People who advocate for an increase in the minimum wage have a goal:  to raise people out of poverty. I share that goal, but I don’t think that raising the minimum wage is the best way to achieve it. First of all, not everyone who earns the minimum wage is living in poverty. Middle class kids who get a summer job aren’t living in poverty. They don’t need higher wages in order to survive. The benefit of a higher wage would not always accrue to the people who need it, so it’s an inefficient approach. Even worse, a true living wage varies from person to person. The minimum wage to lift a young adult living alone out of poverty is much smaller than the minimum wage a single mother with three children would need to earn. The minimum wage is to blunt a tool. Some people receive too much, and others not enough.

Another problem with a minimum wage is that the cost falls on employers. This creates a disincentive for employers to hire anyone at all.  This leads to offshoring some jobs and automating others. Also, putting the burden of a minimum wage on employers tends to push prices up, making it even harder for people to escape from poverty.

As an alternative, I prefer a negative income tax. This would work something like the Earned Income Credit, but delivered with every paycheck instead of in an annual lump. Instead of having taxes deducted from their paycheck, anyone living below the poverty line (relative to their personal circumstances) would receive a subsidy added to their paycheck. This money would come from the federal government, not the employer. The cost of the program would be spread across all taxpayers.

I admit, there are some details which need to be ironed out, such as making sure wages don’t plummet, and giving people an incentive to strive for higher salaries, but overall I think it’s a better starting point than the minimum wage. 

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