Echoing Roy Cordato’s language about a “cruel hoax,” the latest issue of National Review features a short article panning President Obama’s proposal to address income inequality by raising the government-mandated federal minimum wage to $9 per hour.
A higher minimum wage is a cruel sentence of unemployment for young and low-skilled workers, for whom the real minimum wage is $0.00 per hour. It is also a poor way to help out poor people. The Congressional Budget Office estimated that the last minimum-wage increase (to $7.25 per hour) would increase wages by some $11 billion in the subsequent year but only by $1.6 billion for poor families, meaning that it would cost $6.88 to provide $1 in economic gain to poor households. Some of that additional income no doubt flowed to families that are low-income but above the official poverty line, which is to the good, but many minimum-wage earners are nowhere near poor; rather, they are low-earning members of reasonably well-off households, including young people are parents working part-time. If our policy goal is to make work more rewarding for people at the lower end of the labor market, raising the minimum wage is a clumsy and inefficient instrument.
The article goes on to note that a more “straightforward” way to address the issue is to cut payroll taxes, “which eat away at the wages of the poor disproportionately.”