The Truth About Minimum Wages

Minimum wage has done nothing to stop poverty

Since President Johnson first declared war on poverty in his 1964 State of the Union address, this war has cost US taxpayers $22 trillion.The primary implement of this war has and continues to be public assistance programs. Prior to the war, the poverty rate had fallen steadily from just under 35 percent in 1949 to just over 15 percent in 1965. As expenditures on public assistance programs soared from roughly $50 billion per year in 1965 to just under $1 trillion in 2013, the poverty rate has been stuck between 10 percent and 15 percent. These trends suggest that public assistance programs trap people in poverty.

The minimum wage is another major implement in the war on poverty. In 2009, it was raised to $7.25 per hour, its highest level (in real terms) since 1981. Thereafter, the poverty rate inched up to 15 percent in 2010, and remained near that rate through 2013. Despite this, President Obama, in his 2014 State of the Union address, called for the federal minimum wage to be raised to $10.10. Later that year, his sales pitch for this proposal included: “One of the simplest and fastest ways to start helping folks get ahead is by raising the minimum wage. Ask yourself: could you live on $14,500 a year? That’s what someone working full-time on the minimum wage makes. If they’re raising kids, that’s below the poverty line. And that’s not right. A hard day’s work deserves a fair day’s pay.”

The president’s argument above, however, is based on a false narrative. The typical person earning the minimum wage is not raising a family on $7.25 an hour, and working forty hours a week. Only 2.6 percent of US workers earn the minimum wage, and most of them work part time, and are between the ages of sixteen and twenty-four.

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