The Impact of Minimum Wage on Poverty
The increase of the minimum wage in America is not a useful tool in reducing the poverty levels but instead what is valuable and employable in combating the problem is the Earned Income Tax Credit (EITC) and the Federal Contributions Act (FICA) tax.
Analysis of Raising the Minimum Wage
The articles presented in general discuss and analyze the impact of raising the minimum wage in combating the problem of poverty. The argument engenders from the 70 cent increment in 2007 to $7.25 an hour of the minimum wage in the year 2009.As a whole, the recurrent theme is how raising the federal minimum wage is a bad idea which has undesirable consequences. The authors of the articles aim at describing a two-sided view of how increasing the minimum wage is seen as reducing poverty and how this policy is a useful tool in overcoming this problem. As such, much of the discussion revolves around discrediting the minimum wage increase and offering alternatives that the researchers deem more efficient and less costly.
The Proponents' View
In general, the proponents who are advocating for the increase of the minimum wage deem it as a fitting idea for reducing the pangs of poverty during the time of an economic recession. In the same vein, the argument they postulate as the evidence of the poverty reduction levels amongst citizens is the increase in consumer spending bolstered by the rise in the wages of persons considered poor and workers who are earning a low income.
An Alternative Analysis
Furthermore, the advocates of increase of the minimum wage are notably of the opinion that America's poor and low-income families are directly positively impacted by this policy. On the other hand, a study conducted by John P. Formby, John A. Bishop and Hoseong Kim provide an alternative analysis as to the effectiveness of the Fair Wage Minimum Act. The method they use is a comparative form of discussion of the act with other policy solutions of reducing the poverty levels in America (Formby et al., 8). In essence, they note that the 70 cent increase in the minimum wage proves to be ineffective as it is directed not at persons who are in poverty and earn low incomes.
Efficient Alternatives
Also, they determine that a more efficient and efficient alternative to the Fair Minimum Wage Act should be an expansion of the Earned Income Tax Credit (EITC) and a corresponding raising of the rebate level of the Federal Contributions Act (FICA) tax. With such advents, they note that needy families would be able to be assisted in a less costly manner further reducing the number of people living in poverty. Moreover, they go on to dispel the notion that the FMWA will benefit the poor and low-income earners by stating that "many low-income families do not contain a low-wage worker." The effect of this is that 85% of the low-income earners did not experience any monetary increase in their earnings after the government started the 70 cent increase in the three years from 2007 (Neilsen).
They also note that the EITC expansion would result in almost 1.95 million people considered living under the 150% federal poverty line. As such, the FICA tax rebate increasewill eventually lift around 1.65 million people from poverty thus leading to an increase in the amount of money for low-income families in dire need. Finally, they address the issue of the costly impact of raising the minimum wage on the unemployed and persons in active search for a job. They note that the expensive affair of a wage increase cuts both ways affecting both the employee and the employer. On the employer's side, the wage levels for entry job seekers would increase producing a spillover wage for persons already earning an amount above the minimum wage. On the employee's side, the people seeking jobs are likely to find it difficult getting a job especially the new and young applicants.
An Ineffective Approach
On the other hand, Dr. Joseph Sabia and Robert Nielsen underscore the ineffectiveness of increasing minimum wage by postulating that studies done show that there exists now a relationship between lower poverty levels and minimum wage increase (Sherk). Furthermore, they note that many people in poverty have no jobs and thus cannot benefit from the wage increase, and people considered low wage earners do not live in needy families, and minimum wage increase reduces the chances of low-skilled workers getting a job.
Conclusion
In essence, the research by John P. Formby, John A. Bishop and Hoseong Kim is very qualified due to their expertise in public economy. In the case of Dr. Joseph Sabia, he presents biased information due to his unrelated background in economics. As regards my opinion, increase in minimum wage does not reduce poverty due to employer cut on employee numbers and working hours, beneficiaries are not necessarily poor, and people in poverty do not work.
Works Cited
Formby, J. P., Bishop, J. A., & Kim, H. (2010). What's Best at Reducing Poverty?: An Examination of the Effectiveness of the 2007 Minimum Wage Increase. Employment Policies Institute.
Nielsen, R., and J. Sabia. "Can raising the minimum wage reduce poverty and hardship." Washington, DC: Employment Policies Institute (2012).
Sherk, James. "Raising the Minimum Wage Will Not Reduce Poverty." Backgrounder (1994).
