Living on the minimum wage seems like the closest thing to starvation and homelessness. But believe it or not, A minimum wage hike does not cure poverty. The federal minimum wage is $7.25 per hour (or $15,080 per year). In California, the current minimum wage is $8.00 per hour (or $16,640 per year.) President Obama along with local Congressman George Miller (D-Martinez) is championing a $10.10 per-hour minimum wage ($21,008 per year).
On Tuesday, February 18, the nonpartisan Congressional Budget Office released a study on the consequences of a $10.10 per hour minimum wage. The study concluded that 500,000 thousand workers would lose their jobs by the second half of 2016. The study also said that a $10.10 minimum wage hike would lift 900,000 people out of poverty.
To understand the impact of a minimum wage hike can be illuminating. For example, a minimum wage of $10,000 an hour ($21 million a year) sounds great. On $21 million a year, a person could have a private jet, a home on the Riviera, and a chauffeur-driven stretch limousine. But in all likelihood the person would not have a job.
Having a government-mandated minimum wage hike to $15 per hour ($31,000 per year) is what many fast-food workers want. A few months ago, many such workers went on strike to demand $15 an hour.
Consider a Subway Sandwich shop. If business is good, then an owner can probably pay a wage of $15 per hour. But, if business is bad, the owner might have to eliminate jobs.
The history of minimum wage hike legislation is actually a story of racism. When Congress approved the first minimum wage in 1938, the debate in Congress focused on two matters.
The first matter was the movement of firms from the higher-paying North (New York City, for example) to lower-paying Southern states (like South Carolina). In the 1930′s and afterward, the South contained many African-American individuals willing to work for less than ethnics (like Italian-Americans and Irish-Americans) living in the North. A food-processing company or a garment manufacturer located in the North might find lower overhead by moving to the South.
The second matter concerns the migration of labor. An identical minimum wage in both North and South might mean that fewer African-Americans would move from the South to the North. According to some people, having fewer African-Americans in the North might reduce the odds of racial tensions occurring in the North, an area of the nation presumed to be more liberal and more racially tolerant. But perhaps the North just seemed more tolerant. After World War II, many Northerners left Northern inner cities to move to the suburbs.
If the $10.10 minimum wage hike leads to job loss, then government should remove itself from the practice of setting wages. This means that the minimum wage should be abolished altogether.
Yet, the problem of poverty would remain. Instead of raising the minimum wage, why not have government send a check twice a month to low-income individuals? Without a minimum wage, no one would lose his job. And with some help from government, there could be relief from poverty.
Having the government assist poor individuals is not a new idea. Government already helps low-income people by providing food stamps, health care, housing money, school lunches, and more. If the government has to collect some extra taxes from all Americans to help some people avoid poverty, that seems like a better plan than increasing a minimum wage hike that prices low-skilled workers out of entry-level jobs.
However, to qualify for government assistance, government might want to do what President Franklin D. Roosevelt proposed. The president said recipients of government assistance must work.
And that work could be in the private sector or in such public-sector jobs as building roads, schools, hospitals, bridges, and ports.