the most recent data available (2015) from the Census Bureau, 98% of working age Americans with a full-time job are not in poverty.
America needs more jobs, especially for less educated/trained people, and forcing companies to pay $15/hr or $20/hr is only going to increase that problem, not reduce it.
H/T Unbiased America
According to a CBO report published in 2014, proposed minimum wage hikes to $9.00 and $10.10 an hour would cause quite a number of job losses….
And God can imagine what a $15 minimum wage would do – which liberals are crazy enough to be calling for. Elizabeth Warren even ponders why the minimum wage isn’t $22 an hour.
Such hikes won’t raise people out of poverty – they’ll guarantee that the millions who lose their jobs are sent to the poor house.