The wrong way to boost wages of single mothers

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Start with the mothers themselves, each of whom are eligible for thousands of dollars in supplementary income via the state and federal Earned Income Tax Credit. In New York, this credit raises a single mother’s effective full-time hourly wage from $7.25 to $10.44; in Connecticut, it rises from $8.25 to $11.38. In other words, both mothers are already receiving more than the $9.80 federal minimum wage that the authors of the op-ed are calling for—and that’s before accounting for the value of WIC, SNAP, and other benefits.
 
That’s not the only place where the op-ed misleads. The authors say that the stories of these two single mothers can be multiplied a million times over—and  even then, we’d only have an “inkling” of the number of single parents raising children on the minimum wage.
 
Data from the Census Bureau provide a very different picture: Less than 10 percent of the people who would benefit from a $9.80 minimum wage are single parents supporting children. That’s not even close to the 2 million-plus figure the authors of the original op-ed would have readers believe.
 
We shouldn’t minimize the plight of these mothers. Indeed, the tax credits mentioned earlier have been put in place specifically to subsidize their wages. But people who benefit from a higher minimum wage are far more likely to be second- or third- earners in a household with an income far above the poverty line. Census Bureau data show that the average family income of a beneficiary of a $9.80 minimum wage is $50,662 a year.
 
The 28 states that raised their minimum wage between 2003 and 2007 learned the lesson about minimum wages and poverty the hard way. Economists from Cornell and American University studied labor market data over this period, and found no reduction in poverty rates associated with this higher minimum wage.  
 
What’s happened instead is that vulnerable groups like single mothers have suffered the consequences of policymakers’ good intentions. Raising the minimum wage raises the cost to hire and train less-experienced jobseekers, reducing the number of opportunities available to them. Research out of the University of Georgia found that each 10 percent increase in the minimum wage has reduced employment for less-educated single mothers by six percent; it also led to a nearly 10 percent annual reduction in hours worked for those who remained employed.
 
It remains an article of faith among proponents for a higher minimum wage that their preferred policy holds no consequences for less-skilled employees. Yet an overwhelming 85 percent of the most credible economic studies on the subject from the last two decades point to job loss following a wage mandate. Even President Obama and Congressional Democrats recently granted this point, delaying a planned increase in American Samoa’s minimum wage after a government report found that past wage hikes in the US territory had destroyed job opportunities for its low-wage workforce.
 
Given the lack of evidence in support of wage hikes, proponents are forced to appeal to the emotionally-compelling stories of single mothers in poverty. But opponents of wage mandates want to help these group, too. They just want to do so in a manner that’s economically effective rather than politically expedient.
 
Saltsman is a research fellow at the Employment Policies Institute in Washington, DC.