The Big Minimum Wage Lie: Raising It Will Reduce Poverty

Most on the political left, believe that raising the minimum wage will lift millions out of poverty, and that by doing so, government spending on welfare, food stamps, and other poverty related paid-benefits will also decline.  One liberal estimated that low wages are costing tax payers $153 billion a year.

Until 2014, it had been impossible to prove or disprove that assertion. The last time the minimum wage was raised in the years 2007-2009, we were in the midst of the so-called Great Recession where thousands lost their jobs causing the poverty rate to rise.

However, in 2014, there was no recession.  In fact, the unemployment rate fell from 6.7% in December of 2013 to 5.6% in December of 2014; the lowest rate since before the Great Recession.  The economy grew at the fastest rate ever (2.4%) in the last 8 years.  On top of that, 13 states entered the new year with minimum wages that were higher than the current federal wage of $7.25 an hour.  Washington, Oregon, and California led the pack with wages over $9 an hour. So, with all that, it would only be logical to believe that poverty would be reduced.

Unfortunately, the number of people in poverty actually rose by a half million in 2014 to 46.7 million. This after having fallen in 2013 from a high of 48.8 million in 2012.  But, more importantly, California, which has the highest poverty rate in the nation of nearly 24% and which has 20% of all those in poverty in the United States, saw their poverty rate also rise; despite a $9 minimum wage.

While I could name several reasons why this happened, the facts speak for themselves.  13 States raising the minimum wage didn't reduce poverty one iota.  In fact, poverty increased in what was supposedly a good year for the economy and jobs.

In 2015, the number of states with higher-than-federal minimum wage rose to 29.  It will be interesting to see if poverty rises again when the info becomes available in the fall of next year.

References:

Raising The Minimum Wage To $10.10 Could Lift Nearly 5 Million Out Of Poverty: http://thinkprogress.org/economy/2014/01/03/3115831/minimum-wage-poverty/

2014:  13 states raising pay for minimum-wage workers: http://www.usatoday.com/story/money/business/2013/12/29/states-raising-minimum-wage/4221773/

Americans are spending $153 billion a year to subsidize McDonald’s and Wal-Mart’s low wage workers: https://www.washingtonpost.com/posteverything/wp/2015/04/15/we-are-spending-153-billion-a-year-to-subsidize-mcdonalds-and-walmarts-low-wage-workers/

Unemployment Rates by Month: http://data.bls.gov/timeseries/LNS14000000

 California’s Housing Costs Hurt Economy, Increase Poverty, Report Finds: http://www.wsj.com/articles/californias-housing-costs-hurt-economy-increase-poverty-report-finds-1426623141

U.S. 2.4% Economic Growth In 2014 Strongest Since Recession: http://www.forbes.com/sites/samanthasharf/2015/01/30/u-s-economy-grew-2-6-in-fourth-quarter-2-4-in-2014/

Poverty: 2000 to 2012: https://www.census.gov/prod/2013pubs/acsbr12-01.pdf

2104: Typical American family earned $53,657 last year: Poverty Remains High: http://money.cnn.com/2015/09/16/news/economy/census-poverty-income/

Census Bureau: California still has highest U.S. poverty rate: http://www.sacbee.com/news/politics-government/capitol-alert/article2916749.html

State Minimum Wages | 2015 Minimum Wage by State: http://www.ncsl.org/research/labor-and-employment/state-minimum-wage-chart.aspx