Minimum Wage Oppression

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There is a big push on by Democrats to raise the minimum wage to $10.10/hour (I’m sure that extra ten cents will make a big difference). If you’re cynical like me, you probably think they’re doing this to – 1) buy votes, and 2) distract us from the Obamacare disaster. But if you are naïve enough to believe there is good in everyone, including politicians, then you probably think there are some very good reasons for raising the minimum wage. To find out what these reasons are I ventured over to ThinkProgress.org and read a dumbed-down article entitled “Five Reasons To Raise The Minimum Wage Right Now”. The five reasons are:

1. It would boost the economy.

2. It would lift millions out of poverty.

3. It would help close the gender wage gap.

4. It’s an important racial justice issue.

5. Americans support a raise.

Hmmmm. Some of that sounds like it could be true, some of it sounds like baloney, and #5 is completely irrelevant. Let’s look into these claims. (for the sake of brevity I will use MW for ‘minimum wage”)

1. Will raising the MW boost the economy?

ThinkProgress referred to a study by the CBO based on a bunch of assumptions the Democrats ordered them to use and concluded that raising the wage would add 0.3% to economic growth. I took a different approach. The feds have assembled mountains of economic data can be used to see what happened in the past when the MW was raised. Since 1938 the MW has been changed 23 times, starting at $0.25/hour and rising to the current $7.25/hour. I compared economic growth in the year before the MW was raised to the year after to see if there was an economic boost. There were 11 times (48%) when the economy accelerated after the raise, but that means there were 12 instances when it slowed down.

Claiming a wage hike will juice the economy is as valid as flipping a coin and saying, “we’ll have improved growth if it comes up heads.” The first reason is hogwash.

2. Will raising the MW lift millions out of poverty?

This one sounds like it could have some truth to it. If you pay the poorest workers more, they’ll have more money and can improve economically, right? As it turns out, not really. First of all, the vast majority of workers paid the MW don’t live in poverty. They’re teens living at home with mom and dad, students in college, or retirees who got a part time job for some extra bingo money. There is a minority of MW workers who work fulltime to support themselves, but at 40 hours/week the current wage exceeds the federal poverty line for a single person of $11,490. Even after you deduct the income tax cleverly disguised as Social Security and Medicare contributions, a fulltime worker will make $12,282 at the current MW. Raising the wage won’t lift such a person out of poverty, because they’re not in it now.

That still leaves poor families with only one breadwinner, who really are in poverty. Again we can see what has happened to these people when the wage was raised in the past. The feds poverty statistics go back to 1959. Since then the MW has gone up 18 times. On 11 of those occasions (61%) the percentage of Americans below the poverty line went UP. Giving the working poor a raise didn’t make them richer, it got them fired! Or it made it harder for them to find a job (more on this when I discuss unemployment). So the second reason sounds good, but it’s not true either.

3. Will raising the MW close the gender wage gap?

I’m pretty sure when women refer to the “glass ceiling” they’re not talking about $7.25/hour. However, I decided to play along and see if MW hikes improve earnings for women versus men. Since the MW affects those at the bottom it made sense to examine poverty statistics again.

The Census Bureau began keeping track of poverty by gender in 1966. Since then the MW was hiked 16 times. In 11 of those instances (69%) the percentage of women in poverty went UP after the hike. In absolute terms it appears that women do worse when the MW goes up, but the “gender wage gap” is a relative comparison, not absolute. Did women do better (actually, did they do less worse) than men? We have another coin flip. Half the time women fared better when the wage was raised, but half the time the men did. It’s a wash. There’s no evidence that raising the MW will close the gender wage gap.

4. Will raising the MW help solve racial injustice?

We all know why this is included as a reason. If you oppose an MW hike you’ll be accused of being a racist. There couldn’t possibly be any other reason for thinking this is a bad idea, right.

As with gender, the Census Bureau began breaking out poverty statistics by race in 1966. 9 of the 16 wage hikes (56%) since then saw the percentage of blacks in poverty go up. When we look at unemployment statistics below, the data will give a clue as to why this happens. But you can’t say raising the bottom wage will create racial justice if the historically most oppressed race does worse over half the time when the wage goes up.

5. We should raise the MW because Americans support it.

So what?

In the past most Americans supported banning gay marriage, invading Iraq, banning marijuana, invading Vietnam, banning interracial marriage, segregation, prohibition, American Indian genocide, slavery, … The list of terrible things the majority of Americans supported is practically endless making this a terrible justification for anything.

And guess what ThinkProgress? The majority of Americans want to repeal Obamacare. Is that reason good enough for you?

As far as I can tell, the reasons given to justify an MW hike are inconclusive at best. But is there a reason to keep it where it is (or even get rid of it)? The one you keep hearing is that it will increase unemployment. Let’s look at that.

The BLS unemployment stats go back to 1947. Since then the MW has been raised 20 times. Looking at the population as a whole, unemployment rose for half of the wage hikes and went down the other half. Based on that it appears that raising the MW doesn’t affect unemployment, as advocates for doing this are quick to tell you. But if you’re talking about the MW, is appropriate to look at the total working population when only a small fraction are MW earners?

We know that teens working in their first job are a large chunk of those making the MW. How do they fare when the rate is hiked? Since 1947 unemployment among 16 to 19 year-olds went UP for 60% of the wage hikes. I wouldn’t call this conclusive, but it does indicate that raising the MW might make it harder to get your first job.

How do blacks fare? According to ThinkProgress they make up 42% of those earning the MW. Don’t put too much stock in this number, ThinkProgress also claims blacks are 32% of the total workforce when in fact they are only 12%. However, it is true that blacks make up a disproportionate percentage of MW earners. Since 1972 (start of data) the MW was raised 14 times. Unemployment among blacks went up 10 of those 14 times (71%). That’s pretty damning. It also helps explain why black poverty was more likely to increase when the wage is hiked. If you lose your job, or can’t get a job because you don’t have the skills to justify paying you minimum wage, you will be very poor.

I readily admit this is a cursory analysis of the data (statisticians, you can spare me your derision. I’m not going to argue with you.), but it does call into question the premise that raising the MW will do a lot of good and no harm. In fact, if you’re a low wage earning black, a minimum wage hike seems to be a bad deal for you.

If you get into a discussion with someone who thinks we should raise the minimum wage you can use the data to discuss reality with him. Or if you just want to piss him off ask, “why do you want to oppress poor black people?” Because that’s what raising the minimum wage will probably do.

Wayne Middlesteadt is the author of Five Ways To Beat The Market, proven methods to lower your risk while making above average gains in the stock market. For more information on the book visit http://www.slightlyangryoldman.com/Downhome/Five-Ways-To-Beat-The-Market

Data for this article came from:

MW Rates – http://www.dol.gov/whd/minwage/chart.htm#footnote

Poverty Rates – http://www.census.gov/hhes/www/poverty/data/historical/people.html

Unemployment Rates – http://www.bls.gov/news.release/empsit.toc.htm

 

About Author

Wayne Middlesteadt

Wayne Middlesteadt is a 1986 graduate of Georgia Tech and has an MBA from Georgia State University. Currently working as a financial writer and track and field historian, his latest book is Five Ways To Beat The Market.

  • Eduardo

    I want to like punk rock libertarian, the ideas seem grounded in reality. I’m having a hard time reading most of what you write. It’s poorly written and with extreme bias. Any chance we could get some libertarian writing that is well-written with logical lines of thought? It’d be nice to be able to pass on this information to the uniformed without worrying that they’ll close it instantly as it starts preaching at them.

    • jesse

      I dont understand how you might perceive this as slanted, rather than the sad facts.

      • Anthony Ross

        Well, thisis where I perceived a slant. This quote: “a study by the CBO based on a bunch of assumptions the Democrats ordered them to use”

        • Lord Mannyrossa

          Anthony, that isn’t really a slant. That is how the CBO works. Whomever orders the tests gives the data and parameters they wish to use. If you want to say the language is in-artful, that’s fair but the facts are simply facts.

          • Anthony Ross

            OK, that’s fair. In that case, if I were writing this thing, I would have said “The CBO, using data provided by (insert said Democrats here) concluded that…….” That sounds a bit more clinical and accurate than “a study by the CBO based on a bunch of assumptions the Democrats ordered them to use”

          • Lord Mannyrossa

            I would have used similar phrasing to your suggestion as well. If for nothing else than the fact that is is cleaner and clearer to read.

    • William

      Agreed. Absolutely too preachy and definitely cherry-picking information, ala Fox News style (re: see the “job loss” thing they’ve been running with that the CBO outright said they were lying about. Just twisting info.)

      Almost shameful to call this Libertarian writing. Often sheds the informative neutrality for a passive-aggressive tone. More shameful, its written by the author of “Five Ways To Beat The Market, proven methods to lower your risk while making above average gains in the stock market”.

      Of course Wall Street doesn’t want minimum wage raised.

      • Son of Gadsden

        I always shake my head when I see this image. You just called someone out for cherry-picking, then posted this. Wallstreet isn’t who’s going to be hurt by this. Small business is who will be hurt, and small business is much more important. Big business will bitch, but small businesses are the one’s who will be saying the math says they can’t support a payroll that’s going to shoot up over three bucks per worker. The red tape/restrictions/bullshit that the feds have put on businesses is already making most stress to stay afloat. Push them further and you’re going to see a lot of layoffs, and a lot of owners say it’s just not worth it to run a business with these losers in charge. Businesses are there to make money, and if you make it near impossible to make a profit, it’s not worth the stress.

      • erikkinsley

        Stupid Graphic…MOST businesses aren’t on wall street, they are on MAIN street….do you have some secret wage that would only apply to the “FAT CAT”? Moron

    • slings

      Well, I don’t think the “uniformed” public want your writing skills either….

    • Tron

      Agreed. I want to love this site, but it’s like everything is written by Mitt Romney’s stupid brother.

  • ErikTheRed

    Another issue (brought up by many others) is that when correlating unemployment with minimum wage, it’s easy to forget that only around 2-3% of workers are paid minimum wage (and over half of those are teenagers), but unemployment figures cover the general population (except for those who have stopped looking for work or have been otherwise “disappeared” from the stats). But even if the stats were perfect, the “signal-to-noise” ratio of overall unemployment caused by raising the minimum wage is worse than 1:30; basically, you’ll never find it. When the unemployment stats are broken down to show just workers in the lowest wage areas (usually the closest you can get is “by age”), the effects are quite obvious.

    http://www.coyoteblog.com/coyote_blog/2012/01/the-ultimate-end-of-social-democratic-labor-policy.html

    It’s also highly suggestive to note that Obama’s core supporters belong to unions, and many union contracts are set up to trigger automatic wage increases when the minimum wage goes up. I don’t think it requires a tremendous degree of cynicism to think that perhaps Obama cares more about these people (many of whom are doing quite well already) than he does the actual poor.

    • William

      http://www.epi.org/publication/wage-workers-older-88-percent-workers-benefit/

      Unions might get a bite but who cares? The modern robber-barrens don’t need your defense to keep them afloat, they just need your money. The CEO for Chevy made 500 million in a year. He literally makes a billion dollars every two years. Then he needs US tax dollars to bail out his company. Personally, I am no longer interested in trying to defend them against the “evil unions” I’m so often warned about.

      • Mark Hampton

        What an irrelevant and useless post you’ve made.

        • LookAtThisIdiot

          Almost as useless as Ayn Rand’s entire publishing history.

          • Mark Hampton

            Dear god, you’re a fucking moron.

      • Lord Mannyrossa

        You realize it isn’t one or the other right? Unions are trash. Demonstrably so. To say that though, isn’t to say ‘I love corporate bailouts!!’ It is possible, and highly likely in Libertarian circles, to loathe both Unions and Corporate welfare

  • Rudy

    What a joke article. I like most of what this site is about but come on. Mostly teenagers working in fast food? Maybe 10 years ago. Now it’s mostly adults working for peanuts. The glass ceiling exists at every level in business, both CEO level and minimum wage. Also, why dignify the ‘aponents of minimum wage are racist’ with a response? Do you support minimum wage raise? No? Ok… Are you racist? By how hard you are selling that you aren’t I’ll give you the benefit of the doubt and say no. So who cares? Anyone sad enough to feel raising wages of poor workers will prove they aren’t racist won’t be swayed by your arguement. This article takes an ironically yuppy tone, which is less punk rock than Winger. Once again, I like most of this site but this article REALLY missed the mark with me.

    • Mark Hampton

      “Now it’s mostly adults working for peanuts.”

      Source?

      • Rudy

        National Employment Law project has median fast food age at 29, plus tons of references on national media sourced, and finally I open my eyes when I eat fast food and see more wrinkles and beards than pimples and hair jell. Anyone who thinks it’s mostly 16 year olds shoveling you fries is naive.

    • Vernon V

      How can the glass ceiling exist at minimum wage!? is there somehow, like, a DIFFERENT minimum wage for some workers?

  • CM

    The author writes:

    “the vast majority of workers paid the MW don’t live in poverty. They’re teens living at home with mom and dad, students in college, or retirees who got a part time job for some extra bingo money. There is a minority of MW workers who work fulltime to support themselves, but at 40 hours/week the current wage exceeds the federal poverty line for a single person of $11,490.”

    According to 2012 BLS numbers (http://www.pewresearch.org/fact-tank/2013/07/19/who-makes-minimum-wage/), 50.6% of minimum wage earners are ages 16-24. That’s not a “vast majority.” It’s a very slim majority. Don’t overstate your thesis friend.

    The strongest argument against the minimum wage is that it increases unemployment among low-income workers. There’s plenty of economic studies on point for that proposition. But it’s also true that minimum wage Purchasing Power is roughly 20% lower than it was in 1967, when U3 unemployment was under 4% (data available at: http://data.bls.gov/timeseries/LNS14000000). Average wages for lower and middle class earners have also been stagnant for decades, with most of the gains from economic productivity going towards high earners (http://www.motherjones.com/files/Screen%20Shot%202013-03-08%20at%2011.36.19%20AM.png). These two facts together suggest that we could increase the minimum wage by at least 20% without adverse economic effects. $10.10 is more than a 20% increase from the current minimum wage, however, so it’s quite possible that such an increase would increase unemployment among low-income workers, although the actual amount might be negligible enough that low-wage workers as a class are better off.

    The other thing that needs to be taken into account is that wage increases may disqualify some workers from receiving Government benefits that they are currently qualify for at their present income level. This means that for some people, the increased wages will be a wash at best, because they will lose access to food stamps, TANF, or what have you. This is good, however, from the standpoint of getting people off welfare.

    • Wayne Middlesteadt

      16-24 year-olds comprise 50.6% of MW earners – true. What % are the retirees that I also mentioned? There’s also the MW earners who represent secondary income in their home. What % are they?

      Also, as you point out, someone trying to live on MW probably also receives government benefits. If you pay him another $2.85/hr (assuming he doesn’t get his hours cut or lose his job), but he loses $2.85 in benefits what do you think his reaction will be? According to the Whitehouse when discussing the beauty of the Obamacare subisidies, he’ll voluntarily work less so that he can receive the same benefits. Less work for the same pay means no change in welfare payments. It just means lower productivity overall.

      • LookAtThisIdiot

        We get it, you wish a corporation would spoon you to sleep every night.

        • Mark Hampton

          How does it feel to be completely retarded?

  • robbie

    i’m disappointed, i come here usually to read intelligent articles and/or contribute to an intelligent debate. So Imagine my disgust when i read this, sorry but you spent more time saying you weren’t racist than you did making valid points. Furthermore blacks are not the only minority if you are going to speak on racial injustice you need to include all minority races! Finally This statement “statisticians, spare me your derision. Im not going to argue with you” you’re a writer for a well known political hub, if you’re not ready to defend your ideals take yourself back to wall street and leave the writing to those who are passionate about these issues!

    For the rest of you stop skimming because that is the only reason i can see that you would omit primary points of your arguments.

  • pkpdjh

    I have had a lot of conversations with thoughtful folks on both sides of the minimum wage hike debate. At the end of it, I stand where I think Penn Jillette does on this stuff. I’m not against the minimum wage hike on utilitarian grounds, I’m against it on moral grounds. It is simply not my place to stand in the way of a voluntary transaction.

    I know nothing about operating a Wal-Mart or a McDonalds. I haven’t worked for minimum wage in years. So, who am I to tell someone that the arrangement they have agreed to with McDonalds or Wal-Mart isn’t in their best interest? Who am I to tell McDonalds that if they cherry picked the best employees from every nearby food place by paying them $1/hour more they would do better. The fact is that none of knows what is best for these people. It’s hard to know the economic effects of a hike, so let’s let people figure out for themselves what makes them happy. Maybe some kid wants to be the next Sam Walton or Ray Croc, so he wants to work at their respective places no matter what.

    If I want to work on an open source software project for free, is that legal? What if I want to donate my professional services to a charity or a family member? Am I being exploited? What about entrepreneurs who bust their ass only to lose money for a couple years until their business succeeds? What about the local band that plays for a percentage of the cover charge only to go home with gas money? What about the church that hires pros for half their band but then relies on volunteers to fill out the rest of the spots?

    I also like Stefan Molyneaux’s point which is how is that we invest roughly $12K per pupil for 12 years in compulsory schooling and at the end we get someone whose market value is not $7.25/hour. Seriously, that’s criminal.

  • Jon Red

    This is the stupidest god damn shit I’ve ever read. First off, you didn’t even link to the damn article you’re criticizing so that’s a big strike one. Strike two is, you’re calling out thinkprogress.org for spouting a bunch of liberal bs which is like calling out Wal-Mart for carrying cheap consumer crap. No shit. It’s Wal-Mart. And given the high standards of quality THIS article is held to, not to mention the blog that published it, this is basically the pot calling the kettle racist.

    And strike three, and this is the worst one of all, strike three definitely this: “I readily admit this is a cursory analysis of the data (statisticians, you can spare me your derision. I’m not going to argue with you.) but it does–” nope. Shut up. You’re done. You’ve basically said, “I’m not going to stand for anyone actually studying the veracity of my claims, because clearly I don’t care I’m going to criticize a minimum wage hike either way regardless if the statistics I provided make any sense or not.”

    Also, it doesn’t take a statistician to know that when it comes to determining the correlation between two sets of data, you’re doing it wrong. It also doesn’t take a statistician to look at the graph at the beginning of the article and realize it doesn’t mean anything on it’s own. And all it takes is Google to look the image up and realize it simply shows the minimum wage adjusted for inflation. Which supports precisely zero of your points.

    If anything, that graph by itself would support raising the minimum wage back to what it was in 1968 especially since that doesn’t appear to be one of the years where poverty or unemployment went up. Or is it? Ah, who gives a shit, it’s not like any of your readers will actually check, amirite? And if they do, just blow it off as nerdy derisive statisticians.

    Only think I can’t tell is if you’re stupid or if you just think your readers are stupid. Either way, you are a disgrace to Libertarians.

  • LookAtThisIdiot

    Thank you PunkRockLibertarians.com for continually proving why American corporatist libertarianism is an utter joke.

  • Joe

    Never have I read so much that is ridiculously the complete opposite of what the facts are lol.. and i thought only the republicans hated facts.. lol

  • Dan Maser

    Raising MW is nothing more than a sugar coated tax increase. More income to tax and more dollars to spend for more sales tax. Since we are in the world market place now, American workers are also competing for jobs in other countries who don’t have MW, therefore jobs are going over seas.

  • dantopic400

    It’s called punk rock libertarian. What possible conclusion would you draw here other than to oppose a minimum wage hike? I appreciate the discussion, and there are pros and cons to this. The increasing disparity between incomes in this country has become a major problem — and, yes, the weird Fed manipulations have helped to fuel it. We need to do something, but it’s not clear we’ll find a great solution that we can agree on. Romney supports raising the minimum wage (at least this week — perhaps he’ll change his mind next week). There are multiple ways to read the data on minimum wage and a comment is not long enough to go over them. However, your statement that most Americans want to repeal Obamacare is simple to refute. Most polls have shown Americans want to FIX Obamacare (which happens to have reduced my health insurance premiums by 50%), not repeal it.