Study finds minimum wage hikes may widen income gaps

Fast-food workers and union members and leaders gathered in 100 cities across the United States on Thursday to encourage a hike in the minimum wage. Right now, fast-food workers earn $7.25 per hour for 20 hours each week, but they want the wage to soar to $15 an hour. This is the third major protest to happen in the past year; one in November 2012 and the other earlier this year.

Essentially, the primary argument is that full-time workers cannot live on $15,000 per year.

President Obama has stated that he would support a minimum wage of $10.10 per hour, though he did campaign on increasing the minimum wage to $9. Is this a wise policy? Will a higher minimum wage increase jobs and shorten the income gap? A new study says no.

The American Action Forum (AAF) published a study earlier this week titled “Minimum Wage and Combating Poverty” that found raising the minimum wage wouldn’t necessarily benefit anyone in the end. The conservative think-tank’s research discovered that most of those who live in poverty are not the workers making a minimum wage salary. In fact, the biggest demographic of minimum wage workers are teenagers from middle-income families.

In 2011, only 1.2 percent of individuals earned $9 or below per hour, while 1.5 percent had a wage of $10.10 or under. In the end, the AAF concluded that a minimum wage hike wouldn’t benefit 99 percent of all those in poverty as well as neglecting “the vast majority of people in poverty who are actually working.”

What’s the solution to fighting poverty in the Land of the Free, Home of the Brave? Tax credits, is one policy tool that could be utilized.

“Instead of increasing the minimum wage, lawmakers should focus on further improving policy tools, such as the earned income tax credit (EITC),” the institute stated in its report. “In 2011, while 16.1 percent of all people in poverty received the EITC, only 0.3 percent earned less than the minimum wage. Even more drastic, 56.1 percent of all employed persons in poverty received the EITC, compared to the 6.3 percent earning minimum wage.”

The minimum wage has been widely discussed and debated, but the discourse behind the topic has been void of any facts. Economic Collapse News has extensively written on the topic over the past here, but here are some of the most common points that argue against hiking the minimum wage:

–          Minimum wage laws discriminate non-union, unskilled and uneducated workers as well as immigrants.

–          Why stop at $15 per hour? Why not increase minimum wage to $50 or $100 per hour?

–          When it becomes too expensive to maintain a labor force, companies will heavily invest in technology to replace workers.

–          Minimum wage causes prices to rise because consumers pay for overhead costs, revenues, benefits, profits and wages.

–          A higher minimum wage causes businesses to heighten their qualification requirements and job duties.

Here is what Murray N. Rothbard, who labeled minimum wage as “compulsory unemployment,” had to say:

“It is obvious that the minimum wage advocates do not pursue their own logic, because if they push it to such heights, virtually the entire labor force will be disemployed. In short, you can have as much unemployment as you want, simply by pushing the legally minimum wage high enough.”

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