Poverty and the Minimum Wage

 

Americans are a generous and kind-hearted people. We are more than willing to go to bat for the less fortunate among us.  The question is how to do it effectively.  A post six months ago, “A balanced and Sensible Anti-Poverty Program,” laid out four principles for an effective anti-poverty program from Robert Doar of the American Enterprise Institute.  They are:

  • work requirements for welfare recipients
  • work incentives such as the Earned Income Tax Credit
  • fostering married, two-parent families
  • business growth and investment to create more jobs

There is currently much interest in , and public support for, raising the minimum wage at both the state and national levels.  This is viewed by the general public as an effective way of addressing poverty.
CaptureHowever a new report from Mr. Doar makes clear that simply holding a real job, even with low pay, is what makes the biggest difference as to whether or not someone is able to rise above poverty.  Even though the overall poverty rate in the U.S. is about 14%, the poverty rate for fulltime workers is only 3% and even for part-time workers it is just 7% (see the above chart).
Capture1Furthermore, as detailed in the second above chart, the total income (including selected benefits) of a low-income earner, at $8/hour, with two dependent children, and working fulltime, is $30,204, well above the poverty line.
Conclusion: yes, poor people need public assistance but it is equally important to work with them to find and hold a job, regardless of hourly wage.  Not only will this meet their basic material needs, it will also put them on track to become self-supporting, productive citizens.

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