NCPA - National Center for Policy Analysis

White House Report Makes Weak Argument For Minimum Wage Hike

March 15, 2000

Both the House and Senate have voted to raise the minimum wage by $1 to $6.15 per hour, but when the bill is sent to the White House next month it likely will contain tax cuts. Even if the bill Clinton signs has tax cuts attached, raising the minimum wage is bad policy and tax cuts will not change that fact.

Last week the President's National Economic Council released a report touting the benefits of a higher minimum wage. The report reveals just how weak the case actually is.

  • According to the White House report, in 1999 only 4.6 percent of all workers employed at hourly rates were paid at or less than the minimum wage.
  • Of these, 30.1 percent were teenagers and 60.2 percent were part-timers.
  • Only 10 percent of all those earning the minimum wage, a mere 338,000 workers in a labor force of 141 million, maintained families.

The fact is the minimum wage primarily benefits the well-to-do. According to Cornell University economist Richard Burkhauser, whose research is cited in the White House report, 55.3 percent of the benefits of the last minimum wage increase in 1997 went to families with incomes at least twice the poverty level, and 36.5 percent went to families with incomes at least three times the poverty level.

On the other hand, the negative effects of raising the minimum wage are most likely to fall upon those supporting families on minimum wage jobs, says economist David Neumark of Michigan State University. In today's tight labor market, a higher minimum wage may not be a barrier to employment of marginal workers; but in a recession, those most likely to be laid-off will be adults with borderline skills.

Source: Bruce Bartlett, senior fellow, National Center for Policy Analysis, March 15, 2000.

 

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