Minimum wage increases are not the best solution

Published Mar 12, 2013 at 05:00AM

Sen. Jeff Merkley, D-Ore., has added himself to the line of people who want to increase the minimum wage. He should, instead, start a line to increase the earned income tax credit.

President Obama has called for an increase in the federal minimum of about $2 to $9 an hour. Oregon’s Service Employees International Union asked the state earlier this year to increase the minimum annual salary paid by the state to $30,000 from $23,000. And Merkley is co-sponsoring the Fair Minimum Wage Act of 2013. It would increase the federal minimum to $10.10 an hour.

The charm of pushing up the minimum wage is clear. It is tough for any family to get by on $8 an hour. “There is no better program of any kind than a good, living-wage job as a foundation for a successful family,” Merkley said.

But raising minimums has a sequel — an unhappy sequel. It doesn’t just have positive effects. It has negative effects, too. It goes on to make it harder for workers to find jobs. It also punishes employers.

People earning minimum wage tend to have less experience and less training than other workers. A majority of the people earning minimum wage are between the ages of 16 and 24, according to Bureau of Labor Statistics data from 2011. Raising the minimum is not going to make it easier for them to be hired.

Yes, some poor families will benefit by raising the minimums. Other poor families will lose.

A better strategy to help the poor and employed is to expand the earned income tax credit. First of all, it is directly targeted to help the poor. Second, it doesn’t make it harder for employers to hire people. Third, it also provides an incentive to work.

Congress created the credit in 1975 to offset Social Security taxes for the poor. It benefits people with low and moderate incomes. It puts money in their pocket by reducing the tax they own and may generate a refund.

Jamal Raad, Merkley’s press secretary told us he was not aware of any proposals to expand the earned income tax credit. That could be because the minimum wage is easy to explain. Voters get it. The earned income tax credit is more complicated. But when it’s a better solution, Congress should push it.

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