Stop us if you’ve heard this one: “We know our economy is stronger when we reward an honest day’s work with honest wages. But today, a full-time worker making the minimum wage earns $14,500 a year … [A] family with two kids that earns the minimum wage still lives below the poverty line. That’s wrong.”
If that line from President Obama’s State of the Union address last night sounds familiar, it’s because we’ve heard very similar assertions from advocates of a higher minimum wage in New York. So Obama has picked up the same theme in pushing for an increase in the nationwide minimum, to $9 an hour.
But here’s the thing: thanks to the federal Earned Income Tax Credit (EITC), no full-time minimum-wage worker with a family has to remain below the poverty line. An estimated 26 million households across the country claimed $55 billion in earned income credits in 2010, and the Internal Revenue Service says the EITC has lifted nearly 7 million people out of poverty. New York State spends another $1 billion a year to supplement the federal credit with its own exceptionally generous EITC for low-income workers.As explained in this 2012 Empire Center Policy Briefing by Rus Sykes – as also noted here, here and here, among other places — the combined federal and state EITC in New York effectively raise the cash income of a single worker with two kids to $10.44 an hour. That doesn’t count the value of Food Stamp benefits, which add several thousand additional dollars to the annual disposable incomes of working parents in low-wage jobs. (It also doesn’t count the non-cash value of housing and health insurance subsidies.)
The minimum wage is a lousy way to raise the living standards of low-income workers, although it’s a pretty effective way to curtail their job opportunities. As Russell Sykes wrote in the AlbanyTimes Union last spring:
Unlike a minimum wage increase, the EITC provides income support only to workers who really need it — without leading to job loss, deterring hiring or raising the cost of labor across the board.
By contrast, based on a comprehensive analysis of minimum wage studies, economists David Neumark of the University of California at Irvine and William Wascherof the Federal Reserve Board concluded that a higher minimum wage “neither helps low-income families or reduces poverty.” They found that the EITC “subsidizes earnings for low-income working families and creates incentives for employment among families with no workers — pursuing much the same goals as suggested by the rhetoric, if not the reality of minimum wages.”
Few minimum wage earners are the primary source of household income. A 2007 study by economists Richard Burkhauser of Cornell and Joseph Sabia of the University of Georgia found that only 13 percent of workers earning a wage of $7.25 or less were the primary earner in a household, while 46 percent were in families with incomes at or above three times the poverty level. The study concluded: The majority of low wage workers are not household heads … and an even greater share are not poor household heads.”
Advocates of a higher minimum wage, including the president, simply aren’t being honest when they keep implying that a lot of minimum wage workers are trying to support families on $7.25 an hour (not true) and that those who are live below the poverty line (also untrue).
About the Author
You may also like
At mid-year, NY still far below most states in pandemic jobs recovery
New York has added private-sector jobs in all but three of the 38 months since the COVID-19 outbreak of March 2020—but the Empire State remains below its pre-pandemic employment level and continues to trail the national recovery.
On a seasonally adju Read More
At end of ’22, NY still near bottom in pandemic recovery
The more time passes since the spring 2020 Covid-19 outbreak, the more New York stands out among all states for the weakness of its post-pandemic employment recovery.
As of December, seasonally adjusted private employment in New York was still nearly 2 Read More
As leaves turn, NY’s post-pandemic recovery still has very far to go
New York was the national epicenter of the pandemic, and Governor Cuomo's "New York State on PAUSE" business shutdowns and other restrictions led, in short order, to the loss of nearly 2 million jobs in the first full month after the infection began spreading in the New York City area. Read More
More NY job gains in August—but employment needs to rise a lot further
New York's jobs report for August looked relatively strong—but only by comparison, that is, with what was generally regarded as a disappointing national number. On a seasonally adjusted basis, New York gained 28,000 private-sector jobs last month—a growth rate of 0.4 percent, according to preliminary monthly estimates from the state Labor Department. Read More
NY Post-Pandemic Employment Tide Stopped Rising At Year’s End
New York's post-pandemic employment recovery came to a halt and moved into reverse in December, according to the state's for the final month of COVID-wracked 2020.
Private payroll employment in December was 966,000 jobs below the level of the previous Read More
Fewer Workers, Not More Jobs, Explains NY’s September Unemployment Rate Drop
New York State's unemployment rate has fallen sharply since the economically devastating pandemic lockdown last spring. But as state Comptroller Thomas DiNapoli points out in his latest economic report, the jobless rate doesn't tell the whole story. Read More
It’s Official: New York State’s Second Quarter Economic Crash Was the Worst on Record
Further evidence of the massive damage done to New York’s economy by the coronavirus pandemic shutdown has emerged in the latest gross domestic product (GDP) data from the federal Commerce Department's Bureau of Economic Affairs. Read More
Sluggish Reopening: NY’s Private Job Count Down 1.1 Million From Pre-Pandemic Level
Six months into the novel coronavirus pandemic, New York State's private-sector employment recovery was the slowest in the 48 contiguous states—and getting slower. Read More