Higher Minimum Wage Can Hurt the Poor

Carson Bruno, a researcher at the Hoover Institution, writes today for RealClearMarkets about the impact of an increased minimum wage in California. He notes it very likely hurts the poor disproportionally. See how:

Based on the 2013 Current Population Survey (CPS), the median age for a worker making $9 per hour (current CA minimum) was 26, with just under 1/3 of such workers being 21 or younger. This, immediately, raises some red flags. Based on this information, it would appear that the typical minimum wage worker is more likely to be either a) still in school or b) just starting their professional career.

Even if the individual is poor, it is likely to be transitional poverty, rather than fundamental, structural poverty that requires government action.

Approximately half of minimum wage workers live, in fact, in middle or high-income households. Just 49% of those making the minimum wage fall under 200% of the federal poverty line.

There is significant labor slack in the industries most affected by minimum wage policy. This slack makes it more likely for employers to prefer higher-skilled minimum wage labor over low-skilled labor. Since it is more likely that those in lower income households are lower-skilled labor, this suggests that it is more likely that any workplace displacement effects of a minimum wage increase would be clustered among the half of minimum wage workers who are indeed poor. As such, it could be the case that a minimum wage increase doesn't impact all minimum wage workers equally, but rather the benefits are skewed toward those workers from higher income households (i.e. the higher skilled labor) at the expense of those truly in poverty. 

FYI, "workplace displacement effects of a minimum wage increase" is economist-speak for jobs lost due to higher wage costs. It appears we see yet another example of negative consequences flowing from well-intentioned actions taken to help the less fortunate.