It's depressing to hear so many people bring up a minimum wage hike as if its definitely a good thing.
It's depressing because minimum wage hikes are not a wholly good thing. There are side-effects to a minimum wage hike, and they aren't wholly felt by the rich corporations. Poor people are hurt too.
What's most troubling is that there is an alternative policy tool that can help the poor, but it is neglected in favor of raising the minimum wage.
The goal shouldn't be to pass minimum wage. It's to achieve a specific objective - improve society, help the poor, help the middle class, etc. Better still would be a measurable objective.
But it seems we don't care about achieving our objectives. We care about imposing our ideology. After the minimum wage passes who will check to see if its objective was achieved? What are the objectives even?
We believe by passing a minimum wage increase we're fighting evil (the evil corporations) and doing good (helping the poor). We need to get beyond this arrogance and realize that "good" people oppose an increase in the minimum wage. People that have the same objectives that we're supposed to have.
So I suggested there's a better policy tool to help the poor and improve society. It isn't as popular because its not as easily understand. But it has an absolute advantage over the minimum wage as a policy tool to increase equality.
I'm talking about the Earned Income Tax Credit (EITC). That so many people support the minimum wage increase over the EITC is what truly depresses me. Why is the EITC superior?
* The EITC has exactly the same effect on an employees paycheck as a minimum wage hike. If you want to raise someone's income by 3000 you can achieve that with either tool. But when you do it with the minimum wage you help some people, but push others out of a job. The EITC doesn't increases a workers income, but it doesn't cost anyone there job.
* The EITC doesn't make businesses less competitive. Their costs don't raise at all when you increase the EITC.
* The EITC doesn't discriminate against extremely low-skilled workers. The minimum wage discriminates against the lowest skilled among us. If employers have to pay more, they demand a higher quality of employee. People with the lowest skills are the first to lose their employment when you raise minimum wage.
Among academic economists there is a definite consensus on the superiority of the EITC to the minimum wage. Politicians don't push EITC because it doesn't resonate as well. Hopefully we don't have to be that superficial.
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Update: Those wanting some clarity I'll point you here:
Wikipedia summary on the EITC
David Neumark on the minimum wage
The both are definitely worth reading and do a better job of adding clarity than I could.
Update 2:
Even Paul Krugman argues against the idea to increase min. wage:
Paul Krugram on the Living Wage
A short quote:
In short, what the living wage is really about is not living standards, or even economics, but morality. Its advocates are basically opposed to the idea that wages are a market price--determined by supply and demand, the same as the price of apples or coal. And it is for that reason, rather than the practical details, that the broader political movement of which the demand for a living wage is the leading edge is ultimately doomed to failure: For the amorality of the market economy is part of its essence, and cannot be legislated away. -- Paul Krugman