Minimum wage proponents are the worst among the economically challenged as William Dunkelberg of Forbes points out in a recent article:

As a poverty program, raising the minimum wage is like killing flies with a shotgun, not very well targeted.  About 60% of the officially poor don’t work, so the only thing raising the minimum wage does for them is to make it harder for them to get a job if they ever decide they want one.  Workers must bring at least as much value to the firm as they are paid or the firm will fail and all jobs will be lost (no GM bailouts are available to our 6 million small employers that employ half of our private sector workforce).  Raising the minimum wage raises the hurdle a worker must cross to justify being hired.

It is estimated that less than 15% of the total increase in wages resulting from an increase in the minimum will go to people below the poverty line and less than a third of those receiving the minimum wage are families below the poverty line.  Most minimum wage workers are from above median income families.  So, most of the people benefiting from the minimum wage are not the intended targets of the “anti-poverty” aspect of raising the minimum wage.

As a jobs program, raising the minimum wage is a real loser.  Congress raised the minimum wage 10.6% in July, 2009 (know of anyone else getting a raise then?).  In the ensuring 6 months, nearly 600,000 teen jobs disappeared, even with nearly 4% growth in the economy, this compared to a loss of 250,000 jobs in the first half of the year as GDP growth declined by 4%  Why?  When you raise the price of anything, people take less of it, including labor.  The unemployment rate for teens remains unacceptably high.   Workers of all ages that are relatively unskilled are adversely impacted by this policy.

Another argument in favor of the minimum wage is that it is a stimulus, introducing new income and spending into the market.  But was there more income to spend in 2009 when nearly 600,000 teen jobs were lost?  Common sense says that every dollar a minimum wage worker receives must have come out of somebody else’s pocket, either small business owners or their customers.  The money for a higher minimum wage does not come from thin air.

Likewise, Mark Wilson’s essay The Negative Effects of Minimum Wage Laws written for the Cato institute also illustrates this point:

The federal government through the Department of Labor has imposed a minimum wage since 1938. Nearly all the state governments also impose minimum wages. These laws prevent employers from paying wages below a mandated level. While the aim is to help workers, decades of economic research show that minimum wages usually end up harming workers and the broader economy. Minimum wages particularly stifle job opportunities for low-skill workers, youth, and minorities, which are the groups that policymakers are often trying to help with these policies.

There is no “free lunch” when the government mandates a minimum wage. If the government requires that certain workers be paid higher wages, then businesses make adjustments to pay for the added costs, such as reducing hiring, cutting employee work hours, reducing benefits, and charging higher prices. Some policymakers may believe that companies simply absorb the costs of minimum wage increases through reduced profits, but that’s rarely the case. Instead, businesses rationally respond to such mandates by cutting employment and making other decisions to maintain their net earnings. These behavioral responses usually offset the positive labor market results that policymakers are hoping for.

This study reviews the economic models used to understand minimum wage laws and examines the empirical evidence. It describes why most of the academic evidence points to negative effects from minimum wages, and discusses why some studies may produce seemingly positive results.

Some federal and state policymakers are currently considering increases in minimum wages, but such policy changes would be particularly damaging in today’s sluggish economy. Instead, federal and state governments should focus on policies that generate faster economic growth, which would generate rising wages and more opportunities for all workers.

Who Is Paid the Minimum Wage?

Supporters of minimum wages might believe that these laws mainly help to boost the incomes of full-time adult workers in low-income families, some of whom are supporting children. However, the data generally do not support that view. Most workers earning the minimum wage are young workers, part-time workers, or workers from non-poor families.

According to the Bureau of Labor Statistics, 1.8 million paid-hourly employees were paid the federal minimum wage of $7.25 in 2010.⁵ These 1.8 million employees can be broken down into two broad groups:

• Roughly half (49.0 percent) are teenagers or young adults aged 24 or under. A large majority (62.2 percent) of this group live in families with incomes two or more times the official poverty level.⁶ Looking just at the families of teenaged minimum wage workers, the average income is almost $70,600, and only 16.8 percent are below the poverty line.⁷ Note that the federal minimum wage applies to workers of all ages.⁸
• The other half (51.0 percent) are aged 25 and up.⁹ More of these workers live in poor families (29.2 percent) or near the poverty level (46.2 percent had family incomes less than 1.5 times the poverty level).¹⁰However, even within this half of all minimum wage employees, 24.8 percent voluntarily work part-time, and just 34.3 percent are full-time full-year employees.¹¹

Only 20.8 percent of all minimum wage workers are family heads or spouses working full time, 30.8 percent were children, and 32.2 percent are young Americans enrolled in school.¹² The popular belief that minimum wage workers are poor adults (25 years old or older), working full time and trying to raise a family is largely untrue. Just 4.7 percent match that description.¹³ Indeed, many minimum wage workers live in families with incomes well above the poverty level.

By the way, Nan, if your working for minimum wage, even at $10.10 per hour – I have news for you… You’re not in the middle class! Liberals need to stop lowering expectations in this country and stop renaming & reclassifying everything. Lowering what it means to be in the middle class is not helping your cause nor is it helping Americans in any way — it’s just creating a large class of people more dependent on government and that is not the American way!