The Costs of Too Low a Minimum Wage

Interesting piece in Bloomberg View today by Barry Ritzholtz on how the US taxpayer subsidizes large and very profitable corporations due to the very low minimum wage.

Here are some excerpts:

Here’s where things get interesting: A full-time worker (40 hours per week) in the U.S. making minimum wage earns only $15,080 per year. For some context, median individual earnings are $40,404 per year (BLS), while the US poverty level is $23,550 (HHS). Full-time minimum wage earners make 62.7 percent less than median income and are 36.0 percent below the poverty level. (The number you probably hear quoted most often is median household income at $51,017, according to Census. The minimum is 70.4 percent below that).

 If the minimum wage had merely kept up with price inflation since 1968, than it would currently be at $10.77. That is $22,401.60 per year, bringing wages closer to the poverty line. Beyond inflation, if it kept pace with productivity increases, it would be closer to $20 per hour; annual salary would be $41,600, higher than the U.S. median. And just for laughs, if the minimum wage kept up with the earnings of the top 1 percent, it would be higher than $22, or about $45,760.

He closes by saying:

 As someone who does not especially care for fast food -- I worked in a McDonald's in high school, and lasted less than a weekend -- I do not support my tax dollars subsidizing large and profitable companies. Raising the minimum wage to $11.33, the poverty level, effectively shifts the cost of eating greasy French fries and over-cooked burgers from tax-payers to fast food consumers -- where they belong.

 Interesting stuff.