Karl responded recently to a post by Barbara Kiviat who wondered “why should we care about the minimum wage?”. Karl’s general point is that the minimum wage is harming lot’s of families, and Barbara’s point is that we shouldn’t spend so much time on a policy that has little affect on the economy and doesn’t help low income families anyway. But if Barabara thinks both sides care too much about this issue, then shouldn’t she be arguing for Democrats take advantage of the Republican’s foolish obsession and trade a repeal of the minimum wage for a policy that actually benefits poor people?
I’ve argued before that the balance of new minimum wage evidence shows that the minimum wage causes unemployment, so I won’t rehash that evidence here (if you’re under the assumption Card/Krueger is the end of the debate, I’d encourage you to follow the link). But I do want to focus on the inefficiency of the minimum wage. This report from the CBO shows that showed the 2007 increase in the minimum wage cost employers $11 billion, of which $1.6 billion benefited poor families. In contrast, an expansion of the earned income tax credit (EITC) would have cost $2.4 billion, $1.4 billion of which would have gone to poor families. The EITC is cheaper and more targeted. Note that this is only the marginal cost of the most recent increase in the federal minimum wage, not the total cost of federal and state minimum wages, which would be much higher.
What the minimum wage does is effectively push the costs of a multi-billion dollar, illusory, anti-poverty program onto employers. It’s an inefficient way to help poor people, and a hidden tax on businsses that forces them to spend $4 so that the government doesn’t have to spend $1.
Considering how low Barbara believes it’s cost would be in terms of impact on poor people, she should want Democrats exchange a repeal of the minimum wage for a policy that actually helps poor people. After all, what do you do when someone values something more than it’s worth to you? Sell it and buy something better.