Bad Law, Worse Timing
July 25, 2008; Page A14

The federal minimum wage rose by 70 cents yesterday to $6.55 per hour, and left-wing advocates are celebrating the increase as a boon for the so-called working poor. Not to be party poopers, but the reality is that most poor people in the U.S. already earn more than the minimum wage, and most workers who do earn the minimum wage aren't poor.

The wage hike is the second of three annual increases mandated by a 2007 law. Next year the federal wage floor will rise to $7.25. This year's increase will touch some 1.5 million workers, in a workforce numbering more than 146 million. Census data compiled by the Employment Policies Institute reveal that less than 1% of U.S. workers over 25 is earning the minimum wage. Who are these folks?

Most are not family heads making the minimum wage full-time all year. They are young single adults, teenagers living at home or spouses providing a second income. The average family income of a minimum-wage earner is $44,636, and 42% of these workers live with a parent or other relative. Only 15% of employees making the minimum wage are single earners with dependents. "A minimum wage increase today is a middle-class family entitlement," says EPI Executive Director Rick Berman, "because that's who's working at the minimum wage in second and third jobs."

Repeated studies have shown that minimum-wage increases are more likely to slow job creation than reduce poverty. A large share of the costs of these mandates are borne by the same low-income families the wage hike is supposed to help. Employers inevitably pass wage increases onto consumers as higher prices for goods and services, which erodes the spending power of all consumers but especially the poor. Employers also respond by hiring fewer unskilled workers, a disproportionate number of whom are teenagers and minorities.

Artificially increasing the cost of labor is always a bad idea because it distorts the free market. But the timing for this latest minimum-wage hike, amid a weak economy, could hardly be worse.

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