President Obama says he cares about people whose job skills don’t earn them much more than minimum wage. He says that’s why he wants to raise the minimum wage – he says that will mean these low-skilled workers will earn more.
President Obama keeps saying this, even though the best evidence is that raising the minimum wage will hurt many of those workers by costing them their jobs. The Congressional Budget Office, Congress’ nonpartisan accountants, calculates that raising the minimum wage to $10.10 an hour will probably cost 500,000 jobs, perhaps as many as 1 million. It’s fair to ask why President Obama doesn’t seem to care that as many as 1 million low-skilled workers will see their pay reduced to zero.
Liberals usually reply by asking what else can be done for people who don’t earn much. The best answer is a booming economy in which employers compete for workers. But in the Wall Street Journal, Michael Saltsman outlines an answer I and others have advocated: the existing Earned Income Tax Credit. In particular, he notes that Wisconsin’s own Rep. Paul Ryan has talked about how to make the credit, like an income tax in reverse, work better:
“The EITC, a refundable tax credit for low-income households that phases out as income rises, helps the working poor without imposing a harmful mandate on employers. But the EITC has one major weakness: Under current law, the size of the credit is dramatically smaller for individuals and families without children. . . .
“Mr. Ryan's plan would close that gap. His proposal, as described in a House Budget Committee draft, would double the credit that childless adults receive as a percentage of their eligible income—to 15.3% from 7.65%. It would also lower the age of eligibility to 21 from the current 25, and raise the income threshold for receiving the maximum credit to $11,500 from $8,220. The results are significant: A childless adult who now receives $265 annually would take home $1,005 a year under Mr. Ryan's plan. That's roughly the equivalent of raising their minimum wage to $8 an hour.”
Even better, as Saltsman points out: The tax credit goes to people who live in poor households, instead of also going to people whose work skills don’t earn much but who live in well-off homes – such as teenagers of well-to-do families. “Only 18% of the benefits from Mr. Obama's wage proposal would go to minimum-wage earners living in poor families,” Saltsman points out.
Still better: The tax credit doesn’t make it costlier to hire low-skilled workers. It wouldn’t cost up to one million workers their jobs. It doesn’t punish businesses that happen to need a lot of work done that is really only worth $7.25 an hour. It doesn’t make them overpay for that work, the way a minimum wage hike would do.
Maybe that is why the president and other liberals seem to favor the minimum wage hike instead: Perhaps they’re more interested in sending businesses a “you didn’t build that” message and penalizing them accordingly. Perhaps their dislike of entrepreneurs is stronger than any of their talk about helping young people who are going to lose their jobs when the minimum wage rises.
Knowing that, the rest of us should see liberals’ arguments for what they’re worth.