Roosevelt Institute | Cornell University

The Minimum Wage Debate: A debate that should not be occurring

By Jared SiegelPublished March 23, 2014

The federal debate over whether or not to raise the minimum wage focuses on a marginally effective method to combat inequality instead of generating more meaningful policy solutions.

By Jared Siegel, 3/23/2014

For over a year, the United States federal government has become entrenched in the debate over whether to raise the federal minimum wage. Ignited by President Obama's 2013 State of the Union declaration, "Tonight, let's declare that in the wealthiest nation on Earth, no one who works full time should have to live in poverty," Democrats have rallied to raise the standard of living for those struggling to make ends meet. Yet, in a predictable course of events, the proposed bill to increase the minimum wage from $7.25 to $10.10 remains stalled in Congress. The frustrating aspect of this partisan sparring match, however, does not lie in the usual soporific spectacle of ineffective government. Rather, this debate has its unique putrid zest that should have voters pinching their noses and turning the other way in search of new representation. The Republicans and Democrats haven not 't just reached a stalemate on yet another issue; they are fighting the wrong battle entirely.

The Democratic stance is that raising the minimum wage to $10.10 could help approximately 28 million people and leave low-skilled workers with more disposable income that could potentially create more economic growth.

It would be helpful for women and single mothers, who compose roughly two-thirds of those who would receive increased wages, and it would lower the growing wage gap, considering that the U.S. minimum wage is 27% of its average wage, a lower number than that of any country in the Organization for Economic Cooperation and Development aside from Mexico.

The Democrats are correct that passing a minimum wage increase would be positive step towards aiding those who are struggling financially; however, this measure would have a minimal effect in reducing income inequality. Jonathan Guryan, an economist at Northwestern University's Institute for Policy Research, said, "If the goal is to reduce inequality or improve the well-being of people currently living in poverty, there are other policies that the evidence suggests would be much more cost-effective in the long run, like investing in education, improving funding for things like food stamps and expanding the EITC (Earned Income Tax Credit, a federally funded wage subsidy that aids those in dire circumstances)." Most Republicans in Congress side with Guryan's claim that a minimum wage hike would do little to reduce income inequality and contest that there are also negative consequences associated with minimum wage increases including layoffs. Rather than proposing other legislation that could more effectively counteract income inequality, however, Republicans simply reject minimum wage hikes and end the debate there. The partisan debate is framed in terms of whether there should or should not be a minimum wage increase rather than how can the government most effectively combat poverty and inequality.

The minimum wage debate in the federal government is akin to two homeless people on a sidewalk fighting over a peace of bread when across the street there is a job-training program. They are fighting over a short-term and comparatively inconsequential solution to hunger, which is distracting them from a permanent common sense solution. The Republicans and Democrats should be debating over funding education initiatives and expanding the EITC. They are having the wrong debate.